Singapore – the first nation that has regulations for stablecoin in Southeast Asia
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In the article discussing the new crypto exchange in Indonesia, FinFan shared a little information about some of Southeast Asia’s cryptocurrency markets and the potential to grow this field in these countries.
Realizing the huge potential of this decentralized payments market, the Singapore government has issued the first regulatory framework for stablecoins.
Would the adoption of the first laws on these currencies be a bold move by Singapore? Let's find out with FinFan in this article.
Singapore - a nation that is always a pioneer in technology in Southeast Asia, especially in cryptocurrency.
A nation that is always a pioneer in technology in Southeast Asia
Singapore has always been a pioneer in technology fields in Southeast Asia for the past 10 years.
- It is the first country to produce self-driving cars as well as launching the first driverless taxi service in the region.
- Singapore is also the first country to use robot police to help curb crime.
- Singapore is also the region's leading virtual reality and augmented reality country, with the bulk of game creators using this technology to produce games and expand various locations to play VR games.
- Singapore's e-commerce platforms have also spread across the area and consistently generate the most income from the region's e-commerce business.
The financial sector, especially in cryptocurrency
In the financial sector as well, this country is also the pioneer of many cashless payment products and services such as QR Pay, e-wallet, Buy Now Pay Later, etc.
Especially on the issue of cryptocurrency when the Singapore government has always been a pioneer in the region in terms of accepting payments in cryptocurrencies without restricting or banning them.
In an interview with Bloomberg News in 2021, Mr. Ravi Menon, Managing Director of the Monetary Authority of Singapore (MAS) said that Singapore is trying to assert its position as an important center for global virtual currency businesses.
This ambition has not stopped there recently, this country was the first country not only in Southeast Asia but worldwide to accept stablecoins even though other financial powers are still struggling to find a way to accept currencies that are priced equivalent to the fiat currency of a certain country or region.
Other nations are hesitant because they are better at balancing the creation of CBDCs versus accepting stablecoins.
For Singapore, the adoption of stablecoins shows that they are on their way to realizing their ambition to become a hub for leading crypto companies like Binance, Gemini, Ether, etc. However, it also leads to some problems that are detrimental to the country itself in the market.
What difficulties will come to Singapore when this country accepts stablecoins?
Having trouble launching CBDC for its own country
Accepting stablecoins will make it difficult for them to create their own CBDC. Meanwhile, other countries are very supportive of creating CBDCs as another way of trading for their citizens and can scale globally like with fiat currencies.
The reason it was difficult to create a CDBC for Singapore itself is because stablecoins both meet the needs of decentralization and are staked with the real value of fiat money.
Once a user is familiar with direct P2P transactions from one person to another without the influence of the government or another third party, will they accept the switch to using a state-owned currency like CBDC?
It is known that Singapore has also researched and developed its own SGD currency, but its applicability at the moment is not high, so it has not been released to the public.
However, what if at some point the whole world switched completely to buying and selling and exchanging through each country's CBDC instead of fiat physical currency?
Illegal actions are also a notable point when accepting stablecoins.
Illegal actions are always a concern when cryptocurrency or stablecoins are widely applied. Many cases of money laundering or corruption have been carried out in an organized manner with the amount of up to hundreds of billions of dollars worldwide (most recently the case of the exchange that was once believed to be in the 2nd place in the world is FTX).
This is probably also the reason why USDT and USDC, although already possessing a large number of users in the market, still do not have an accepted law like in Singapore. Not only that, a number of major exchanges such as Binance and Coinbase have also been sued by a number of US financial regulators such as the SEC for fraud, circumvention, and violation of securities laws.
In short, Singapore's acceptance of stablecoins can also help the country continue to achieve its goal of becoming the world's digital financial hub in the near future.
However, in the immediate future, Singapore must solve the outstanding problems that these stablecoins bring to its economy such as money laundering, disruption, etc.
The Singapore Government has also made great efforts to be able to both take advantage of the strengths of stablecoins and solve the above problems with a number of solutions such as:
In short, Singapore's approval of stablecoins can assist the country accomplish its long-term objective of being the world's digital financial hub.
However, in the short term, Singapore must address the underlying issues that these stablecoins bring to its economy, such as money laundering, disruption, and so on.
*The Singapore Government has also made significant attempts to capitalize on the merits of stablecoins while simultaneously addressing the aforementioned issues with a variety of solutions, including:
- Reserves that back stabelcoins must be held in low-risk and highly-liquid assets. They must equal or exceed the value of the stablecoin in circulation at all times
- Stablecoin issuers must return the par value of the digital currency to holders within five business days of a redemption request
- Issuers must also provide “appropriate disclosures” to users, including the audit results of reserves.*