Tag: stablecoins

Singapore’s Stablecoin Regulatory Framework Announced: All Details

Singapore has announced a framework for stablecoins, as the overall global crypto sector faces increased rules and regulations in different parts of the world. The Monetary Authority of Singapore (MAS) announced these rules on August 15, which now allow for stablecoins to become part of the country’s existing financial system. The government of Singapore had begun deliberations on stablecoin rules last year in October. In the ten months since, authorities invited and reviewed feedback from the public, especially since stablecoins fall under the crypto category.

Stablecoins are essentially cryptocurrencies that are pegged against reserve assets like gold or fiat currencies. Unlike regular cryptocurrencies, that are impacted by market volatility, stablecoins pose a lesser risk for investors as their underlaying assets make them less susceptible to major dips. Tether, USD Coin, and Binance USD are some examples of popular stablecoins.

The MAS’ stablecoin regulatory framework has been designed for single-currency stablecoins (SCS). Only stablecoins pegged to the Singapore dollar or other G10 currencies like Australian dollar, US dollar, and British Pound among others, will be eligible for receiving the MAS certification, the official statement from Singapore’s authorities said.

“SCS reserve assets will be subject to requirements relating to their composition, valuation, custody, and audit to give a high degree of assurance of value stability,” the MAS said.

Web3 firms that wish to issue stablecoins in Singapore will have to ensure that they maintain minimum base capital and liquid assets. The country aims to avoid companies being exposed to the risks of collapse and insolvency.

The MAS has directed stablecoin issuers to return the value of stablecoins to holders within five business days from them submitting redemption requests.

“Issuers must provide appropriate disclosures to users, including information on the SCS’ value stabilising mechanism, rights of SCS holders, as well as the audit results of reserve assets. Only stablecoin issuers that fulfil all requirements under the framework can apply to MAS for their stablecoins to be recognised and labelled as ‘MAS-regulated stablecoins’,” the official document said.

Not all stablecoins will be regulated by MAS and if any issuer is found guilty of promoting a non-MAS certified stablecoin as one, they would be subject to penalties. The MAS will also list defaulted stablecoins on the Investor Alert List to warn potential investors.

“MAS’ stablecoin regulatory framework aims to facilitate the use of stablecoins as a credible digital medium of exchange, and as a bridge between the fiat and digital asset ecosystems,” said Ho Hern Shin, Deputy Managing Director (Financial Supervision), MAS.

In its exploration of the digital assets sector, Singapore is taking a gradual and calculated approach. Crypto and Web3 advocacy groups from India and Singapore signed a memorandum of understanding (MoU) last month. The groups, Bharat Web3 Association (BWA) and the Blockchain Association Singapore (BAS), have decided to join forces on nurturing and fostering the Web3 sector.

This MoU entails that both India and Singapore will collaborate with their expertise and resources on the growth of the blockchain sector.

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Stablecoins May be Accepted as Bail Bonds in New York; Crypto Growth Consistent in US

The New York state of the US is considering the implementation of stablecoins in its internal financial system. Regulators of the state have floated a proposal to let the residents pay and settle bail bonds in the form of stablecoins. This move has been proposed in accordance with New York’s plans to cautiously experiment with virtual digital assets. It, however, could be a few months before the fate of this proposal is sealed by the state authorities.

On May 10, the New York Assembly Bill 7024 was extended to the state legislative assembly, seeking an official payment mode status for stablecoins to pay bail bonds in state prisons.

“Authorises fiat-collateralised stablecoins as a form of bail; directs the commissioner of taxation and finance to promulgate rules and regulations identifying forms of fiat-collateralised stablecoin acceptable for posting bail to establish a system for the administration of the acceptance, recording, and processing of stablecoins as a means of securing bail,” the proposal said.

Stablecoins make for a distinct category of the crypto ecosystem. Pegged to reserve assets like gold or fiat currencies, stablecoins fare comparatively better than other altcoins in the infamously volatile crypto market.

By making bail bold payments acceptable as stablecoins, New York will be able to record all the sensitive information permanently and unchangeably on the blockchain network of choice. This would also reduce the laundering of cash inside the prison system, where the chances of it being stolen or misused are likely to be higher.

For now, the New York authorities have not revealed which stablecoins are they planning on integrating with their bail bond systems.

Tether, USD Coin, Ripple, and Binance USD are among popular stablecoins, all pegged to the US dollar, which could be taken into consideration.

The state has been discussing the ways in which it could explore use cases of crypto while also deciding the extent of these experiments.

In April last year, Kevin Thomas, a senator from New York proposed to add crypto-related scams under the category of criminal offenses.

The state, which has also emerged as a hub for crypto mining activities, has also witnessed internal opposition against allowing crypto miners to increase their power-intensive processes.

In October 2019, New York businesses reached out to governor Kathy Hochul asking for a ban on crypto mining, citing environmental concerns.

Among latest developments being reported from the region, the New York Senate is also mulling over a proposal to allow residents to pay fees, taxes, fines, and civil penalties in the form of cryptocurrencies like Bitcoin, Ether, Litecoin, and Bitcoin Cash.

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EU’s Pending Banking Law Calls for Fast-Track Crypto Capital Rules for Banks

Tough capital rules for banks holding cryptoassets must be fast-tracked in the European Union’s pending banking law if Europe wants to avoid missing a globally-agreed deadline, the bloc’s executive has said.

The global Basel Committee of banking regulators from the world’s main financial centres has set a January 2025 deadline for implementing capital requirements for banks’ exposures to cryptoassets such as stablecoins and bitcoin.

“For the time being, banks have very low crypto-asset exposures and only a limited involvement in providing crypto-asset-related services,” the European Commission said in an informal discussion paper seen by Reuters.

“Banks have expressed interest in trading crypto-assets on behalf of their clients and to provide crypto-assets-related services.”

Basel’s standards are applied in the EU with a law, and a delay could mean that banks have to wait longer to enter the cryptomarket as separate EU rules for trading cryptoassets come into force in 2024.

To enforce Basel’s crypto rules, the EU could either propose a new law, or expand the banking law it is now finalising as called for by the European Parliament.

Parliament and EU states have equal say on the banking law and are due to start negotiating the final text, which could include the provisions on cryptoassets, the paper said.

This would give banks clarity on their requirements for crypto-asset exposures and would ensure that risks stemming from these are adequately addressed, the Commission paper said.

“From an international perspective, it would also allow the EU to fully align itself with the implementation deadline agreed on at Basel level.”

A separate draft law would not be forthcoming until the end of 2023 at the earliest, the paper said. Parliament goes to the polls mid-2024, making it harder to approve a new law in time for 2025.

The Commission paper also suggests that the bloc’s European Banking Authority (EBA) could coordinate with the EU’s securities watchdog ESMA to ensure that cryptoassets are properly categorised.

Basel has set punitive capital charges on unbacked crypto currencies like bitcoin, and less conservative charges on stablecoins, which are backed by an asset or fiat currency.

It could also be useful to mandate EBA, in cooperation with ESMA, to maintain a list of how existing cryptoassets are categorised, the paper said.

© Thomson Reuters 2023
 

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RBI Suggests Common Approach to Crypto Assets to Avoid Potential Financial Risks

To address potential financial stability risks and protect investors, it is important to arrive at a common approach to crypto assets, the Financial Stability Report released by RBI said on Thursday.

In this context, various options are being considered internationally, it said.

One option is to apply the same-risk-same-regulatory-outcome principle and subject them to the same regulation applicable to traditional financial intermediaries and exchanges, the report said.

Another option is to prohibit crypto assets, since their real life use cases are next to negligible and the challenge is that different countries have different legal systems and individual rights vis-à-vis state powers, it noted.

A third option is to let it implode and make it systemically irrelevant as the underlying instability and riskiness will ultimately prevent the sector from growing, it said.

The third option, however, is fraught with risks as the sector may become more interconnected with mainstream finance and divert financing away from traditional finance with broader effect on the real economy, the report said.

Regulating new technology and business models after they have grown to a systemic level is challenging, it pointed out.

To promote responsible innovation and to mitigate financial stability risks in crypto ecosystem, the report said it is vital for policymakers to design an appropriate policy approach.

In this context, under India’s G20 presidency, one of the priorities is to develop a framework for global regulation, including the possibility of prohibition, of unbacked crypto assets, stablecoins and decentralised finance (DeFi), it said.

The collapse and bankruptcy of the crypto exchange FTX and subsequent sell-off in the crypto assets market have highlighted the inherent vulnerabilities in the crypto ecosystem.

Recently, Binance, the largest crypto exchange, also prohibited withdrawals of stablecoins on its platform. The implosion of FTX was preceded by failure of TerraUSD/Luna, an algorithmic stablecoin, a run on Celsius, a crypto lender, and bankruptcy of Three Arrows Capital, a cryptocurrency hedge fund.

Observing that the turmoil has provided several insights, it said crypto assets are highly volatile.

The price of Bitcoin has tumbled by 74 percent (as on December 14, 2022) from its peak in November 2021. Other crypto assets have also experienced similar falls in prices and heightened volatility.

In addition, crypto assets exhibit high correlations with equities, it noted.

Furthermore, it said, contrary to claims that they are an alternative source of value due to inflation hedging benefits, crypto assets’ value has fallen even as inflation rose.

Second, the report said, the collapse of TerraUSD/Luna is a reminder of how so-called stablecoins that promise to maintain a stable value relative to fiat currency are subject to classic confidence runs.

Finally, it said, the failure of FTX and Celsius reveals that crypto exchanges and trading platforms were carrying out different functions such as lending, brokerage, clearing and settlement that have different risks without appropriate governance structures.

This exposed them to credit, market and liquidity risks disproportionate to what was necessary to discharge their essential functions, it said, adding leverage is a constant theme across the crypto ecosystem, making failures rapid and losses huge and sudden.

 

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BTC, ETH Retain Pumped Prices Despite Minor Dips as Crypto Chart Reflects More Reds than Greens

These last days of July are turning out to be quite the roller-coaster ride for cryptocurrencies, price-wise. After seeing profits almost consecutively in the recent days, the crypto chart showed losses for most crypto assets on Tuesday, July 26. Bitcoin dipped by over three percent to trade at $22,624 (roughly Rs. 18 lakh) as per Indian exchange CoinSwitch Kuber. Losses of up to 3.60 percent also hit Bitcoin on international exchanges. As per Binance and CoinMarketCap, BTC is currently priced around $21,110 (roughly Rs. 17 lakh).

Ether tailed behind Bitcoin to maintain its recovered prices despite seeing losses. Incurring a dip of over five percent, ETH is currently trading at $1,534 (roughly Rs. 1.22 lakh), the crypto price chart by Gadgets 360 showed.

BTC and ETH have been joined by several other popular cryptocurrencies in being impacted by losses.

These include Binance Coin, Cardano, Ripple, Solana, Polkadot, as well as Polygon.

Dogecoin and Shiba Inu also slipped down the price ladder with losses of 2.77 percent and 4.40 percent respectively.

Stablecoins such as USD Coin and Binance USD managed to get the greens on the price charts owing to miniscule gains.The overall crypto market dunked by 3.23 percent to sink below the trillion-dollar-mark.

As per CoinMarketCap, the current valuation of the crypto market stands at $972 billion (roughly Rs. 77,55,060 crore).

The dip in the crypto market comes in the backdrop of the US government mulling another interest rate hike this week.

Most economists and investors reportedly believe the central bank’s Federal Open Market Committee (FOMC) will raise interest rates by 75 basis points, or three quarters of a percentage point. Between today and tomorrow, the FOMC will conduct two meetings in Washington DC to decide on the expected interest rate changes.

“Crypto and global financial markets are poised for increased volatility and turbulence as we have significant macroeconomic events in the week ahead in the form of the FOMC. After hitting a 40 year record high Consumer Price Index (CPI) print of 9.1 percent last month, the FED is expected to implement another 75 bps rate hike to curb inflation which could negatively impact risk-on assets such as crypto. A high interest-rate environment  could potentially lead to increased selling pressure and profit booking opportunities for crypto investors who witnessed sizeable rallies in the markets recently,” the research team at CoinDCX told Gadgets 360.

Cryptocurrency is an unregulated digital currency, not a legal tender and subject to market risks. The information provided in the article is not intended to be and does not constitute financial advice, trading advice or any other advice or recommendation of any sort offered or endorsed by NDTV. NDTV shall not be responsible for any loss arising from any investment based on any perceived recommendation, forecast or any other information contained in the article. 

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Bitcoin, Ether Rise Again Pulling Up Majority Altcoins, Stablecoins See Dips

Bitcoin opened with gains on Thursday, July 14, days after being burdened with losses. The oldest cryptocurrency opened trading at $20,993 (roughly Rs. 16.70 lakh) after gaining profits by 2.33 percent on Indian exchange CoinSwitch Kuber. Even bigger gains rained over Bitcoin on international exchanges. On Binance and Coinbase for instance, BTC grew by nearly 4.20 percent to trade at $20,286 (roughly Rs. 16 lakh). In the last 24 hours, Bitcoin’s overall value has risen by 3.97 percent, showing signs of recovery.

Ether also found itself on the green side of the price chart as it opened trading on Thursday. Spiking by two percent, ETH is currently trading at $1,151 (roughly Rs. 91,800), Gadgets 360’s crypto price tracker shows.

Among other cryptocurrencies that saw gains, Binance Coin, Ripple, Cardano, Solana, Polkadot, and Tron emerged on the list.

While Shiba Inu reeled-in profits, Dogecoin remained affected by losses.

Talking of losses, Thursday did not open with gains for stablecoins.

Tether, USD Coin, and Binance USD, all saw dips.

Litecoin, Stellar, and Monero also saw losses.

The current market cap of the crypto sector stands at $897 billion (roughly Rs. 71,60,501 crore), as per CoinMarketCap.

In the coming days, the Bitcoin network may encounter some snags because majority BTC mining farms in Texas, US have halted their operations owing to extreme heat conditions. The power supplier of the state has advised BCT miners to take a breather so that power supply in the region is not disrupted.

In other news, the US Treasury has opened gateway for public suggestions on crypto laws. The last date of submitting the suggestions has been decided as August 8.

Cryptocurrency is an unregulated digital currency, not a legal tender and subject to market risks. The information provided in the article is not intended to be and does not constitute financial advice, trading advice or any other advice or recommendation of any sort offered or endorsed by NDTV. NDTV shall not be responsible for any loss arising from any investment based on any perceived recommendation, forecast or any other information contained in the article. 

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