Review of Web 3.0 Panel | Opportunities and Challenges of Stablecoins under the Singapore Regulatory Framework

The concept of RWA (Real-World Assets) is undoubtedly one of the hottest topics currently, and tokenizing them has become a significant channel for value capture. They represent digital solutions and liquidity options for various actual assets in the real world.

Among all asset classes, fiat-collateralized stablecoins are undoubtedly heavyweight participants. However, regulatory uncertainties remain one of the biggest obstacles to their development. As Liang Xinjun, co-founder of Fosun Group, said during the roundtable discussion on “Opportunities and Challenges under the new MAS Stablecoin Regulatory Framework” in Singapore on September 12, “Regulatory affinity determines the application scenarios of stablecoins.”

So, for the stablecoin race, are there still opportunities for newcomers? Which type holds more potential? Liang Xinjun believes, “Newly issued USD stablecoins face enormous regulatory pressure from the US. Once launched, they might be on a countdown to demise. Stablecoins of other currencies, however, have great potential because people are always willing to give them a try, especially if they haven’t experienced losses with them yet.” Moreover, he sees great potential in stablecoins linked to a continuous exchange rate of the USD, as they are not USD, but are tied to it. They are backed by multi-currency reserves held in various banks, pegged 1:1 in cash form — this aligns with the regulatory framework in Singapore.

Speaking of Singapore’s stablecoin regulatory framework, roundtable participants delved deep into its nuances.

Ben He, founder of imToken, believes that Singapore’s issuance of stablecoins extends traditional Emoney and is now clearly categorized under DPT (Digital Payment Token). There are three key elements: a 100% hard peg; the ability to retrieve the equivalent purchasing power in fiat or other currency; and effective communication with the user ecosystem. Regardless of whether it’s PayPal or VISA, they can leverage distributed ledgers in blockchain to issue stablecoins, integrating them alongside their existing payment and settlement networks. This development holds immense promise and acts as a potent catalyst for the entire ecosystem’s growth.

DCS Fintech Holdings CEO, Charles Huang, states that under Singapore’s stablecoin regulatory framework, the regulations for Fintech/payment company issuers and those with banking licenses are distinct. The former needs to apply for an SCS license, operate as an independent entity, refrain from other business activities, and must deposit the custodial funds in banks. They are permitted to issue stablecoins pegged to top currencies like the US dollar, Euro, and Yen. The latter assumes the liability of banks, requiring a 100% hard peg. Clients must be able to retrieve their funds at any time. Ultimately, the stability of stablecoins is guaranteed by the creditworthiness of Singaporean banks. Transitioning from traditional banking T+2, T+3, or even some T+7 settlement cycles, the introduction of stablecoins facilitates instant transfers. This can enhance settlement efficiency, foster cross-border fund flows, stimulate payment innovation, and address security concerns.

Sun Lulin, founder of PlatON, emphasized that the term ‘StableCoin’ and its perception will evolve over the years. Fundamentally, only the M0 issued by central banks, be it on centralized ledgers or decentralized ones, can be legally recognized as stable. Most stablecoins issued today by commercial banks and other entities are essentially M2.

He believes the logic behind issuing stablecoins is divided into three layers: the first layer is trustless, functioning on public chains essentially as a clearing center, resembling the accounting ledgers of central banks. The next layer consists of tools such as wallets and other formal verification tools, and is trustworthy. The topmost layer is the banking sector, which is trusted and must be licensed. Not every level can be decentralized; any large-scale commercial activity or service targeting users must have the requisite licenses.

Concerning public chains, Sun Lulin pointed out that most public chains today face challenges as they position themselves as payment tools. Regulatory hurdles will inevitably arise. Only by genuinely serving as a utility platform can public chains progress in line with regulations. “No application is exclusive to Web3; Web3 is merely a capability.”

Currently, PlatON has made some advancements in the realm of fully decentralized clearing network construction, which will be showcased at the Hong Kong Fintech Week. Stay tuned!