Public Education Efforts on Risks, Costs and Benefits of Using Stablecoins

32 Mr Saktiandi Supaat asked the Prime Minister and Minister for Finance (a) whether the Government will roll out public education efforts to inform Singaporeans of the risks, costs, and benefits of using stablecoins such as Singapore Dollar stablecoin (XSGD); (b) whether the widespread adoption of SGD-backed stablecoins can affect the conduct of Singapore’s monetary policy or currency stability; and (c) whether the Government has evaluated such impacts.

Mr Gan Kim Yong (for the Prime Minister): MoneySense, which is the national financial education programme, has provided regular information to the public about the risks of crypto-assets that have no inherent and fundamental value. Financial institutions in Singapore are not allowed to promote such products to the general public. Stablecoins are a form of crypto-assets that are supposed to maintain a stable value relative to a fixed reference asset, such as the US Dollar or Singapore Dollar (SGD). Stablecoins may be used for payments, and some payments services companies have started introducing the use of stablecoins for retail payments. MoneySense will educate consumers on how stablecoins operate, the risks associated with these products and how to differentiate between unregulated stablecoins and regulated stablecoins.

The Monetary Authority of Singapore (MAS) is preparing legislation for a stablecoins regulatory framework. When implemented, this framework will differentiate MAS-regulated stablecoins, which are backed by high quality reserves, from other crypto-assets, including unregulated stablecoins, which may have no fundamental value or may not be backed by adequate reserves.

Well-regulated stablecoins can play a role in making cross-border payments more efficient. They can also be used in wholesale settlement of tokenised forms of financial assets. There is growing interest by financial institutions to provide multi-currency payment and cash management solutions to corporate customers using stablecoins and tokenised deposits.

Consumers should exercise care when dealing with stablecoins, especially unregulated ones. Stablecoins in general are not as safe as bank deposits in Singapore, as bank deposits are tightly regulated and protected by deposit insurance.

Our current assessment is that the growing use of SGD stablecoins is unlikely to affect currency stability or the conduct of monetary policy. First, the issuance of each SGD-stablecoin would have to be fully backed by SGD cash or high-quality liquid SGD denominated assets. This means there is no new net SGD creation as a direct effect of stablecoins issuance, and hence no impact on domestic monetary stability. Second, the value of SGD stablecoins backed by SGD assets is very small. MAS will monitor developments, but we expect demand internationally to be predominantly for stablecoins pegged to key global reserve currencies.

MAS will continue to closely monitor the growth of SGD stablecoins and stablecoin developments around the world. We advise the public to be cautious about crypto-assets and stablecoins, as these are generally not suitable for retail investors to hold savings and wealth. Larger value savings and investments should be held with licensed banks and regulated investment products.