Deputy Prime Minister and Minister of Finance and President Monetary Authority of Singapore (MAS) Lawrence Wong spoke about the regulatory implications of the Terraform Labs collapse in a parliamentary session yesterday (May 8, 2024).
Terraform Labs, the company behind the Terra stablecoin, was a Singapore-registered startup that did not engage in activities that required a license from the Monetary Authority of Singapore (MAS), and therefore did not have a license.
Wong stated as a result The collapse of TerraUSD, a stablecoin developed by Terraform Labs, which was part of the cryptocurrency sector, had little impact on Singapore's financial system and economy. He stressed that local financial institutions have minimal exposure to cryptocurrencies.
Despite the limited outflow, the incident highlighted the speculative and risky nature of cryptocurrencies. MAS has been warning the public about these risks since 2017 and has restricted cryptocurrency advertising in public spaces since January 2022.
In response to evolving global standards, MAS established stricter rulesmainly aimed at protecting retail consumers.
New measures coming into force this year include mandatory risk assessments for customers, bans on trade incentives and restrictions on lending for cryptocurrency transactions.
These regulations also extend to business conduct, requiring the platform to maintain proper asset segregation, conflict of interest assessments and risk management processes.
In November last year, he also had MAS accepted Stablecoin issuance is consistent with the proposed regulatory framework. StraitsX SGD Issuance and StraitsX USD Issuance received approval for their stablecoins, XSGD and XUSD, 1-1 with Singapore and US dollars, respectively.
Additionally, Paxos Digital Singapore was authorized to issue a new stablecoin backed by the US dollar. After the legal changes, these will be recognized as “MAS regulated stablecoins”.
Lawrence Wong
Wong concluded,
“We also remind those who trade cryptocurrencies that the rules and regulations of MAS cannot prevent financial losses arising from such activities.
Consumers should be aware of the risks of doing so, and understand that cryptocurrencies are highly volatile and have no intrinsic value.'
