Singapore's Monetary Authority Advances Digital Money Plans with Focus on Regulated Stablecoins

The Monetary Authority of Singapore (MAS) has unveiled its digital money plans, emphasizing regulated stablecoins, tokenized deposits, and central bank digital currencies (CBDCs). While stablecoin regulations are expected to come into force in a year, MAS has granted approval to subsidiaries of StraitsX and Paxos to issue stablecoins. The regulatory framework points towards potential differences in these stablecoins, which might settle on privately controlled ledgers even if available on multiple public blockchains.

Key Points from MAS's Project Orchid Paper:

1. Regulated Stablecoins and Tokenized Deposits on Orchid Compatible Ledgers (OCLs): MAS's vision for regulated stablecoins and tokenized deposits involves settling on "Orchid compatible ledgers." These ledgers must be under the control of a defined operator, complying with legal and regulatory requirements.
2. Private Control and Permissionless Networks: The paper suggests that permissionless networks allowing anyone to view, edit, and conduct activities may not meet the qualifications as an Orchid compatible ledger. This indicates a departure from the current operation of stablecoins on public blockchains.
3. Potential Setup: One possibility is the existence of a private master ledger logging transactions across all blockchains where the stablecoin is issued. This master ledger could function as a central securities depository (CSD) for digital currencies, serving as the legal settlement layer.

Paxos and StraitsX Involvement:

1. Paxos: Paxos, known for issuing stablecoins like Paxos USD and PayPal's stablecoin, received in-principle approval from MAS for a new subsidiary, Paxos Digital Singapore. Paxos aims to provide regulated Singapore-based USD stablecoins in collaboration with enterprise clients.
2. StraitsX: StraitsX is creating two legal entities, StraitsX SGD Issuance for the existing XSGD stablecoin and Straits X USD Issuance. XSGD is issued on multiple public blockchains.

Notable Considerations:

1. Stablecoins on Ethereum: Paxos responded, mentioning that the Singapore stablecoins will be issued on Ethereum and operate similarly to existing tokens.
2. Private Ledger Requirement: It's uncertain if the private ledger requirement was present in the Singapore stablecoin framework published in August.

MAS's move reflects a nuanced approach to digital money, introducing regulatory considerations that may impact the design and operation of stablecoins in Singapore.