Stablecoins are a type of cryptocurrency that is widely used in trading and other operations related to cryptocurrency. What is special about them is that, unlike many known cryptocurrencies, their exchange rate is as stable as possible as their value is regulated according to the current exchange rate of a particular cryptocurrency.
Stablecoins are widely used in trading since they remove the necessity to convert cryptocurrency to fiat currency and are also used for money transfers, as they correspond directly to certain fiat currencies.
Although allegedly stable, stablecoins have never been regulated, which caused some ambiguity, which is undesirable on various occasions, especially in the official domains.
Now Singapore has made the first attempt in history to put forward certain general regulations for stablecoin value. These are:
- ​Stablecoins must maintain their reserves in assets that have minimal risk and can be easily converted to cash. These assets should be valued at the same price or higher than the stablecoins they back.
- When someone requests to redeem their stablecoins, the issuer must return the full face value of the stablecoins within 5 days.
- Furthermore, issuers are required to provide clear and comprehensive information to users. This includes sharing the outcomes of audits related to the reserves they hold.
The collapse of the UST stablecoin that took place about a year ago was an incentive for many institutions to consider the possibility of regulating cryptocurrency.
One initiative was put forward by Great Britain with regulators gaining the right to supervise stable coins yet without special regulations on how it’s to be done. Hong Kong is in turn conducting vivid discussions on stablecoin regulations, that are planned to be introduced the following year.
