In-depth Analysis of Global Stablecoin Regulatory Frameworks in Three Regions

1. European Union

1. Regulatory Progress

In June 2023, the European Union officially released the "Regulation on Markets in Crypto-Assets" ( MiCA Regulation ), aimed at establishing a unified regulatory framework for crypto assets. The rules regarding the issuance of stablecoins in this regulation will take effect on June 30, 2024.

2. Regulatory authorities

The European Banking Authority ( EBA ) and the European Securities and Markets Authority ( ESMA ) are responsible for establishing regulatory frameworks and supervising significant stablecoin issuers. The competent authorities of each member state also possess some regulatory powers.

3. Main Content of Regulatory Framework

a. Definition of stablecoin

The MiCA legislation divides stablecoins into two categories:

• Electronic Currency Token ( EMT ): A crypto asset that stabilizes its value by referencing only one official currency.
• Asset reference token ( ART ): A cryptocurrency that stabilizes value by referencing a combination of the values of one or more official currencies.

b. Issuer access threshold

ART issuers are divided into two categories:

1. Obtained authorization from member states as a legal entity or enterprise
2. qualified lending institutions

There are exemptions for issuer qualification requirements, but the white paper filing still needs to be completed.

c. Stablecoin value stabilization mechanism and reserve asset maintenance

• ART issuers must maintain sufficient reserve assets to cover risks and meet redemption demands.
• Reserve assets must be isolated from the issuer's assets and held by a third party.
• Reserve asset investments are limited to low-risk, high-liquidity financial instruments.

d. Compliance requirements in the circulation segment

• Holders have the right to redeem ART at any time.
• Set a cap on the maximum circulation of ART
• Important ART must undertake additional obligations, such as liquidity stress testing, etc.

2. United Arab Emirates

1. Regulatory Progress

In June 2024, the Central Bank of the UAE issued the "Payment Token Service Regulations," clarifying the definition and regulatory framework for stablecoins.

2. Regulatory authorities

The Central Bank of the UAE is responsible for the federal regulation of stablecoins, but not including the DIFC and ADGM financial free zones.

3. Key Content of Regulatory Framework

a. Definition of stablecoin

"A virtual asset designed to maintain stable value by referencing the value of a fiat currency or another stablecoin that is priced in the same currency."

b. Issuer access threshold

The applicant must be the legal person of a UAE registered company, obtain Central Bank approval, and meet initial capital requirements, etc.

c. Stablecoin value stabilization mechanism and reserve asset maintenance

• Establish an effective system to protect and manage reserve assets
• Store reserve assets in cash in a separate custodian account
• The value of reserve assets shall not be less than the total face value of circulating stablecoins in fiat currency.
• Engage an independent third party for monthly audits

d. Compliance requirements for circulation links

• Only as a payment tool, interest is not allowed
• Holders can redeem at any time for fiat currency
• Issuers must comply with anti-money laundering/anti-terrorism financing regulations.
• Formulate a personal data protection policy for users

3. Singapore

1. Regulatory Progress

In December 2019, the "Payment Services Law" was introduced, and in August 2023, the "stablecoin regulatory framework" was released.

2. Regulatory authorities

The Monetary Authority of Singapore ( MAS ) is responsible for regulation.

3. Main content of the regulatory framework

a. Definition of stablecoin

Applicable to single-currency stablecoins issued in Singapore and pegged to the Singapore Dollar or G10 currencies.

b. Issuer Access Threshold

• Minimum capital requirement: not less than 50% of annual operating expenses or 1 million SGD
• Business restrictions: engaging in trading, asset management, and other businesses is not allowed.
• Solvency requirements: maintain sufficient liquid assets

c. stablecoin value stabilization mechanism and reserve asset maintenance

• Reserve assets are limited to cash, cash equivalents, and short-term bonds.
• Establish a fund and open an isolated account to separate reserve assets
• The market value of reserve assets must be higher than the circulation scale of the stablecoin.

d. Compliance requirements for circulation links

The issuer must assume the statutory redemption obligation and redeem at par value within 5 working days.