Singapore Sounds Alarm on ‘Unstable’ Stablecoins as Risks Mount Ahead of New Rules`
Singapore is escalating its warning to the global crypto industry: unstable stablecoins may be quietly endangering the broader economy. Speaking at the Singapore FinTech Festival, Monetary Authority of Singapore (MAS) Managing Director Chia Der Jiun warned that many unregulated stablecoins “have a patchy record of keeping their peg” — a flaw that could trigger wider financial stress if left unaddressed.
Chia’s comments come as Singapore prepares to roll out one of the world’s most comprehensive regulatory frameworks for stablecoins. But his tone signaled a deeper message: the era in which lightly supervised stablecoins can operate freely across financial systems is quickly coming to an end.
Stablecoins have long been marketed as the backbone of the digital asset economy — fast, borderless, and interoperable across applications. But in Chia’s view, these features mean nothing if the asset cannot reliably hold its value. Peg failures, he warned, carry the potential to undermine trust in digital money as a whole, especially as tokenized financial systems continue to scale.
To illustrate the severity of the risk, Chia compared stablecoin depeggings to the 2008 money market fund runs — a financial shock that triggered widespread panic after assets once considered “safe” suddenly wobbled. Even a small breach of confidence, he said, can catalyze a rush of withdrawals and destabilize the market. The implication was clear: the crypto industry may be underestimating how quickly instability can spread.
Against this backdrop, MAS is finalizing its stablecoin regulatory framework, first announced in August 2024. The rules will draw a sharp line between fully regulated, reserve-backed stablecoins and all other digital tokens. According to Chia, only stablecoins with credible reserve backing, robust redemption guarantees, and strong oversight will be recognized as settlement-grade assets suitable for large-scale financial use.
In practical terms, Singapore is preparing to push out unregulated stablecoins from areas of the financial system where stability is paramount — especially for institutional transactions and cross-border settlements.
Chia emphasized that the “next phase of digital money” requires three pillars: speed, programmability, and stability. While stablecoins have succeeded in the first two, he said the third remains dangerously weak for many issuers. Without solid reserves and enforceable redemption rights, confidence can unravel quickly, causing failures that ripple across markets and erode trust in digital payments.
But stablecoins are only part of Singapore’s broader digital money roadmap. MAS is also actively testing wholesale central bank digital currency (CBDC) issuance and tokenized bank liabilities under its BLOOM initiative — short for Borderless, Liquid, Open, Online, Multicurrency. These trials aim to understand how different forms of digital money can interact within a fully tokenized financial infrastructure.
MAS has invited financial institutions, settlement networks, and market operators to participate, signaling that Singapore’s long-term goal is to build a unified, resilient digital settlement layer where stability is a baseline requirement, not an optional feature.
Chia added that the regulatory framework may evolve further as the market matures. If certain regulated stablecoins become systemically important, authorities may introduce tighter controls, expand cross-border cooperation, and possibly give such issuers access to central bank facilities — a move that would blur the line between private digital money and public monetary infrastructure.
The message from Singapore is unmistakable: digital finance is entering a new era where stability is non-negotiable. For stablecoin issuers, the bar is rising — and only those with strong reserves, transparency, and regulatory supervision are likely to survive.