Lawrence Wong Addresses Regulatory Actions Following Terraform Labs’ Collapse

Lawrence Wong Addresses Regulatory Actions Following Terraform Labs’ Collapse

by May 9, 2024

Deputy Prime Minister and Minister for Finance and Chairman of Monetary Authority of Singapore (MAS) Lawrence Wong, addressed the regulatory aftermath of the Terraform Labs’ collapse in a parliamentary session yesterday (8 May  2024).

Terraform Labs, the company behind the Terra stablecoin, was a Singapore-registered startup not involved in activities requiring a license from the Monetary Authority of Singapore (MAS), and thus, was not licensed.

Wong noted that the fallout from the collapse of TerraUSD, the stablecoin developed by Terraform Labs, was contained within the cryptocurrency sector, with minimal impact on Singapore’s mainstream financial system and economy. He emphasised that local financial institutions have minimal exposure to cryptocurrencies.

Despite the limited spillover, the incident highlighted the speculative and risky nature of cryptocurrencies. MAS has been cautioning the public about these risks since 2017 and restricted cryptocurrency advertising in public spaces in January 2022.

In response to evolving global standards, MAS imposed stricter regulations, aimed primarily at protecting retail consumers.

New measures that will take effect this year include mandatory risk-awareness assessments for customers, bans on trading incentives, and restrictions on providing credit for cryptocurrency transactions.

These regulations also extend to business conduct, requiring platforms to maintain proper asset segregation, conflict of interest assessments, and risk management processes.

In November last year, MAS had also approved stablecoin issuance aligned with its proposed regulatory framework. StraitsX SGD Issuance and StraitsX USD Issuance received approvals for their stablecoins, XSGD and XUSD, pegged 1-1 to the Singapore and US dollars, respectively.

Additionally, Paxos Digital Singapore was authorized to issue a new US dollar-backed stablecoin. Following legislative amendments, these will be recognised as “MAS-regulated stablecoins.”

Lawrence Wong

Lawrence Wong

Wong concluded,

“We also remind those who trade cryptocurrencies that MAS’ rules and regulations cannot prevent monetary losses arising from such activities.

 

Consumers must be aware of the risks of doing so, and understand that cryptocurrencies are highly volatile and have no intrinsic value.”