Singapore Plan Would Ban Interest on Mas-regulated Stablecoins

Singapore’s central bank, the Monetary Authority of Singapore (MAS), has proposed a sweeping legislative overhaul that would prohibit interest payments on stablecoins approved under its regulatory framework, while introducing mandatory stress tests, recovery plans, and stronger customer asset protections. The proposed amendments to the Payment Services Act 2019, released for public consultation on September 1, also open the door for jointly issued stablecoins and a limited set of foreign-regulated tokens to qualify for the “MAS-regulated stablecoin” designation, provided they meet stringent risk and governance standards. The move marks a significant tightening of Singapore’s stablecoin regime, first adopted in 2023, and signals that MAS is prioritizing financial stability and consumer safeguards over yield-bearing digital assets. The consultation period runs through early October, with the regulator aiming to finalize legislation by year-end. Prohibition on Interest Payments and Expanded Safeguards Under the proposed changes, any issuer holding a MAS license under the Single-Currency Stablecoin (SCS) framework would be explicitly barred from offering interest or any form of yield on its stablecoins. Tokens outside the SCS framework would remain classified as digital payment tokens and would continue to fall under Singapore’s existing consumer protection rules for those assets. The consultation document outlines a raft of new requirements for qualifying issuers: Stress testing - Mandatory scenario analysis to assess resilience under adverse market conditions. Recovery planning - Issuers must draft and maintain a plan to restore compliance and value stability in the event of a breach. Orderly wind-down arrangements - Procedures to redeem tokens and return customer funds if the issuer ceases operations. Protection of pre-issuance customer funds - Safeguards for money received from customers before stablecoins are minted. MAS Deputy Managing Director for Financial Supervision Ho Hern Shin stated: “MAS’ proposed legislative amendments will give effect to a stablecoin framework that promotes responsible financial innovation. The framework will provide clear regulatory guardrails for stablecoins that meet high standards of value stability and governance.” She added: “This is important as asset tokenisation gains traction. Trusted and well-regulated stablecoins can serve as a credible settlement asset in tokenised financial markets, while mitigating risks to users and the broader financial system.” Scope of the Framework and Eligibility Criteria The existing SCS framework, finalized in 2023, applies only to single-currency stablecoins issued in Singapore and pegged to the Singapore dollar (SGD) or a Group of 10 (G10) currency. The G10 list includes: U.S. dollar (USD) Euro (EUR) Japanese yen (JPY) Pound sterling (GBP) Swiss franc (CHF) Canadian dollar (CAD) Australian dollar (AUD) New Zealand dollar (NZD) Norwegian krone (NOK) Swedish krona (SEK) The original framework established requirements covering reserve assets, minimum capital, timely redemption at par, and comprehensive disclosures. The new proposals expand that structure in two key directions. Jointly Issued Stablecoins MAS is now willing to consider stablecoins jointly issued by a Singaporean entity and a foreign affiliate as eligible for the MAS-regulated label, provided the combined operational and regulatory risks are sufficiently mitigated. The jointly issued token must meet all SCS requirements, and the foreign entity must be subject to a comparable supervisory regime. Selected Foreign-regulated Stablecoins The regulator is also exploring the recognition of a limited number of foreign-issued stablecoins that are supervised under regulatory frameworks Singapore deems comparable to its own. Recognition would be selective, not automatic, and would not extend to every stablecoin regulated by an overseas authority. Qualifying foreign-issued stablecoins could support cross-border wholesale transactions, such as settling tokenized securities or interbank payments. Stablecoin Category Eligibility for MAS-Regulated Label Key Conditions Domestically issued single-currency (SGD or G10) ✅ Yes SCS license, full reserve backing, redemption at par, no interest Jointly issued (Singapore + foreign entity) ✅ Yes, case-by-case Combined risks must be mitigated; foreign entity under comparable supervision Foreign-issued, non-G10 ❌ No Not eligible for the label Foreign-issued, G10-pegged (e.g., USDC, EURC) ✅ Limited, selective Framework must be deemed comparable by MAS; only for wholesale transactions Any stablecoin offering interest ❌ Prohibited Interest payments banned entirely for MAS-regulated tokens Cross-border Recognition and Tokenized Settlement Integration The cross-border proposals arrive alongside separate MAS work on tokenized settlement, which the central bank has been testing with industry through Project Guardian and other initiatives. MAS previously finalized the regime’s features on reserve backing and redemption reliability while preparing draft legislation, alongside trials of regulated stablecoins and tokenized bank liabilities. The consultation notes that recognized foreign stablecoins would be permitted primarily for wholesale, institutional use cases, not for retail circulation within Singapore. Jointly issued tokens, by contrast, could carry the MAS-regulated label and be used for both retail and wholesale transactions if they meet all operational and regulatory standards. MAS is also seeking feedback on capital requirements, value stability mechanisms, and disclosure standards for issuers. The regulator has indicated that any stablecoin that fails to maintain a consistent peg or that exhibits material volatility could face immediate suspension or revocation of its MAS-regulated status. Market and Industry Reaction The prohibition on interest payments is expected to have the most immediate impact on the stablecoin industry in Singapore. Several issuers, including those experimenting with yield-bearing stablecoins (e.g., through staking of reserve assets), will need to restructure their products to comply. The ban aligns with global trends - the European Union’s Markets in Crypto-Assets (MiCA) regulation also prohibits interest on asset-referenced tokens and e-money tokens. Analysts noted that the move could reduce the appeal of MAS-regulated stablecoins for yield-seeking investors, but could enhance trust and stability for institutional users. The selective recognition of foreign stablecoins opens a pathway for major issuers like Circle (USDC) and potentially others to seek MAS recognition, though the bar is set high. Industry participants have until October 5 to submit comments to MAS. The regulator expects to publish a final set of legislative amendments in the first quarter of 2025, with the new rules taking effect by mid-2025. What Are the Key Changes in MAS’s Proposed Stablecoin Rules? The proposed amendments to the Payment Services Act 2019 would ban interest payments on MAS-regulated stablecoins, introduce stress testing and recovery planning requirements, and expand the framework to cover jointly issued and selected foreign-regulated stablecoins. Will Singapore Allow Foreign Stablecoins Like USDC or Eurc? MAS is considering recognizing a limited number of foreign-issued stablecoins that are supervised under regulatory frameworks deemed comparable to Singapore’s, but only for wholesale cross-border transactions. Recognition will be selective, not automatic. Why Is Mas Banning Interest on Stablecoins? The ban is designed to prevent stablecoins from being marketed as yield-bearing instruments, which could blur the line between stablecoins and investment products. MAS wants stablecoins to function strictly as reliable settlement assets, not as speculative yield tools. What Happens to Existing Stablecoin Issuers in Singapore? Issuers currently offering interest or yield on their stablecoins will need to discontinue those features if they wish to obtain or maintain the MAS-regulated label. Tokens that do not comply will remain classified as digital payment tokens under existing consumer protection rules. How Does This Compare to the EU’s Mica Stablecoin Rules? Both MAS and the EU’s MiCA framework prohibit interest on stablecoins, require full reserve backing, and mandate redemption at par. However, MAS’s proposal is more selective regarding foreign recognition, while MiCA allows any EU-authorised stablecoin to circulate across the bloc automatically.