The Monetary Authority of Singapore (MAS) released a new consultation proposing strict regulations for local stablecoins, including a total ban on interest payments. The proposed framework mandates mandatory stress tests, formal recovery plans, and enhanced customer protections. Furthermore, MAS outlined potential pathways to recognize selected foreign-regulated or jointly issued stablecoins within the country’s financial system.
MAS Proposes Interest Ban and Stronger Safeguards for Stablecoin Issuers
New legislative updates to the Payment Services Act 2019 were proposed by the Monetary Authority of Singapore (MAS) on Sept. 1, banning interest payouts on locally regulated stablecoins while tightening financial protections. These amendments outline specific eligibility criteria for issuer oversight and define which digital assets can officially carry the “MAS-regulated stablecoin” label.
Under the Single-Currency Stablecoin framework, only licensed issuers can market themselves as official MAS-regulated entities. Unregulated digital assets remain categorized as standard digital payment tokens, leaving them governed by Singapore’s baseline consumer protection rules for cryptocurrency assets.
“Responsible financial innovation will be promoted through MAS’ proposed legislative amendments to establish a robust stablecoin framework. This regulatory structure provides clear guardrails for digital assets maintaining high standards of governance and value stability,” stated Ho Hern Shin, MAS Deputy Managing Director for Financial Supervision, who further noted:
“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.”
Feedback on capital reserves, value stability, par redemptions, and disclosure standards for token issuers is actively sought in the latest regulatory consultation. The proposed measures mandate comprehensive stress testing, recovery strategy planning, orderly wind-down procedures, and the strict protection of customer funds collected prior to token minting.
Foreign Stablecoins Could Qualify Through Limited Pathways
The original regulatory framework covers single-currency stablecoins minted domestically and pegged either to the Singapore dollar or a Group of Ten (G10) currency. Included in the G10 category are the U.S. dollar, euro, yen, pound sterling, Swiss franc, Canadian dollar, Australian dollar, New Zealand dollar, Norwegian krone, and Swedish krona. Introduced in 2023, the guidelines established strict requirements regarding reserve backing, minimum capital reserves, prompt redemptions, and transparency disclosures for qualifying issuers.
The current framework would be expanded under these new proposals to allow joint stablecoin issuances by local and overseas entities, provided all associated risks are properly mitigated. Additionally, MAS is evaluating the recognition of select foreign-issued stablecoins managed under international regulatory regimes that Singapore considers equivalent to its own standards.
These cross-border proposals arrive alongside ongoing MAS initiatives on tokenized settlement, which the central bank continues to test with industry partners. Core features regarding reserve backing and redemption reliability were previously finalized by MAS during draft legislation preparation, conducted in parallel with trials involving regulated stablecoins and tokenized bank liabilities.
Selective recognition would be maintained rather than applied automatically, ensuring that not every overseas-regulated stablecoin receives approval. Eligible foreign-issued tokens could facilitate international wholesale transactions, whereas jointly issued digital assets can carry the official MAS-regulated label provided their operational and regulatory risk profiles meet strict central bank criteria.
Interest Ban Would Prevent Issuers From Paying Holders
A ban on paying interest on MAS-regulated stablecoins is introduced under the proposed update, marking one of several key enhancements outlined by MAS alongside the licensing amendments.
Limitations on issuer-funded yields have emerged as a central debate among international regulators drafting stablecoin rules. An economic analysis of stablecoin return caps was conducted by the White House to evaluate whether such restrictions safeguard traditional bank lending by curbing competition from interest-yielding digital assets.
Fixed valuations are generally targeted by stablecoins through cash reserves, collateral pools, redemption systems, or market incentive models. Structural designs vary significantly across the industry, with yield-generating tokens introducing distinct risk profiles compared to payment-focused digital assets backed by cash and liquid holdings.
Public feedback on the proposed legislation and associated policy positions is being accepted by MAS through Oct. 16. Because the consultation period remains open, key measures—including the interest payout ban, foreign-recognition channels, and heightened protective guardrails—remain pending proposals rather than active, enforceable regulations.
