Singapore Plan Would Ban Interest on MAS-Regulated Stablecoins

MAS Proposes Interest Ban and Stronger Issuer Safeguards

The Monetary Authority of Singapore (MAS) proposed legislative changes Sept. 1 that would prohibit interest payments on MAS-regulated stablecoins and introduce stronger financial safeguards. The proposed amendments to the Payment Services Act 2019 would establish how issuers qualify for MAS supervision and which tokens may use the “MAS-regulated stablecoin” designation.

Only issuers licensed under the Single-Currency Stablecoin framework could describe themselves as licensed MAS-regulated stablecoin issuers. Tokens outside the framework would remain classified as digital payment tokens and subject to Singapore’s existing consumer protection rules for those assets.

“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,” MAS Deputy Managing Director for Financial Supervision Ho Hern Shin said, adding:

“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.”

The stablecoin consultation also seeks feedback on capital, value stability, redemption at par, and disclosure requirements for issuers. Proposed enhancements include stress testing, recovery planning, orderly wind-down arrangements, and protection of customer funds received before stablecoins are issued.

Foreign Stablecoins Could Qualify Under Limited Pathways

Singapore’s original framework applies to single-currency stablecoins issued domestically and pegged to the Singapore dollar or a Group of 10 (G10) currency. The G10 list covers the U.S. dollar, euro, yen, pound sterling, Swiss franc, Canadian dollar, Australian dollar, New Zealand dollar, Norwegian krone, and Swedish krona. The framework adopted in 2023 established requirements covering reserve assets, minimum capital, timely redemption, and disclosures for qualifying issuers.

The new proposals would expand that structure by allowing stablecoins jointly issued by Singaporean and foreign entities to qualify when their risks are sufficiently mitigated. MAS is also considering recognizing a limited number of foreign-issued stablecoins supervised under regulatory frameworks that Singapore determines are comparable.

The cross-border proposals arrive alongside separate MAS work on tokenized settlement, which the central bank has been testing with industry. 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.

Recognition would stay selective rather than automatic, and would not extend to every stablecoin regulated by an overseas authority. Qualifying foreign-issued stablecoins could support cross-border wholesale transactions, while jointly issued tokens could carry the MAS-regulated label if their operational and regulatory risks meet the authority’s standards.

Interest Ban Would Bar Issuers From Paying Holders

The proposed prohibition would bar issuers from paying interest on MAS-regulated stablecoins, one of several enhancements MAS set out alongside the licensing amendments.

Restrictions on issuer-paid returns have become a prominent policy question in other jurisdictions writing stablecoin rules. A White House economic analysis of stablecoin yield restrictions examined whether such rules would protect bank lending by limiting competition from interest-bearing digital tokens.

Stablecoins generally seek to maintain a fixed value through reserves, collateral, redemption mechanisms, or related market incentives. Their structures vary considerably, with yield-bearing stablecoin designs presenting different risks from payment tokens backed by cash and liquid assets.

MAS is accepting public comments on the proposed legislation and related policy positions through Oct. 16. The consultation remains open, meaning the interest prohibition, foreign-recognition pathways, and expanded safeguards are proposals rather than rules currently in force.