Singapore’s Monetary Authority published a consultation paper on proposed amendments to the Payment Services Act 2019 that would give its stablecoin framework legal force, including a ban on paying interest to holders of regulated stablecoins.
The consultation, opened September 1, sets out how stablecoin issuers can qualify as MAS-regulated entities and the safeguards they must meet for value stability and user protection. Comments are due by October 16.
Under the proposed rules, only licensed issuers may label their products as “MAS-regulated stablecoins.” Unregulated stablecoins would be treated as digital payment tokens subject to existing consumer protection rules. The framework targets single-currency stablecoins issued in Singapore and pegged to the Singapore dollar or a G10 currency. It does not cover algorithmic stablecoins or multi-currency tokens, both of which fall outside the single-currency scope.
MAS Deputy Managing Director Ho Hern Shin said the amendments would “promote responsible financial innovation” and “provide clear regulatory guardrails for stablecoins that meet high standards of value stability and governance.” The consultation builds on MAS’s 2023 single-currency stablecoin framework, which was voluntary and lacked the legislative teeth to enforce compliance. The new amendments would convert that framework into enforceable law.
Yield Ban and Stress Testing
The most striking provision is the interest prohibition. Issuers of MAS-regulated stablecoins would be barred from paying interest, returns, or any other benefit attributable to holding the token. MAS argues stablecoins should function as payment instruments rather than investment products, a stance that puts it at odds with issuers like Circle, which has explored yield-bearing USDC products, and decentralized finance protocols that offer staking returns on stablecoin deposits.
The yield ban could reshape how stablecoin issuers structure their products in Asia. Tether and Circle, which together control more than 80% of the global stablecoin market, would need to decide whether to offer stripped-down versions of their tokens in Singapore or forgo the MAS-regulated label entirely. Smaller issuers that have built their business models around passing reserve yields to holders would face an even tougher choice.
Beyond the yield ban, the framework requires quarterly stress testing and forces issuers to maintain recovery and orderly wind-down plans. Issuers would also need technical capabilities to trace, freeze, and burn stablecoins linked to illicit activity, a provision that echoes similar requirements under the EU’s Markets in Crypto-Assets regulation. The stress testing requirement is particularly notable because it mirrors what regulators demand of traditional banks, signaling that MAS views stablecoin issuers as potential systemic actors rather than fintech startups.
Customer monies received before tokens are issued must be safeguarded, extending duties already applied to existing Payment Services Act licensees. The regulator proposes criminal penalties for entities that represent their stablecoins as MAS-regulated without authorization, a holding-out prohibition that would carry real enforcement consequences. This goes further than most other jurisdictions, which typically rely on civil penalties or administrative sanctions for unauthorized use of regulatory labels.
Cross-Border Provisions
MAS also proposes allowing stablecoins jointly issued by a Singapore and foreign issuer to qualify as MAS-regulated, provided risks are sufficiently mitigated. The regulator would recognize a limited number of foreign-issued stablecoins regulated under comparable frameworks, a move aimed at supporting cross-border wholesale use cases where tokens settle trades across jurisdictions.
The proposal extends to designating certain stablecoins as “Designated Systemic Stablecoins” regardless of where they are issued, giving MAS power over tokens that could pose risks to financial stability. This mirrors language in the EU’s MiCA regulation and the US stablecoin bill, both of which include systemic risk designations for large-scale issuers. The designation power would apply even to tokens issued outside Singapore if they gain sufficient adoption in the city-state’s financial system.
Singapore’s multi-jurisdictional issuance provision could become a template for other Asian regulators. By allowing joint issuance with foreign entities, MAS is acknowledging that stablecoins are inherently cross-border instruments that do not fit neatly into single-country regulatory frameworks. The provision also opens the door for Singapore-based firms to partner with foreign issuers to create products that meet MAS standards while serving global markets.
A Global Race With Different Rules
The consultation arrives as stablecoin regulation accelerates globally. The EU’s MiCA framework already governs stablecoin issuers. Japan reformed its crypto framework earlier this year, shifting oversight from the Payment Services Act to the Financial Instruments and Exchange Act. The US CLARITY Act has stalled in Congress, with a Senate procedural vote expected mid-September.
Singapore’s approach differs from all three by explicitly banning yield on regulated stablecoins. The restriction effectively bars stablecoin issuers from competing with bank deposit rates, which could push users toward unregulated alternatives or offshore platforms. It also creates an asymmetry: banks in Singapore can pay interest on deposits, but stablecoin issuers cannot.
The consultation paper signals that Singapore views stablecoins as infrastructure for tokenized financial markets rather than speculative assets. MAS is building toward a world where regulated stablecoins settle tokenized bonds, funds, and equities, a path it has been developing through Project Guardian and related initiatives. The emphasis on settlement utility over investment returns reflects a regulatory philosophy that treats stablecoins as plumbing, not products.
What Comes Next
MAS will accept public comments through October 16. If adopted, the amendments would convert the 2023 MAS-SCS framework from a voluntary guidelines regime into enforceable law with real penalties.
Whether the interest ban proves workable will depend on how competitors position their products under the new rules. Circle, Tether, and emerging yield-bearing protocols may need to choose between forgoing the MAS-regulated label or stripping yield features for Singapore users. The consultation paper does not address whether yield from underlying reserve assets, such as Treasury bills, would count as interest prohibited under the framework, a question that could determine how much value issuers can still extract from regulated stablecoins.
For the broader stablecoin industry, the MAS proposal sets a precedent that other regulators may follow. If Singapore can build a functional regulated stablecoin market without yield, it weakens the argument that stablecoins need investment returns to compete with traditional payment methods. Whether that argument holds up in practice remains to be seen.
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