Singapore Weighs Full-Reserve Rules and Yield Ban for Stablecoin Issuers

Singapore’s financial regulator has proposed new stablecoin requirements that would force issuers to maintain full reserves against tokens in circulation and prohibit them from offering interest or other yield-related benefits.

The Monetary Authority of Singapore (MAS) said the proposed amendments to the Payment Services Act would require stablecoin issuers to hold assets equivalent to at least 100% of their outstanding tokens at all times.

Those reserve assets would have to be kept separately from the issuer’s own funds and held with licensed financial institutions, providing greater protection for stablecoin holders.

The proposed framework is designed to strengthen redemption protections for users of Singapore-regulated stablecoins. Issuers would need to maintain adequate reserves and protect those assets while customers are waiting to redeem their tokens.

MAS said stablecoins should primarily function as payment instruments rather than investment products. The regulator also wants to prevent the public from using stablecoins as a way to generate returns similar to interest earned on bank deposits.

Under the proposed rules, issuers would be prohibited from paying interest or providing other benefits based on how long customers hold their stablecoins. MAS said the approach is consistent with international regulatory standards.

The US GENIUS Act and the European Union’s Markets in Crypto-Assets (MiCA) framework similarly prohibit stablecoin issuers from offering interest or yield on their tokens.

“MAS’s stance remains that while stablecoins may be used for payments, they should not be used by the public as investment products or for the generation of yield, akin to bank deposit,” the proposed legislation states.

Ho Hern Shin, MAS deputy managing director for financial supervision, said properly regulated stablecoins could become reliable settlement assets for tokenized financial markets while reducing risks to users and the wider financial system.

Foreign Stablecoins Could Receive Limited Recognition

The consultation also proposes a framework for recognizing a limited number of foreign stablecoins issued under overseas regulatory regimes considered comparable to Singapore’s.

However, several details remain unresolved, including how the recognition process would operate, how regulatory responsibilities would be allocated for jointly issued stablecoins and whether existing Singapore-based issuers would receive transitional arrangements.

MAS first sought public feedback on its stablecoin framework in October 2022 and released its response in August 2023. The latest consultation is open until Oct. 16, while a separate consultation on subsidiary legislation will take place later.

The regulator has not yet announced when the new requirements would take effect.

Stablecoin Testing Already Underway

The proposed rules arrive as regulated stablecoins are increasingly being tested in Singapore’s financial system.

Ripple is exploring whether its RLUSD stablecoin could replace manual payment procedures that have historically slowed cross-border trade. The project is being tested through Singapore’s central bank sandbox, a controlled environment that allows companies to experiment with financial technology under regulatory supervision.

The trial forms part of BLOOM, a MAS initiative designed to expand settlement capabilities involving tokenized bank liabilities and regulated stablecoins.

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