Singapore’s central bank has proposed changes to the Payment Services Act that would stop licensed issuers from offering yield on regulated stablecoins. The move would give legal force to the Monetary Authority of Singapore’s single-currency stablecoin framework and sharpen the distinction between payment-focused tokens and investment products.
Under the draft amendments, issuers covered by the MAS regime could not provide interest, returns, or other commercial benefits linked directly or indirectly to a user’s stablecoin balance. MAS said the approach is intended to keep regulated stablecoins positioned as a trusted medium of exchange and settlement asset rather than a savings or yield-bearing instrument.
Yield ban at the center of the proposal
The consultation paper makes the proposed prohibition explicit: licensed issuers of MAS-regulated stablecoins would be barred from paying any interest or other benefit connected to holding the token. That restriction would apply whether the benefit is offered directly or structured indirectly.
MAS said the proposed rule is consistent with international regulatory practice. In its framing, a regulated stablecoin should function like a payments tool, not as a product marketed for passive income.
Stronger rules on safeguarding and resilience
The draft package also adds tighter requirements around customer protection and issuer operations. Customer monies received before stablecoins are minted, as well as funds owed during direct redemptions, would need to be safeguarded immediately so that they are ringfenced if an issuer becomes insolvent.
Issuers would also have to run quarterly stress tests covering redemption runs and market shocks. MAS would have the power to require additional capital or liquidity buffers if needed under those conditions.
In addition, regulated issuers would need the technical ability to trace, freeze, and burn stablecoins linked to illicit financial activity. They would also be required to maintain board-approved recovery and orderly wind-down plans, with the expectation that redemption requests are fully met before an exit from the market.
Limits on how unregulated tokens are presented
MAS is also drawing a clearer line between tokens that meet its stablecoin standards and those that do not. Assets outside the framework would continue to be treated as Digital Payment Tokens rather than MAS-regulated stablecoins.
To reduce confusion for retail users, the regulator is considering rules for crypto platforms that offer unregulated stablecoins. These could include mandatory risk warnings, disclosures about backing assets, and possible limits on using the term “stablecoin” in marketing to retail customers when the token is not MAS-regulated.
Cross-border framework and consultation timeline
The proposal goes beyond domestic issuance. It includes measures for multi-jurisdictional stablecoin arrangements, a pathway to recognize certain foreign-regulated stablecoins, and provisions for designating stablecoins whose scale could affect broader financial stability.
MAS has opened the consultation to the public and industry participants, with feedback due by October 16, 2026. The next confirmed step is the consultation process itself, after which MAS will decide whether and how to finalize the legislative amendments.
Source: bitpinas.com