Singapore proposes full reserves and yield ban for stablecoin issuers

The Monetary Authority of Singapore opened a public consultation on September 1 on amendments to the Payment Services Act that would require stablecoin issuers to hold reserves covering all tokens in circulation and bar them from paying yield to holders, according to CoinDesk. The consultation closes on October 16.

Issuers would have to maintain reserve assets equal to at least 100 percent of outstanding tokens at all times, held in accounts separate from their own funds and custodied only with licensed financial institutions. Holders would be able to redeem tokens at par within five business days, according to Coinpedia.

“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,” said Ho Hern Shin, deputy managing director for financial supervision at the authority.

The proposals bar issuers from paying interest or other benefits calculated by reference to a customer’s holdings. The regulator said stablecoins should function as payment instruments rather than investment products or deposit substitutes, and described the approach as aligned with international practice. Both the US GENIUS Act and the European Union’s Markets in Crypto-Assets regulation contain comparable prohibitions.

The framework covers single-currency stablecoins issued in Singapore and pegged to the Singapore dollar or a Group of Ten currency. Only issuers meeting the full requirements could market tokens as MAS-regulated stablecoins, with others treated as digital payment tokens under existing rules. Non-bank issuers above a 5 million Singapore dollar threshold would require a Major Payment Institution licence, while banks would be exempt from licensing but subject to the substantive rules, according to The Crypto Times.

Further measures under consideration include mandatory stress testing, recovery and orderly wind-down plans, and safeguards for customer funds received before tokens are issued. The consultation also raises limited recognition for foreign stablecoins supervised under regimes the authority considers comparable, according to Blockhead.

The consultation supplies the legislative structure for a framework the authority finalised in August 2023. No implementation date has been announced, and the amendments would still need to pass through Singapore’s legislative process.