Singapore sets out strict stablecoin regime

The Monetary Authority of Singapore has published a consultation paper proposing a formal licensing regime for single-currency stablecoin issuers under amendments to the Payment Services Act. The move aims to place these digital tokens within a defined regulatory perimeter by setting clear conditions for issuance and ongoing operations.

Under the proposal, only issuers that meet the new criteria would be able to operate as licensed single-currency stablecoin providers in Singapore. This would create a distinct category of regulated payment instruments separate from other forms of digital tokens.

A central feature of the draft framework is a requirement that stablecoin issuers maintain 100% reserve backing for all tokens in circulation. Reserves must be sufficient at all times to cover the outstanding supply, providing assurance that tokens can be redeemed in full.

Issuers would also be required to guarantee redemption of stablecoins at par value within five business days. This redemption obligation is designed to support confidence in the stability and liquidity of the tokens used for payments.

The consultation proposes prohibiting stablecoin issuers from paying interest or any other form of yield on stablecoin holdings. This restriction is intended to distinguish payment-focused stablecoins from products that resemble interest-bearing deposits or investment instruments.

By blocking yield payments, the rules would limit the ways issuers can incentivise users to hold stablecoins, potentially affecting product design and how stablecoins are marketed to consumers and businesses.

The draft framework includes a range of operational guardrails, such as quarterly stress testing to assess issuers’ resilience under adverse conditions. Issuers would also need to prepare recovery and orderly wind-down plans to manage severe disruptions or failures.

The combination of capital, testing and operational requirements is described as creating a significant barrier to entry. These demands are expected to limit the number of stablecoin issuers able or willing to meet the standards required for authorisation.

The consultation also addresses cross-border activity, contemplating limited recognition for certain foreign-linked stablecoins. Joint Singapore-foreign issuance could be permitted on a case-by-case basis, subject to regulatory assessment.

Foreign-issued stablecoins that are regulated under comparable overseas frameworks may receive limited recognition in Singapore. The consultation cites the EU’s Markets in Crypto-Assets (MiCA) regime as an example of a framework that could be considered comparable for this purpose.

These cross-border provisions signal how Singapore may position its stablecoin rules alongside other major jurisdictions, while still retaining discretion over which foreign tokens can access its market.