Introduction

Singapore was one of the first major financial centres to publish a stablecoin framework, but for three years it existed only as policy. That is about to change. On 1 September the Monetary Authority of Singapore (MAS) published proposed amendments to the Payment Services Act that would put the framework into law, create a new licence and widen its scope to include foreign stablecoins. Comments close on 16 October.

From policy to statute

The proposals introduce a new stablecoin issuance licence. Only licensed issuers could describe their tokens as “MAS-regulated stablecoins”. MAS would also have a new power to name any stablecoin a “designated systemic stablecoin” if needed to protect financial stability. Issuers of such coins would have to meet broadly the same standards, or face limits on circulation in Singapore.

The framework would now cover three types of stablecoin:

The core requirements

For MAS-regulated stablecoins, the proposals include:

• Reserves: a separate pool worth at least 100% of the par value of coins in circulation, held in segregated accounts on trust.
• Redemption: holders can redeem at par within a timeframe MAS will set.
• Stress testing: at least quarterly, with results shared with MAS.
• Recovery and wind-down: plans submitted every year, with the funding behind them independently verified.
• Safeguarding: customer money held from payment until the tokens are delivered.
• AML/CFT: customer due diligence, the travel rule, and the technical ability to trace, freeze or burn tokens used for illicit purposes.

The open questions

Several of the most commercially important points are still being consulted on. MAS is asking whether to:

• ban issuers from paying interest or other benefits linked to holding a stablecoin;
• restrict issuers from lending out customer funds;
• require a minimum share of reserves in cash or bank deposits;
• cap individual holdings or total issuance; and
• require verified identity for every holder and restrict the use of self-hosted (“unhosted”) wallets.

The last proposal matters most for the wider industry. Requiring identity checks on every holder, or limits on unhosted wallets, would change how Singapore-regulated stablecoins can circulate on public blockchains.

Coins outside the framework

Stablecoins that are not admitted will still be treated as digital payment tokens under the Act. Licensed service providers offering them to retail customers would have to give extra disclosures and risk warnings. They would also be barred from marketing them to retail investors as “stablecoins”.

What it means for the region

Hong Kong already has its own stablecoin licensing regime. Singapore’s proposal to recognise foreign coins regulated under an equivalent regime creates a route for cross-border recognition, provided regulators have information-sharing agreements in place. Issuers choosing where to base themselves will compare reserve rules, the treatment of interest, and wallet restrictions between the two.

For banks, fund managers and payment firms, a protected “MAS-regulated” label gives a clear standard for which tokens they can accept, hold or settle with. That certainty should help stablecoins reach mainstream use, but it may limit features such as yield that have driven much of the demand.

Summary

MAS is turning Singapore’s stablecoin framework into law, with a new issuance licence, a legally protected label, coverage of multi-jurisdictional and foreign coins, and a power to designate systemic stablecoins. The fixed requirements cover reserves, redemption, stress testing and AML/CFT. The questions on interest, lending, holding caps and unhosted wallets are still open and will shape the market. Issuers and their advisers have until 16 October to respond.