MAS Proposes Act Prohibiting Issuers from Paying Returns on Stablecoins

Singapore is taking another major step towards defining how stablecoins should operate within its financial system. On 1 September 2026, the Monetary Authority of Singapore (MAS) published a consultation proposing amendments to the Payment Services Act 2019 to give legal effect to its Single-Currency Stablecoin framework.

One of the most notable proposals is a ban on licensed stablecoin issuers paying interest, returns or other commercial benefits linked to simply holding their tokens. 

For crypto users, this raises an important question: what will happen to USDT and other yield-bearing stablecoins in Singapore?

Key Takeaways

• MAS proposes banning yield payments linked to holding regulated stablecoins.

• MAS-regulated stablecoins would require full reserve backing and redemption at par.

• USDT may remain usable as a Digital Payment Token, but that does not make it an MAS-regulated stablecoin.

What Is MAS Proposing for Stablecoins?

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The proposed amendments would bring Singapore's existing Single-Currency Stablecoin framework into the Payment Services Act. 

The framework is designed for stablecoins pegged to a single currency and aims to give users greater confidence that qualifying tokens maintain their value and can be redeemed appropriately.

The most discussed change is the proposed prohibition on interest and returns. Under the proposed MAS-SCS regime, licensed issuers would not be permitted to provide holders with interest, returns or other commercial benefits that are attributable to holding the stablecoin.

In practical terms, a stablecoin issuer could not simply encourage users to keep their tokens by promising an annual return based on how long they hold them.

Why Does MAS Want to Ban Stablecoin Yield?

The reasoning is relatively straightforward. MAS wants regulated stablecoins to function primarily as payment instruments, rather than products that resemble savings accounts or investments.

If a stablecoin provides an attractive return simply for being held, users may view it less like digital money and more like an interest-bearing financial product. This could blur the distinction between stablecoins and traditional investment or savings products.

Singapore is therefore following a broader international regulatory direction. Similar concerns have appeared in other major jurisdictions, including the United States and the European Union, where regulators have considered the potential risks of treating payment-oriented stablecoins as yield-generating assets.

The policy choice also creates a clearer purpose for the MAS-SCS label: users would know that a regulated stablecoin is designed around payments, stability and redemption rather than investment returns.

Read Also: What Is Stablecoin Staking? Beginner's Guide to Earning

Stronger Reserve and Redemption Requirements

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The proposed yield restriction is only one part of the framework. MAS is also proposing significant safeguards around how stablecoins are backed and redeemed.

Under the proposed regime, issuers would be required to maintain reserve assets equivalent to at least 100% of the outstanding stablecoins. These reserves would need to consist of safe and liquid assets and would be segregated from the issuer's own funds.

This is important because stablecoin users ultimately depend on the issuer's ability to honour redemption requests.

Redemption at Par

Another key requirement is redemption at face value. Holders of qualifying stablecoins would be able to redeem their tokens for the underlying fiat currency at par, subject to the framework's requirements and within the proposed five-business-day period.

For example, if a qualifying stablecoin is designed to maintain a value of one Singapore dollar, users should have a defined mechanism to redeem the token for its underlying value rather than relying entirely on secondary-market liquidity.

This is intended to strengthen confidence during periods of market stress.

Licensing and the MAS-Regulated Label

The proposal would also create a clearer distinction between stablecoins that qualify under the Singapore framework and other crypto tokens.

Only issuers licensed under the relevant MAS framework would be allowed to market their tokens as MAS-regulated stablecoins.

This distinction matters because simply calling a token a stablecoin would not automatically mean it has MAS regulatory status.

MAS is also proposing additional requirements covering stress testing, recovery planning and orderly wind-down arrangements. These measures are designed to ensure that issuers have plans for dealing with serious financial or operational problems rather than waiting until a crisis occurs.

Read Also: How to Buy USDT with Singapore Bank Transfer

Is USDT Legal in Singapore?

One of the biggest questions for crypto users is whether Singapore's proposed rules mean that USDT will become illegal.

The short answer is not necessarily.

Singapore already regulates crypto-related activities under the Payment Services Act, including Digital Payment Token services. MAS's current regulatory structure includes licensed entities providing DPT services, demonstrating that crypto activity can operate within a regulated framework.

Under the proposed framework, a stablecoin that does not qualify as an MAS-regulated stablecoin would remain outside the MAS-SCS category and could instead fall under the existing Digital Payment Token regime, depending on the specific circumstances.

That means users should not automatically interpret the proposed yield prohibition as a blanket ban on USDT.

The key distinction is between being legally usable as a digital asset and qualifying for the MAS-regulated stablecoin designation.

What About Yield-Bearing Stablecoins?

This creates an interesting choice for stablecoin issuers.

A token could seek to qualify as an MAS-regulated stablecoin, benefiting from a framework built around reserves, redemption and regulatory oversight, but its issuer would not be able to pay holders returns linked to holding the token.

Alternatively, a token could remain outside the MAS-SCS designation and potentially offer yield through its own structure, but it could not market itself as an MAS-regulated stablecoin.

For users, this means the source and structure of any stablecoin yield will become increasingly important.

A return offered by a separate platform or financial service is not necessarily identical to interest paid by the stablecoin issuer. Users will need to examine the product carefully rather than assuming that every stablecoin yield programme falls under the same regulatory treatment.

Read Also: What Is a USDT Payment? A Guide for the App and Website

What Could Singapore's Stablecoin Rules Mean for Crypto Users?

The proposed framework could make Singapore's stablecoin market easier to understand, particularly for newcomers.

Users would have a clearer way to distinguish between regulated stablecoins and other digital assets. At the same time, the absence of issuer-paid yield could make MAS-regulated stablecoins less attractive to users who primarily hold stablecoins to generate passive returns.

For issuers, the requirements could increase operating costs. Maintaining 100% reserves, meeting redemption obligations, conducting stress tests and preparing wind-down plans require substantial infrastructure and compliance resources.

However, these requirements could also strengthen confidence in stablecoins as payment instruments.

MAS is also considering recognition of certain foreign-issued stablecoins and potential multi-jurisdictional issuance models, subject to safeguards. This could eventually make Singapore's framework more internationally connected rather than simply focused on locally issued tokens.

Importantly, the proposals remain subject to consultation. Stakeholders have until 16 October 2026 to submit feedback, meaning the final rules could differ from the current proposals.

Read Also: What Is Stablecoin Staking? Beginner's Guide to Earning

Conclusion

MAS's latest stablecoin proposal could significantly reshape how regulated digital dollars operate in Singapore. The proposed ban on interest and returns linked to holding a stablecoin reinforces the regulator's goal of keeping MAS-regulated stablecoins focused on payments rather than investment. 

At the same time, 100% reserve backing, redemption at par, licensing and stronger risk-management requirements could improve user confidence. 

USDT and other stablecoins should not automatically be viewed as banned, but their regulatory status will matter. For those who want convenient access to crypto markets, Bitrue offers spot trading, futures and other crypto services in one platform, making it easier to manage digital assets while keeping up with changing regulations.

FAQ

Is USDT illegal in Singapore?

Not automatically. USDT can fall under Singapore's broader Digital Payment Token framework rather than qualifying as an MAS-regulated stablecoin. Users should distinguish between DPT status and the MAS-SCS designation.

Will MAS ban stablecoin interest?

The proposal would prohibit licensed MAS-SCS issuers from paying interest, returns or other commercial benefits that are attributable to holding the regulated stablecoin.

What is an MAS-regulated stablecoin?

It is a stablecoin issued under the proposed MAS Single-Currency Stablecoin framework and subject to requirements covering reserves, redemption, licensing and other safeguards. Only qualifying licensed issuers would be allowed to use the MAS-regulated stablecoin designation.

When will Singapore's stablecoin rules take effect?

The proposals are currently under consultation. MAS is accepting feedback until 16 October 2026, so the final legislation and implementation timetable may change.

Can stablecoin users still earn yield?

Potentially, but the structure matters. A regulated MAS-SCS issuer would not be permitted to pay returns linked to holding the stablecoin. Other yield products may be treated differently depending on how they are structured and which regulatory regime applies.

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