Singapore Proposes Strict 100% Reserves and Yield Ban for Stablecoin Issuers

The Monetary Authority of Singapore has published a comprehensive regulatory framework proposing that all licensed stablecoin issuers maintain 100% reserve backing in low-risk, highly liquid assets. The proposed statutory guidelines also mandate a strict prohibition on yield generation or interest payouts on stablecoin holdings, aiming to distinguish payment tokens from interest-bearing deposit accounts.

According to details reported by CoinDesk, the city-state's financial watchdog stated that its proposed rules are carefully aligned with international regulatory benchmarks, including frameworks established across the European Union and the United States. In addition to reserve requirements and yield restrictions, the draft policy outlines formal pathways for the domestic recognition and circulation of qualified foreign-issued stablecoins that meet comparable regulatory standards.

Under the proposed regime, reserve assets backing single-currency stablecoins must consist exclusively of central bank deposits, short-term sovereign debt instruments, or cash equivalents denominated in the underlying reference currency. Issuers must also ensure rapid redemption mechanisms, allowing token holders to convert digital assets back to fiat currency within designated operational timelines without penalty.

The ban on interest distribution aims to mitigate risks associated with shadow banking activities and speculative yield farming. By ensuring that stablecoins function purely as reliable digital mediums of exchange and settlement rather than high-yield speculative instruments, the regulator seeks to safeguard retail users from systemic insolvency events.

Industry stakeholders are reviewing the consultation papers to evaluate the economic impact on prospective issuers operating in Southeast Asia. While the high reserve thresholds and yield restrictions may increase operating costs, the formal recognition framework for foreign stablecoins offers a clear roadmap for cross-border digital asset integration in Singapore's financial center.