Singapore is moving closer to a statutory stablecoin regime, and one of its most important proposals is not about blockchain technology. On 1 September, the Monetary Authority of Singapore opened a consultation on amendments to the Payment Services Act that would prohibit issuers of MAS-regulated stablecoins from paying interest, returns or other benefits simply because a customer holds a token balance.
The consultation remains open until 16 October, so the restriction was not yet law as of 2 October. Its purpose is clear: MAS wants regulated stablecoins to function as payment and settlement instruments, not as savings products that compete with deposits while operating under a lighter risk framework.
That distinction determines what risks an issuer can take, how it earns money and what users should expect when they hold the token.
Why a payment token is different from a deposit
A fiat-backed stablecoin makes a relatively narrow promise. The issuer receives ordinary money, creates an equivalent amount of tokens and holds reserve assets against the liability. Users can transfer the token and should be able to redeem it into the reference currency at par.
Under Singapore’s proposed framework, reserves must equal at least 100% of the par value of tokens in circulation. The broader MAS framework also includes requirements on reserve composition, custody, capital, disclosure and timely redemption.
A bank operates differently. It takes deposits and uses part of that funding to make loans or buy longer-dated assets. That creates credit, liquidity and maturity risk, which is why banks are subject to a much more demanding prudential regime.
A payment-stablecoin issuer is supposed to do less: hold liquid reserves, operate the payment infrastructure and meet redemptions. If the same token starts paying a return simply for being held, customers may begin to treat it like a deposit or money market product.
The next question is where that return comes from. It could be a share of reserve income, a platform subsidy, lending income or returns from decentralised-finance protocols. The latter models introduce borrowers, collateral and market risk that do not exist in a simple fully reserved payment claim.
The no-yield proposal therefore protects the boundary on which the lighter payment regime depends. It does not prevent the issuer from earning money; it limits what can be promised to the holder under that licence.
The reserve can still earn income
Banning interest for holders does not make stablecoin issuance an unprofitable business. Cash, short-term government securities and overnight repurchase agreements can generate income inside the reserve portfolio.
Circle reported $2.637 billion of reserve income in 2025, equal to 96% of its combined revenue and reserve income.
MAS explicitly recognises this model. Its consultation notes that some issuers use reserve returns to fund operations. It asks separately whether customer funds and the interest earned on them should be restricted from on-lending or materially financing other business activities.
The economics are straightforward. Users receive transferability and a redemption claim. The issuer earns the difference between the return on safe reserve assets and the cost of custody, liquidity, compliance, technology and distribution.
That model is still sensitive to interest rates. When short-term yields fall, issuer margins fall as well. Regulation therefore has to prevent a search for yield that weakens reserve quality.
MAS is considering minimum holdings of cash or bank deposits that can be used quickly for redemptions. It also proposes at least quarterly stress tests and powers to require additional capital, liquidity or reserve buffers when weaknesses appear.
The payment use case is becoming real
The debate matters because stablecoins are starting to develop a measurable payment role beyond crypto trading.
The World Trade Organization estimates that genuine stablecoin payments reached about $390 billion in 2025, roughly 0.02% of global payment volumes but more than twice the 2024 level. Business-to-business payments accounted for about $226 billion, or 60% of the total, and grew 733% year on year. Asia represented around $245 billion, with Singapore among the region’s major digital-finance hubs.
Those figures are far below the roughly $35 trillion in reported annual stablecoin transaction volume. Most of the larger number reflects crypto trading, internal transfers and automated blockchain activity rather than payments to suppliers, contractors or workers.
The practical opportunity is narrower but real. Stablecoins can operate almost continuously, settle quickly and sometimes reduce the number of correspondent institutions involved. That can help with smaller cross-border business payments, platform payouts, digital services and corporate treasury transfers.
They do not replace trade finance. A stablecoin does not provide working capital, documentary checks, guarantees, insurance or risk allocation between buyer and seller. Its most credible role is to improve selected settlement processes inside a broader financial system.
Yield can make balances less stable
A yield-bearing stablecoin may attract more funds, especially when its rate is above bank deposits. But those balances can also leave more quickly when the rate falls, confidence weakens or a better-paying product appears.
A Financial Stability Institute review shows that the market for stablecoins designed to deliver on-chain returns grew from less than $1 billion in 2023 to more than $19 billion by September 2025.
The return does not always come from the issuer. Exchanges and other platforms may lend tokens to traders, use them in margin pools, place assets in decentralised lending protocols or fund rewards from their own balance sheets.
To the user, these arrangements can look similar: a familiar stablecoin and an advertised annual yield. Economically, they are different. A promotional reward is a platform expense. Reserve sharing redistributes issuer income. Lending introduces borrower and collateral risk.
That is why an issuer ban does not solve the whole problem. If yield simply moves to an affiliated platform, the economic risk remains. Regulators will need to look at the source of the benefit, not only the entity paying it.
What users receive in return
Singapore is offering issuers a clear trade. A licensed firm can use the protected MAS-regulated stablecoin label and position the token for payments and tokenised markets. In return, it must maintain full reserves, honour redemptions, disclose how the product works and prepare for stress or failure.
The 2026 consultation adds quarterly stress testing and recovery and orderly wind-down plans. MAS is also considering limited recognition of foreign-regulated stablecoins and multi-jurisdictional issuance, subject to comparable supervision and aligned reserve standards.
A no-yield token may be less attractive to someone looking for the highest return. Corporate treasurers and payment users usually value something else: reliable redemption, legal clarity, operational continuity, interoperability and predictable treatment across jurisdictions.