Proposal · Comments close · Effective · Applies to Banks
MAS proposes that banks may treat cryptoassets on permissionless blockchains as Group 1, the lower-capital category, if they meet principle-based requirements on governance, technology, settlement finality and AML. Deeming provisions give a safe harbour, including issuer powers to freeze or correct transactions and whitelisting of holders. The treatment is available from publication, subject to exposure and issuance caps, while MAS consults.
Why it matters: MAS is breaking from the Basel default that a permissionless chain means Group 2 capital, and banks can use the new treatment now.
For Ethereum: Tokenised deposits, bonds or stablecoins issued by a bank on Ethereum or an Ethereum L2 can qualify for Group 1 if the issuer keeps freeze, correction and whitelisting controls.
In its March 2025 consultation, MAS’s draft rules meant every cryptoasset on a permissionless blockchain would fall into Group 2, the conservative capital treatment (para 2.2). Respondents called that “not technology neutral and punitive”, citing layer 2 safeguards among other things (para 1.2).
MAS now proposes to disapply the validator and network conditions that permissionless chains cannot meet, provided the asset meets principle-based requirements in Annex C (para 2.4):
Governance: a sufficiently diversified validator set and documented governance (Annex C, para 2).
Technology and finality: issuer systems that keep accurate records, and a business continuity plan that works if the chain fails (para 3).
AML: an issuer regulated for AML with identity checks on holders, or measures shown to be as effective (para 4).
Annex D sets deeming provisions. Among them: the issuer can correct or freeze transactions under governance controls; the chain has a documented point of finality; the bank monitors chain health; smart contracts are independently audited; and only whitelisted, pre-screened wallets can hold the token.
The treatment applies from publication until the rules are finalised, subject to caps (paras 1.4, 2.7 to 2.9). For locally incorporated banks, Group 1 exposure to permissionless cryptoassets is capped at 2% of Tier 1 capital and issuance at 5%. For foreign bank branches, the caps are 0.2% and 1% of branch assets. Banks must notify MAS a month before using the treatment (para 2.13). Comments closed on 18 May 2026.
Implications
This is a practical fix for Singapore banks that want to issue tokenised deposits or bonds on public chains. Under the Basel standard, doing so pushes the exposure into Group 2 and makes it uneconomic. MAS keeps the Basel structure but lets the issuer’s own controls stand in for the validator controls a public chain cannot offer.
The caps keep this small for now. Two percent of Tier 1 is enough for pilots and early products, not for balance-sheet scale. MAS says it will review whether caps are needed at all when the rules are final (para 2.12).
The deeming provisions describe a specific kind of token: issuer-controlled, whitelisted and reversible. That fits the Project Guardian model that MAS has promoted since 2022.
For Ethereum
This is the most Ethereum-relevant item in the Wire this year. It accepts that a bank can issue on a public permissionless chain, and cites layer 2 safeguards in doing so. But the path runs through issuer controls on the token, not through trust in the chain alone. Ether itself has no issuer to freeze, correct or whitelist, so it stays in Group 2. What moves into Group 1 is bank-issued tokens that use Ethereum as settlement infrastructure.
Elsewhere in Asia
Hong Kong’s custody guidance makes the same distinction between permissioned tokens and permissionless tokens on public chains, for custody instead of capital.
What to watch
MAS’s response to feedback and the final cryptoasset capital rules, including whether the caps survive.