The Monetary Authority of Singapore (MAS) has proposed giving banks a workable pathway to hold cryptoassets on public, permissionless blockchains without facing prohibitive capital charges — a meaningful departure from both its own previous position and the global standard set by the Basel Committee on Banking Supervision.
The proposal, published last week as Consultation Paper P009-2026 , is the second major consultation MAS has issued on the topic. The first, Consultation Paper P003-2025 published in March last year, proposed implementing the Basel cryptoasset standards for Singapore-incorporated banks with an effective date of 1 January 2026. Industry respondents pushed back hard, arguing that the Basel framework's treatment of permissionless blockchain assets was "punitive and not technology neutral."
Under Basel's 2022 cryptoasset standards, any asset on a public, permissionless network — including major stablecoins such as USDC and USDT — was effectively barred from favourable capital treatment, attracting a 1,250% risk weight that made it capital-prohibitive for banks to hold them in any meaningful capacity.
MAS deferred implementation to 1 January 2027 at the earliest and signalled it would revisit the permissionless blockchain question. The April 2026 paper is that revisit — proposing a principle-based alternative that would allow certain permissionless blockchain assets to qualify for the more favourable Group 1 treatment, provided banks can demonstrate the associated risks have been adequately mitigated.
The consultation closes on 18 May 2026.
How We Got Here
The Basel Committee's 2022 cryptoasset standards sorted crypto into two buckets. Group 1 — tokenised traditional assets and stablecoins with effective stabilisation mechanisms — received capital treatment broadly aligned with traditional equivalents. Group 2 attracted a 1,250% risk weight. The problem was where the line fell: any asset on a permissionless blockchain was effectively barred from Group 1, regardless of design or risk controls, on the basis that validators could not be presumed regulated and settlement finality could not be guaranteed. Since virtually every major stablecoin operates on a public permissionless blockchain, the framework would have made it capital-prohibitive for banks to hold them in any meaningful capacity. Singapore, which has spent years positioning itself as a hub for digital asset innovation and which passed its landmark stablecoin regulatory framework in August 2023, would have found its banks structurally excluded from one of the most important corners of the crypto market.
MAS initially proposed implementing the Basel standards for Singapore-incorporated banks with an effective date of 1 January 2026. Industry respondents — including banks, law firms, and trade bodies such as the Asia Securities Industry and Financial Markets Association — pushed back hard, arguing the permissionless blockchain treatment was punitive and not technology neutral. MAS deferred implementation to 1 January 2027 at the earliest and signalled it would revisit the question. The April 2026 paper is that revisit.
Singapore Stepping Out on Its Own
The latest MAS consultation paper goes further than many in the industry anticipated.
The core proposal is a principle-based alternative framework that would allow certain cryptoassets on permissionless blockchains to qualify for Group 1 prudential treatment, provided banks can affirmatively demonstrate that the associated risks have been adequately mitigated. MAS is explicit that this represents a deliberate departure from the Basel position: the prior approach, it now acknowledges, "was not technology neutral and punitive, in view of advances in implementation practices."
The Basel framework contained two requirements that, in practice, made permissionless chains incompatible with Group 1 classification: the network risk requirement, which demanded that all key network elements be well-defined and transactions traceable; and the validator requirement, which demanded that all node validators be regulated, supervised, or subject to appropriate risk management standards. MAS is now proposing principle-based alternatives to both. Rather than requiring these conditions to be met by definition, banks would be able to meet equivalent thresholds through their own risk assessment, governance frameworks, and technical controls.
For VASPs, stablecoin issuers, and tokenisation platforms, this matters enormously. If a stablecoin operating on Ethereum or another major public chain can now qualify for Group 1 treatment — where previously it faced a 1,250% risk weight — the economics of banks holding, settling in, or providing custody for that asset change fundamentally.
Guardrails: Caps, Notifications and Senior Management Sign-Off
MAS is not throwing open the doors. During the interim period — from now until the broader cryptoasset framework is finalised — banks wishing to classify permissionless blockchain assets as Group 1 will be subject to the following conditions.
Locally-incorporated banks face exposure caps: permissionless cryptoasset exposures classified as Group 1 are capped at 2% of Tier 1 capital, and issuances of Group 1 permissionless cryptoassets that create liabilities for the bank are capped at 5% of Tier 1 capital. Exposures exceeding these caps revert to conservative treatment regardless of whether the asset otherwise meets the principle-based requirements.
Before adoption, banks must notify MAS at least one month in advance of applying the alternative approach to any given asset, provide senior management confirmation that the relevant requirements have been satisfied, and in some cases obtain MAS approval before proceeding.
Crucially, banks do not have to wait for final rules. MAS has indicated that institutions can begin adopting the proposed framework on an interim basis immediately.
AML/CFT: A Non-Negotiable Condition
One thread running through both papers is the centrality of anti-money laundering and counter-terrorism financing controls. MAS is including AML/CFT-related requirements as a condition of the more favourable prudential treatment, and is explicitly seeking feedback on whether those requirements are appropriately calibrated.
This means eligibility for Group 1 treatment is not purely a technical or financial risk question. A bank's ability to identify transaction participants, trace fund flows, and manage financial crime risk on a given network will be part of the eligibility assessment. For assets on networks with strong on-chain analytics tooling and transparent transaction histories, this is manageable. For assets on networks where traceability is limited, it could remain a barrier regardless of how the capital rules evolve.
Why MAS Is Moving Ahead of Basel
The timing raises an obvious question: why is MAS pressing ahead when the Basel Committee has itself acknowledged a review of the permissionless blockchain provisions is underway? The answer appears to be impatience with the pace of international reform, combined with competitive pressure. Basel's own chair, Erik Thedéen, confirmed in November 2025 that a review was planned but set no timeline: "The focus back then was very much on the bitcoins of this world.
Now of course everyone is talking about stablecoins. Permissionless ledgers: are these as risky as we thought? We need to start analysing. But we need to be fairly quick on it." Global implementation remains fragmented, with the US, EU, and UK each taking different approaches. A Singapore that waited for consensus risked falling behind the jurisdictions it competes with most directly for digital asset business.
What This Means for the Industry
For banks with digital asset ambitions , the April 2026 paper is an invitation to engage. The 2% and 5% Tier 1 capital caps are modest relative to the size of major Singapore banks, but they are enough to support meaningful stablecoin and tokenised asset activity. The pre-notification and governance requirements are workable for institutions that already have robust crypto risk frameworks. The key task now is responding to the consultation with concrete feedback on where the principle-based requirements need further clarity.
For stablecoin issuers , the paper changes the calculus around bank partnerships. If Singapore banks can hold and transact in Group 1-eligible stablecoins without punitive capital charges, the appetite for bank-issued or bank-integrated stablecoin products — already spurred by MAS's 2023 stablecoin framework and the finalisation of its stablecoin regulations at the 2025 Singapore FinTech Festival — is likely to grow.
For tokenisation platforms , the reclassification pathway for permissionless blockchain assets is the key development. Singapore has been home to significant tokenisation pilots — Project Guardian chief among them, a multi-institution initiative involving over 40 financial institutions across seven jurisdictions that MAS has been actively driving toward commercial scale — but the Basel risk weight overhang has limited how far those pilots could scale into mainstream bank balance sheets. A workable Group 1 pathway removes that overhang, at least in principle.
For VASPs more broadly , the retail investor bar on AT1 and Tier 2 instruments — already in force since 1 January 2026 — is a reminder that MAS's openness to innovation does not extend to relaxing protections for ordinary investors. Any capital instrument that a VASP or bank might issue in digital form must now be structured exclusively for accredited or institutional investors if it is to count toward regulatory capital.
The consultation on permissionless blockchains closes on 18 May 2026. Given that the final framework — which supersedes the interim approach — is not expected before 1 January 2027, the response that MAS receives over the next three weeks will play a significant role in shaping what Singapore's crypto banking rules look like for years to come.
MAS Notice 637, as amended effective 1 January 2026, is available on the MAS website . Consultation Paper P009-2026 is open for submissions until 18 May 2026 at 11.59pm Singapore time.
