Stablecoins have become a hot topic within Singapore’s financial ecosystem. Alongside the Central Bank Digital Currency (CBDC), a tokenized digital Singapore dollar and various initiatives backed by government regulators, stablecoins are one of the most significant developments in the world of cryptocurrency and blockchain technology.
As the name suggests, stablecoins are digital assets designed to maintain a stable value against a reference asset such as the US Dollar or gold.
This stability makes them an attractive option for investors and businesses looking to mitigate the risks associated with cryptocurrency volatility, offering the benefits of digital currencies, such as fast transactions and low fees, without the drawbacks.
Stablecoins can be backed by fiat, commodities, or even other cryptocurrencies and offer a variety of benefits, including faster and cheaper cross-border transactions, greater financial inclusion, and the potential for programmable currency.
This means that unlike many digital assets whose real-world applications won’t be known for some time (if ever), stablecoins are beginning to show demonstrable real-world use cases.
In Singapore, stablecoin development is taking a unique turn with the concept of “purpose-bound money” with companies like StraitsX driving its development from concept to field testing across Singapore, and soon applications that will allow tourists to make payments in Singapore using local payment apps.
For co-founder and CEO Liu Tianwei, Straits X His interest in the cross-border potential of digital money dates back to his days as a young Amazon engineer when he couldn’t figure out how to quickly and securely receive payment to ship an Amazon Kindle Fire unit back to Singapore, and solving a real-world problem became his primary motivation for founding a payments tech startup.
Stablecoin brings blockchain benefits to cross-border payments in Singapore
Straits X, Formerly known as Xfersis a payments infrastructure provider in Singapore and Southeast Asia. Founded in 2015, the company has been at the forefront of stablecoin development in the region, with a focus on real-world applications and practical solutions.
Liu Tianwei
“We’re technologists at heart, but we’re also fundamentally a practical payments infrastructure. We’re not really interested in the individual-based speculative stuff, but from a technology perspective, we’re always trying to think how can we use this for real-world applications.”
Tien Wei explains.
StraitsX’s stablecoin journey began after it recognised the potential benefits of blockchain technology in cross-border payments.
Tianwei noted that traditional payment systems involve two processes – communication and settlement – and moving funds across borders can take days or even weeks to complete.
But with stablecoins, the process is much more efficient, Tianwei noted.
“To achieve payment confirmation, I am literally transferring the use of tokens that were in my wallet on the common blockchain to your wallet.
This means that once the tokens arrive in your wallet, you don’t have to wait three or four days to get your money. The money is already there.”
The company is developing its own stablecoins, including XSGD, a stablecoin backed by the Singapore dollar, XIDR, a stablecoin backed by the Indonesian rupiah, and XUSD, a stablecoin pegged 1:1 to the US dollar.
StraitsX is Received in-principle approval from Monetary Authority of Singapore (MAS) Issuing stablecoins aligned with central bank policies New Stablecoin Regulatory Framework.
Money with a purpose: Piloting interoperable payments in the real world
While stablecoins theoretically offer advantages in terms of speed and efficiency, StraitsX has brought the concept one step closer to reality with the development of purpose-driven money (PBM).
The company is working with MAS to Project OrchidIt is an initiative aimed at exploring the concept of PBM for the widespread distribution of money for commercial purposes and its interoperability with electronic wallets, payment systems and blockchain.
Project Orchid and its first use of targeted funding grabSource: StraitsX
As Tianwei explained, PBMs are essentially programmable versions of stablecoins that can be used for specific purposes, such as government aid or vouchers.
“The idea here is, you know, we’ve been talking about this whole blockchain thing, the programmability of assets, for almost 15 years now. It’s a hot topic, it’s very exciting today, but we haven’t seen any real-world applications yet.
So we were invited by MAS to start thinking about: Can we actually create real-world use cases where stablecoins work in the hands of consumers and retailers?
Under the auspices of MAS’s Project Orchid, the first iteration of PBM was a digital voucher system that mimicked the CDC voucher concept (Community Development Council or CDC vouchers, which are distributed for use at participating local shops and food stalls to help cover Singaporeans’ everyday expenses), in which users store vouchers in a “wallet of their choice” and can be used at participating shops.
StraitsX is working with Grab to The use of these digital vouchers was piloted. Available at selected F&B outlets at Singapore Fintech Festival 2022 and participating Grab merchant partners.
For the Singapore Fintech Festival 2023, StraitsX collaborated with Grab to expand this pilot. UOB Introducing the Pitstop Pack industry pilot in Singapore, allowing users to purchase PBM vouchers. favorite.
In the latest version, the voucher is Grab Web3 Wallet It can be used to make payments at 200 participating stores islandwide, as well as at the convention site.
Process flow for using StraitsX XSGD at Singapore Fintech Festival 2022. Source: StraitsX
The Future of PBM: Programmable and Compliant by Design
The project has since expanded to include cross-border payments, with major international payment providers like Alipay on board, and Tianwei revealed that Chinese and Hong Kong tourists will be able to use their local payment methods by August 2024. Alipay The app is Grab Pay nowthere is also a hawker centre.
“(Chinese tourists visiting Singapore) simply enter the amount they want to pay in Singapore dollars – the normal in-app payment they are used to. We then show them the real-time FX code so they know how much they will pay in the local currency, i.e. Chinese yuan – and they just need to click confirm.”
Tianwei said that on the receiving side, merchants receive payment results from payment acquirers, e.g. GrabPay or PayNow, but for Chinese tourists it will be the usual Alipay transaction.
StraitsX’s CEO believes this approach removes barriers to adoption, delivering a familiar and seamless payments experience without requiring knowledge of the underlying technology or payments processes.
In fact, Tianwei noted that by working closely with MAS to meet the guidelines of the regulator’s new stablecoin framework, all boundaries will be built into the smart contracts governing these transactions on the blockchain, ensuring that transactions meet all AML (anti-money laundering) and fraud requirements and that funds are only issued for specific goods and services.
StraitsX’s co-founder says this is what the company envisions as the next iteration of PBMs.
“We can create a programmable payments ecosystem that is very similar to the one we are used to, but in a cross-border environment.
Additionally, we ensure that all rules and regulations are built into the design, ensuring that wallets that want to participate can quickly join and immediately see that they are compliant by design.”
StraitsX expanded the pilot at SFF 2023, working with Grab and UOB to introduce the Singapore Pitstop Pack industry pilot, allowing users to purchase PBM vouchers from Fave. Source: StraitsX
Security and Privacy in the Stablecoin Era
As with any new technology, particularly one with financial utility, stablecoins and PBMs raise security and privacy concerns. Tianwei acknowledges these concerns but points out that the open-source nature of public blockchain technology could actually enhance security.
“The real value of this kind of innovation happening on a public blockchain instead of a private one is that on a public blockchain, anyone can participate, and more importantly, anyone can innovate in their own way.”
Additionally, the programmable nature of PBMs allows for built-in compliance with regulations and privacy measures using the smart contracts mentioned above.
“Many of these rules, regulations and privacy concerns are built in by default and must be adhered to by design by all players in cross-border payments.”
Tien Wei says:
Driving innovation
For Tianwei, the motivation behind StraitsX’s stablecoin and PBM efforts is rooted in a desire to solve real-world problems and deliver innovation.
“Technology has caught up and in recent years we have seen blockchain once again being seen as a game changer.”
Just as AWS has become synonymous with cloud technology and is now the foundation for much product innovation, he added:
“We are building the blockchain infrastructure that will enable the development of the next generation of products, and that is what motivates me.”
As Singapore continues to lead innovation in fintech, the development of stablecoins and purpose-built currencies is poised to change how Singaporeans think about digital payments and financial inclusion. And with companies like StraitsX leading the implementation of real-world solutions, using stablecoins to conduct cross-border transactions may become a reality sooner rather than later.
