The growing adoption of stablecoins across Asia signals a major shift in the region’s financial landscape.
Traditionally, stablecoins pegged to the US dollar, such as USDT and USDC, have largely dominated the cryptocurrency topography.
However, there has been some change recently as Asian markets have started accepting stablecoins pegged to their respective local currencies.
This trend highlights efforts to strengthen monetary sovereignty, promote financial inclusion, and modernize payment systems in an increasingly digital world.
From Singapore’s XSGD to Indonesia’s IDRT and new pilots in Thailand and the Philippines, stablecoins are reshaping the region’s economic strategy.
As seen in Report by Tiger Researchthis type of transition signals the region’s strategic push to reduce dependence on the US dollar in cross-border trade, investment, and domestic financial systems.
Most of these countries believe that local currency stablecoins could provide an opportunity to maintain control over monetary policy and reduce risks associated with foreign exchange fluctuations.
One of the main drivers of this movement is the desire to maintain monetary sovereignty, as stablecoins pegged to local currencies allow governments to align digital financial systems with national economic goals.
This is especially important in countries with a history of currency crises, where stablecoins can be a tool to increase economic stability and resilience.
These efforts also appear to complement ongoing efforts to develop central bank digital currencies (CBDCs), as both digital assets aim to modernize traditional financial systems.
Stable coin representing Asia
Straits X (XSGD)
StraitsX’s XSGDis pegged to the Singapore dollar and has emerged as one of Asia’s most prominent local currency stablecoins.
XSGD, which operates on Ethereum and other blockchain networks, boasts a market capitalization of over $18 million.
Its uses range from making cross-border payments, replenishing digital wallets through Grab, and reducing currency conversion costs for businesses and traders in Southeast Asia.
Singapore’s progressive regulatory framework, supported by the Monetary Authority of Singapore’s Payment Services Act, has significantly facilitated the adoption of XSGD.
Rupiah Token (IDRT) and Straits X XIDR
There are two notable stablecoin projects in Indonesia. Rupiah Token (IDRT) and XIDR of StraitsX.
IDRT, issued by PT Rupiah Token Indonesia, is widely used on centralized and decentralized exchanges, enabling seamless participation in the decentralized finance (DeFi) ecosystem.
IDRT, with a market capitalization of $4.8 million, is gaining attention among crypto enthusiasts seeking exposure to the Indonesian rupiah.
Meanwhile, XIDR operates within the broader StraitsX ecosystem and supports multiple DeFi platforms.
Despite having a small market capitalization of $124,960, XIDR is integrated into Indonesia’s evolving blockchain infrastructure and is poised for future growth.
Both projects exemplify how stablecoins can bridge traditional financial and Web3 technologies, enhancing accessibility for both users and institutions.
Tether (CNHt)
Tether CNHt It is a stablecoin pegged to the offshore Chinese Yuan (CNY). It acts as a stablecoin for international trade involving Chinese companies.
Despite China’s strict regulations on crypto activities, CNHt allows businesses to settle transactions in Renminbi without the fluctuations associated with exchange rates.
This competes with China’s official digital yuan, which is more widespread in the country due to government promotion and integration into the domestic financial system.
GMO Yen (GYEN)
GMO Yen (GYEN)It is a stablecoin pegged to the Japanese yen (JPY) with a market capitalization of $10 million, issued by GMO Trust.
Unlike other stablecoins targeted at retail or emerging markets, GYEN is focused on institutional customers and provides a secure and regulated alternative for businesses dealing with Japanese Yen.
Although currently not permitted for use in Japan, Japan’s positive attitude toward blockchain technology suggests the possibility of future regulatory adaptation.
Budding pilots from Thailand and the Philippines
Thailand and the Philippines have demonstrated regulatory openness to stablecoins.
Thailand recently approved its approval.The first ever cross-border payment solution using stablecoinsleverages blockchain technology to facilitate seamless transactions for tourists and expatriates.
Similarly, the Central Bank of the Philippines Peso Stablecoin Pilot Explore the possibilities of financial inclusion and cross-border remittances.
Coinbase interested in developing Thai baht and Philippine peso stablecoins The strategic importance of this region is further emphasized.
These initiatives aim to make transactions faster, cheaper and more accessible, and foster innovation in Southeast Asia’s digital financial landscape.
Not without risk
While there has been progress in the development and adoption of stablecoins, setbacks have also occurred.
of TerraUSD Stablecoin Implosion In May 2022, it was designed to maintain a $1 peg through an algorithm and a linked token called Luna, causing a massive sell-off that rocked the crypto market.
Tether, the largest stablecoin by market capitalization and also originating from the United States, has also faced increased scrutiny over its reserves and the composition of its holdings. Ability to maintain peg during market fluctuations.
Another example occurred not that long ago, in June 2021. Collapse of IRON Finance’s Algorithmic Stablecoin Binance Smart Chain has demonstrated the risk of attach attachments and rapid depegging events.
This incident further highlighted the need for robust mechanisms to manage stability.
It is also best to note that while these examples are primarily from outside Asia, the region is not immune to stablecoin challenges either.
Advantages and challenges of adopting stablecoins
Advantages of stablecoins in Asia
The list of incidents I mentioned above should not deter anyone from inching closer to using stablecoins. It just reminds you of that risk.
And despite these incidents, stablecoins offer some attractive benefits to Asian economies.
These promote monetary sovereignty and allow governments to control monetary policy and reduce dependence on foreign currencies, thereby reducing exposure to foreign exchange risks.
Additionally, stablecoins provide an accessible entry point for Asia’s unbanked and underserved populations and strengthen financial inclusion by effectively digitizing local currencies. .
The benefits also extend to cost efficiency, as stablecoins enable faster and cheaper cross-border payments, eliminate the need for intermediaries, and reduce transaction fees.
Additionally, local currency stablecoins streamline transactions by minimizing the complexity of currency conversion, fostering regional economic cooperation, and facilitating smoother transactions for businesses and individuals.
overcome obstacles
But nothing good happens without challenges. Here are some challenges I can think of that could hinder its widespread adoption.
We start by establishing a clear and consistent regulatory framework. This must be a top priority to ensure that stablecoins remain stable.
Such frameworks are essential to ensuring transparency, preventing abuse, and promoting consumer protection, all of which are essential to building trust in stablecoins.
Another challenge is limited awareness and skepticism among users and businesses alike, especially in less tech-savvy regions.
Educational initiatives and user-friendly platforms are also needed to increase understanding of stablecoins and encourage broader acceptance.
Finally, stablecoins face competition from CBDCs as many governments prioritize the development of CBDCs over private stablecoins.
This creates a competitive environment for adoption and integration, requiring stablecoin projects to demonstrate their unique value proposition and interoperability with existing and evolving financial systems.
Regulatory frameworks in Asian countries
Several countries in Asia have actively developed or are developing their own regulatory frameworks to address the complexities of stablecoin operations.
First, Singapore is one of the “digital asset leaders” and has completed a regulatory framework for stablecoins.
On 15 August 2023, the Monetary Authority of Singapore (MAS) new framework To ensure high value stability for Singapore-regulated stablecoins. The framework applies to single currency stablecoins (SCS) pegged to the Singapore dollar or G10 currencies issued in Singapore.
Hong Kong is also developing Regulations focused on fiat-backed stablecoins. By prioritizing these assets, Hong Kong aims to reduce risks and promote protection for investors.
Japan, known for its proactive stance on digital currencies, has established a regulatory foundation based on the Payment Services Act. This framework provides clear guidelines for the issuance and operation of stablecoins in the country.
By incorporating these regulatory measures, Asian countries can balance innovation and consumer protection and foster a stable and reliable ecosystem.
The role of collaboration
The success of stablecoin implementation in Asia will depend on cooperation between governments, fintech companies, and traditional financial institutions.
Strategic partnerships can drive innovation, address technical and operational challenges, and build trust among stakeholders.
Let’s take an example of how Singapore’s StraitsX partners with Grab and Ant International Launching a blockchain-based cross-border payment system and demonstrating the power of public-private collaboration in accelerating adoption.
Elsewhere in Asia, such as Hong Kong, fintech firm IDA is working with East Asia Bank to 1:1 Hong Kong dollar pegged stablecoin To enhance the adoption of digital assets.
Korean government too Collaborate with private companies like Ground X (Kakao’s blockchain subsidiary) develops a stablecoin ecosystem and explores use cases for CBDC.
As mentioned earlier, Japan already has a clear regulatory framework established as follows. Payment Services Act (PSA)despite the fact that only the GMO JPY stablecoin is approved for use in the country.
Therefore, to further accelerate its use, the Japanese government is actively collaborating with a consortium of banks and technology companies to research and develop stablecoins and CBDC infrastructure.
These examples demonstrate how collaborative efforts can accelerate the development and integration of stablecoins into existing financial systems, paving the way for adoption and innovation across Asia.
Future impact on Asia’s digital economy
The rise of stablecoins in Asia does not simply mean a change in monetary policy. That means a broader transformation of the region’s digital economy.
Stablecoins pave the way for sustainable economic growth and innovation by reducing dependence on the US dollar and promoting financial sovereignty.
It also provides a basis for strengthening regional cooperation as neighboring countries seek common solutions for cross-border trade and remittances.
As stablecoins become more popular, they may intersect with other emerging trends such as DeFi, Web3, and tokenized assets.
This convergence could create new opportunities for businesses and consumers and improve the efficiency and inclusiveness of Asia’s financial systems.
Featured image credit: Edited from freepic
