Key Points
Asian national stablecoins are on the rise: several Asian countries are developing stablecoins pegged to local currencies to maintain monetary sovereignty and reduce reliance on the dollar in global trade. These stablecoins enhance the efficiency of cross-border payments and align with the national financial strategies of countries like Singapore and Indonesia.
Case studies show: Projects like XSGD pave the way for stablecoin adoption, speeding up transactions, lowering costs, and reducing currency conversion costs. However, challenges remain, such as limited usage and market adoption of smaller stablecoins like XIDR.
Key steps for wider adoption: To fully realize the potential of national stablecoins, governments should focus on conducting feasibility studies, running pilot projects, and establishing clear regulatory frameworks. Cooperation between the public and private sectors is vital to overcoming technological, regulatory, and operational hurdles.
1. Dynamic Shifts in Stablecoin Adoption
Currently, most stablecoins are pegged to the US Dollar (USD), reinforcing the dollar's dominant position in global finance. However, Asia has begun shifting towards issuing stablecoins pegged to local currencies. This change aligns with broader global economic trends, as many countries seek to reduce reliance on the dollar in trade, investment, and financial transactions.
The core issue this report seeks to explore is: Despite the dominance of the US dollar, why do some Asian countries still issue non-USD stablecoins? To answer this question, we will examine the benefits of national stablecoins, highlight key case studies, and discuss how non-USD stablecoins are playing an increasingly important role in the Asian financial landscape.
2. Benefits of National Stablecoins
The primary motivation for issuing national stablecoins is to maintain monetary sovereignty. By pegging stablecoins to their local currencies, countries can ensure that their monetary policies align with national economic objectives. This allows for better control over economic and political outcomes. Countries can manage external economic pressures more effectively, which is especially important during periods of forex market volatility.
Many countries in Asia, especially those that have experienced currency crises, are particularly sensitive to these issues. This makes stablecoins an attractive tool for enhancing economic stability and resilience. However, most countries prioritize the development of Central Bank Digital Currencies (CBDCs) over stablecoins issued by private companies.
CBDCs provide governments with more direct control over monetary policy and the financial system, making them easier to regulate than private stablecoin alternatives. Currently, only a few countries allow the issuance of stablecoins. Most countries are still developing regulatory frameworks and considering implementation.
However, a challenge to the popularity of dollar stablecoins like USDT and USDC is their restrictions. It is estimated that in South Korea, about 10% of trade is conducted through dollar stablecoins, and these transactions often go unrecorded in official statistics. Recognizing these practical limitations, governments are accelerating efforts to develop policies to help them compete effectively in the global stablecoin market.
3. Case Study: Non-USD Stablecoin Projects in Asia
3.1. StraitsX Singapore Dollar (XSGD)
XSGD is issued by StraitsX and is a stablecoin backed by the Singapore Dollar, operating on Ethereum and extending to four other networks. With a market capitalization exceeding $18 million, it has quickly become one of the most trusted stablecoins in Asia due to its establishment under the Singapore Monetary Authority's (MAS) Payment Services Act.
Users can use XSGD to top up in the Grab App. Source: blockhead.co
XSGD enables seamless cross-border transactions of the Singapore Dollar, benefiting businesses and traders operating in Southeast Asia. In 2024, Singapore's super app Grab will allow users to top up their digital wallets with cryptocurrencies, including XSGD, expanding its utility in everyday transactions. By using a stablecoin pegged to the Singapore Dollar, companies can avoid converting to USD, saving on exchange fees and increasing transaction speeds.
3.2. Indonesian Rupiah Token (IDRT)
IDRT is issued by PT Rupiah Token Indonesia and is a stablecoin pegged to the Indonesian Rupiah (IDR). With a market cap exceeding $4.8 million, it operates on networks such as Ethereum and Binance Smart Chain. Although the Indonesian government does not promote specific stablecoins, it has expressed support for blockchain technology as part of its broader goals to enhance financial inclusion and support the digital economy.
Source: rupiahtoken.com
IDRT is widely used across various CEX and DEX platforms such as Binance, Uniswap, and PancakeSwap, allowing users to trade and invest using a currency pegged to the Indonesian Rupiah. This accessibility on popular exchanges enhances IDRT's role in the decentralized finance (DeFi) ecosystem, making it a practical tool for users seeking exposure to the Indonesian currency in the cryptocurrency space.
3.3. Straits Times Indonesian Rupiah (XIDR)
XIDR Ecosystem. Source: StraitsX
XIDR is also issued by Xfers and is pegged to the Indonesian Rupiah, forming part of the broader StraitsX ecosystem, which includes XSGD. Although XIDR has a relatively small market capitalization of $124,960, it shows potential for growth, especially as Indonesia integrates blockchain solutions into its financial infrastructure.
Compared to IDRT, the XIDR ecosystem is broader, supporting multiple DeFi platforms, institutional custody solutions, and a wider array of personal wallet options, which may provide it with broader utility in areas like decentralized finance and institutional trading. Despite XIDR's involvement in various sectors, its market cap is lower than that of IDRT, possibly because IDRT established itself earlier in the field. In the future, XIDR could play a key role in Southeast Asia's financial landscape, providing fast and efficient payment services for online retailers throughout the region.
3.4. Indonesian Rupiah Stablecoin (IDRX)
IDRX, developed by PT IDRX Indo Inovasi, is a stablecoin pegged to the Indonesian Rupiah, operating across multiple blockchain networks, including Base. Its primary goal is to connect traditional finance and Web3 by providing a stable digital representation of the Indonesian national currency.
Source: IDRX
Like other stablecoins, IDRX is committed to enabling decentralized financial applications, facilitating cross-border payments and remittances, and providing stability to hedge against cryptocurrency market volatility. Although still in its early stages, IDRX has partnered with Indodax, Indonesia's largest cryptocurrency exchange by market share. While it does not yet offer advanced features like fair trading mechanisms, the project shows significant potential for widespread adoption and functionality expansion, strengthening its role in Indonesia's evolving digital economy.
3.5. BiLira Turkish Lira (TRYB)
BiLira (TRYB) is a stablecoin based in Turkey, pegged to the Turkish Lira, and is an Ethereum-based stablecoin that provides relevant insights for the Asian market. BiLira has a market cap of approximately $34.6 million, operates without direct regulation, and carries higher risks, but fills a gap in cross-border payments involving the Turkish Lira. Additionally, BiLira's developers launched its innovative cryptocurrency exchange, BiLira Kripto, providing users with more channels for trading and transacting using stablecoins supported by the Turkish Lira.
However, given the ongoing instability of the Turkish Lira against the dollar, currently, 4% of Turkey's GDP is spent on purchasing stablecoins. This presents a significant challenge for local stablecoins like BiLira to compete with dominant currencies like the dollar.
3.6. Tether CNHt (Renminbi)
Tether CNHt, pegged to the offshore Chinese Yuan (CNY), is a stablecoin for international trade by Chinese enterprises. Despite strict regulations on cryptocurrency activities in China, CNHt allows businesses to settle transactions in Yuan without exchange rate fluctuations, providing a solution for traders looking to transact in Yuan.
However, it is worth noting that Tether CNHt competes with the official Chinese digital Yuan (also known as e-CNY), which has gained wider adoption in China. The digital Yuan is strongly promoted by the Chinese government, integrated into the domestic financial system, and favored for retail and institutional trading due to its legal status and support from the People's Bank of China. Additionally, it has recently been integrated with Huawei's HarmonyOS NEXT operating system, significantly enhancing its accessibility and further solidifying its position in China's digital financial ecosystem.
In contrast, Tether CNHt is positioned for offshore markets and international trade, providing an alternative to dollar-pegged stablecoins. In domestic use, the digital Yuan is increasingly used for everyday transactions, such as retail payments in Beijing and Shanghai. This widespread promotion makes it more popular in mainland China compared to private stablecoin alternatives like CNHt.
3.7. GMO Yen (GYEN)
GMO JPY (GYEN) is a stablecoin issued by the regulated entity GMO Trust based in the United States. GYEN is pegged to the Japanese Yen (JPY) and operates on Ethereum, with a market cap of $10 million. Unlike other stablecoins primarily targeting retail or emerging markets, GYEN aims to serve institutional clients, providing a safer and more regulated alternative for businesses transacting in Yen. Bitstamp is one of the first centralized exchanges to accept GYEN, marking its entry into the cryptocurrency industry.
Legally, this stablecoin complies with New York state’s stringent financial regulations, ensuring high transparency and consumer protection. Although GYEN is not regulated under Japanese law and is currently not allowed for use in Japan, the country's positive attitude towards blockchain and fintech development suggests potential for future regulatory adjustments that could integrate assets like GYEN into Japan's digital financial ecosystem.
4. Key Considerations and Conclusions
4.1. Key Considerations
As interest in national stablecoins grows across Asia, governments and businesses are exploring tangible steps to integrate these digital currencies into their economies. The following table outlines the primary use cases, associated benefits, and challenges of national stablecoin adoption.
The following table highlights the essential elements required for the successful adoption of national stablecoins. Economic sovereignty is the core driver, as stablecoins provide countries with a way to reduce dependence on foreign currencies and strengthen control over domestic monetary systems. This is especially crucial for countries facing currency volatility or external economic pressures.
Regulatory compliance and consumer trust are equally important. Governments must establish clear frameworks to ensure transparency and prevent abuse, while businesses need to provide secure, user-friendly systems to gain public trust. Stablecoins also present a means to improve financial inclusion by extending digital financial tools to underserved populations, especially in areas with limited banking services.
Lastly, cross-sector collaboration is crucial. Strategic partnerships between governments, fintech companies, and traditional financial institutions will determine how well stablecoins integrate into existing ecosystems. By comprehensively addressing these issues, countries can lay a solid foundation for the adoption of stablecoins that align with their economic and social priorities.
4.2 Conclusion
National stablecoins offer Asian countries a unique opportunity to strengthen financial sovereignty, improve currency management, and modernize payment systems. By pegging stablecoins to local currencies, governments can create digital tools that align with domestic priorities, providing secure and efficient alternatives to traditional systems.
However, the adoption of stablecoins must follow a structured approach, including rigorous feasibility assessments, pilot programs, and transparent regulatory frameworks. Through strategic cooperation between public institutions and private enterprises, national stablecoins can lay the groundwork for sustainable economic growth and innovation. This, in turn, can pave the way for future applications such as cross-border trade and regional cooperation.
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