Key Points

  • The Growing Trend of National Stablecoins in Asia: Some Asian countries are developing stablecoins pegged to local currencies to maintain currency sovereignty and reduce reliance on the US Dollar in global trade. These stablecoins enhance the efficiency of cross-border payments and align with national financial strategies in countries like Singapore and Indonesia.

  • Case studies show: Projects like XSGD pave the way for the adoption of stablecoins, enabling faster transactions at lower costs while reducing currency conversion fees. However, challenges remain, such as limited usage and market adoption of smaller stablecoins like XIDR.

  • Key steps for broader adoption: To fully realize the potential of national stablecoins, governments should focus on conducting feasibility studies, running pilot projects, and establishing clear regulatory frameworks. Collaboration between the public and private sectors is crucial for overcoming technological, regulatory, and operational barriers.

1. The Dynamic Shift in Stablecoin Adoption

Currently, most stablecoins are pegged to the US Dollar (USD), reinforcing the dollar's dominant position in the global financial arena. However, Asia has started to shift towards issuing stablecoins pegged to local currencies. This change aligns with broader global economic trends, as many countries seek to reduce their reliance on the dollar in trade, investment, and financial transactions.

The core question this report seeks to explore is: why do some Asian countries still issue non-dollar stablecoins despite the dominance of the US dollar? To answer this question, we will examine the benefits of national stablecoins, highlight key case studies, and discuss how non-dollar 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 currency sovereignty. By pegging stablecoins to their national currency, countries can ensure that their monetary policy aligns with national economic objectives. This can provide better control over economic and political outcomes. Countries can better manage external economic pressures, which is especially important during fluctuations in foreign exchange markets.

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 privately issued stablecoins.

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 handful of countries allow the issuance of stablecoins. Most countries are still in the process of developing regulatory frameworks and considering implementation.

However, a challenge to the popularity of dollar-pegged stablecoins like USDT and USDC is their limited adoption. It is estimated that about 10% of trade in South Korea is conducted through dollar-pegged stablecoins, and these transactions often go unrecorded in official statistics. Recognizing these practical limitations, governments are accelerating efforts to develop policies that help them compete effectively in the global stablecoin market.

3. Case Studies: Asian Non-Dollar Stablecoin Projects

3.1. Straits Bank 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 Payment Services Act by the Monetary Authority of Singapore (MAS).

XSGD enables seamless cross-border transactions in Singapore Dollars, benefiting businesses and traders operating in Southeast Asia. In 2024, Singapore's super app Grab will allow users to top up their digital wallets using cryptocurrencies, including XSGD, expanding its utility in everyday transactions. By using a stablecoin pegged to the Singapore Dollar, companies can avoid converting to US Dollars, saving on conversion fees and increasing transaction speed.

3.2. Indonesian Rupiah Token (IDRT)

IDRT is issued by PT Rupiah Token Indonesia, a stablecoin pegged to the Indonesian Rupiah (IDR). Its market capitalization exceeds $4.8 million and operates on networks such as Ethereum and Binance 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.

IDRT is widely used across various CEXs and DEXs, such as Binance, Uniswap, and PancakeSwap, allowing users to trade and invest using currency pegged to the Indonesian Rupiah. This accessibility on popular exchanges expands IDRT's role in the decentralized finance (DeFi) ecosystem, making it a practical tool for users seeking exposure to Indonesia's currency in the cryptocurrency space.

3.3. Straits Times Indonesian Rupiah (XIDR)

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 growth potential, especially as Indonesia integrates blockchain solutions into its financial infrastructure.

Compared to IDRT, XIDR has a broader ecosystem, supporting multiple DeFi platforms, institutional custody solutions, and a wider range of personal wallet options, which may give it broader utility in areas such as decentralized finance and institutional trading. Despite XIDR's involvement in multiple sectors, its market capitalization is lower than that of IDRT. This may be because IDRT established a foothold in the sector earlier. In the future, XIDR could play a key role in Southeast Asia's financial landscape, providing fast and efficient payment services for online retailers across the region.

3.4. Indonesian Rupiah Stablecoin (IDRX)

IDRX is developed by PT IDRX Indo Inovasi, a stablecoin pegged to the Indonesian Rupiah that operates 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.

Like other stablecoins, IDRX is dedicated 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 already partnered with Indodax, Indonesia's largest cryptocurrency exchange. While it lacks advanced features such as fair trading mechanisms, the project shows significant potential for widespread adoption and functional expansion, thereby 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 capitalization of approximately $34.6 million, and its operations are not under direct regulation, posing higher risks while filling the gap for cross-border payments involving the Turkish Lira. Additionally, BiLira's developers have launched their innovative cryptocurrency exchange, BiLira Kripto, which provides users with more avenues to trade and transact using Turkish Lira-backed stablecoins.

However, given the continued instability of the Turkish Lira against the US Dollar, currently 4% of Turkey's GDP is used to purchase stablecoins. This presents significant challenges for local stablecoins like BiLira in competing against dominant currencies like the US Dollar.

3.6. Tether CNHt (Renminbi)

Tether CNHt is pegged to the offshore Chinese Yuan (CNY) and serves as a stablecoin for Chinese enterprises engaged in international trade. Despite strict regulations on cryptocurrency activities in China, CNHt allows businesses to settle transactions in Yuan without experiencing exchange rate fluctuations, providing a solution for traders wishing 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 seen broader adoption in China. The digital Yuan is heavily promoted by the Chinese government, has been integrated into the domestic financial system, and is 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, greatly enhancing its accessibility and further solidifying its position in China's digital financial ecosystem.

In contrast, Tether CNHt is positioned in offshore markets and international transactions, providing an alternative to dollar-pegged stablecoins. In domestic usage, the digital Yuan is increasingly used for everyday transactions, such as retail payments in Beijing and Shanghai. This broad promotion makes it more popular in mainland China compared to private stablecoin alternatives like CNHt.

3.7. GMO Japanese Yen (GYEN)

GMO JPY (GYEN) is a stablecoin issued by the regulated entity GMO Trust, headquartered in the United States. GYEN is pegged to the Japanese Yen (JPY) and operates on Ethereum, with a market capitalization of $10 million. Unlike other stablecoins primarily targeting retail or emerging markets, GYEN aims to serve institutional clients by providing a safer, more regulated alternative for businesses trading in Yen. Bitstamp was one of the first CEXs to accept GYEN, marking its movement in the crypto industry.

Legally, this stablecoin complies with New York State's strict 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, Japan's positive stance towards blockchain and fintech development indicates potential for future regulatory adjustments that may integrate assets like GYEN into the country's digital financial ecosystem.

4. Key Considerations and Conclusions

4.1. Key Considerations

As interest in national stablecoins grows across Asia, governments and enterprises are exploring practical steps to integrate these digital currencies into their economies. The following table outlines the main use cases for national stablecoin adoption, along with associated benefits and challenges.

The following table highlights the essential elements required for the successful adoption of national stablecoins. Economic sovereignty is the core driving factor, as stablecoins provide countries with a way to reduce reliance on foreign currencies and strengthen control over their domestic monetary systems. This is particularly important 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 earn public trust. Stablecoins also offer a way to improve financial inclusion by extending digital financial tools to underserved populations, particularly in areas with limited banking services.

Finally, cross-sector collaboration is crucial. Strategic partnerships between governments, fintech companies, and traditional financial institutions will determine how well stablecoins can be integrated into the existing ecosystem. By comprehensively addressing these issues, countries can lay a solid foundation for stablecoin adoption that aligns with their economic and social priorities.

4.2 Conclusions

National stablecoins provide Asian countries with 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, offering secure and efficient alternatives to traditional systems.

However, the adoption of stablecoins must follow a structured approach that includes 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.

Original link