Article sourced from: Tiger Research

Key Points

  • The growth of national stablecoins in Asia: Some Asian countries are developing stablecoins pegged to local currencies to maintain monetary sovereignty and reduce reliance on the USD 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 the adoption of stablecoins, enabling faster transactions, lower costs, and reduced currency conversion expenses. 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 to overcoming technical, 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 field. However, Asia has begun to shift towards issuing stablecoins pegged to local currencies. This shift aligns with broader global economic trends, as many countries seek to reduce their dependence on the dollar in trade, investment, and financial transactions.

The core question this report seeks to explore is: Despite the dominance of the USD, why are some Asian countries still issuing non-USD stablecoins? To answer this, we will examine the benefits of national stablecoins, highlight key case studies, and explore 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 national currencies, countries can ensure that their monetary policies align with national economic objectives. This allows for better management of economic and political outcomes. Countries can better manage external economic pressures, especially during periods of forex market volatility.

Many Asian countries, 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.

CBDC provides governments with more direct control over monetary policy and the financial system, making it 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 USD-pegged stablecoins like USDT and USDC is their restriction. It is estimated that about 10% of trade in South Korea is conducted through USD-pegged stablecoins, with these transactions often not recorded in official statistics. In light of these practical limitations, governments are accelerating efforts to develop policies that help them compete effectively in the global stablecoin market.

3. Case Study: Asian Non-USD 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 expanding to four other networks. XSGD has a market capitalization of over $18 million and has quickly become one of Asia's most trusted stablecoins due to its establishment under the Payment Services Act of the Monetary Authority of Singapore (MAS).

Users can top up their wallets in the Grab App using XSGD. Source: blockhead.co

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 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, save on exchange fees, and enhance transaction speed.

3.2. Indonesian Rupiah Token (IDRT)

IDRT, issued by PT Rupiah Token Indonesia, is a stablecoin pegged to the Indonesian Rupiah (IDR). It has a market capitalization of over $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.

Source: rupiahtoken.com

IDRT is widely used on various CEX and DEX platforms, 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 looking to engage with 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 growth potential, especially as Indonesia integrates blockchain solutions into its financial infrastructure.

Compared to IDRT, XIDR has a broader ecosystem that supports multiple DeFi platforms, institutional custody solutions, and a wider range of individual wallet options, which may provide it with broader utility in areas such as decentralized finance and institutional trading. Despite its involvement across multiple sectors, XIDR's market capitalization is lower than that of IDRT. This may be due to IDRT establishing a foothold in the field earlier. In the future, XIDR may play a key role in the Southeast Asian financial landscape, providing fast and efficient payment services for online retailers across 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 dedicated to enabling decentralized financial applications, facilitating cross-border payments and remittances, and providing stability to hedge against cryptocurrency market volatility. Although still in the early stages, IDRX has already partnered with Indonesia's largest cryptocurrency exchange, Indodax. While it is not yet equipped with advanced features such as fair trading mechanisms, the project shows immense 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 directly regulated, presenting higher risks, but it fills a gap in cross-border payments involving the Turkish Lira. Additionally, the developer of TRYB, BiLira, has launched its innovative cryptocurrency exchange, BiLira Kripto, which provides users with more channels to trade and transact using stablecoins backed by the Turkish Lira.

However, given the ongoing instability of the Turkish Lira against the USD, currently about 4% of Turkey's GDP is used to purchase stablecoins. This poses significant challenges for local stablecoins like BiLira in competing with dominant currencies like the USD.

3.6. Tether CNHt (Renminbi)

Tether CNHt is pegged to offshore Renminbi (CNY) and serves as a stablecoin for international trade by Chinese enterprises. Despite strict regulations on cryptocurrency activities in China, CNHt allows businesses to settle transactions in Renminbi without experiencing exchange rate fluctuations, providing a solution for traders looking to transact in Renminbi.

However, it is worth noting that Tether CNHt competes with the official Chinese digital renminbi (also known as e-CNY), which has seen broader adoption in China. The digital renminbi is heavily promoted by the Chinese government, has been integrated into the domestic financial system, and is favored by retail and institutional trading due to its legal status and support from the People's Bank of China. Furthermore, it has recently 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 USD-pegged stablecoins. Domestically, the digital renminbi 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 US-based regulated entity GMO Trust. 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 is designed to serve institutional clients, providing a safer and more regulated alternative for businesses transacting in Yen. Bitstamp was one of the first CEXs 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 permitted for use in Japan, Japan's positive attitude toward blockchain and fintech development indicates that future regulatory adjustments may integrate assets like GYEN into the country's digital financial ecosystem.

4. Major Considerations and Conclusions

4.1. Major Considerations

As interest in national stablecoins grows across Asia, governments and businesses are exploring practical steps to integrate these digital currencies into their economies. The table below outlines the main use cases, associated advantages, and challenges of national stablecoin adoption.

The table below highlights the essential elements required for the successful adoption of national stablecoins. Economic sovereignty is a core driving factor, as stablecoins provide countries with a means to reduce dependence 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 gain 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 integrate into existing ecosystems. By comprehensively addressing these issues, countries can lay a solid foundation for stablecoin adoption that aligns with their economic and social priorities.

4.2 Conclusion

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, 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 collaboration 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