Representations of different cryptocurrencies. — Reuters
SINGAPORE (Bloomberg): Singapore awarded a batch of in-principle license approvals to stablecoin issuers, intensifying the competition among Asian financial hubs for a slice of a key crypto segment with a market value of US$127bil.
The approvals for Paxos Digital Singapore Pte and StraitsX open up a pathway for issuing such tokens under regulatory oversight. Stablecoins are typically pegged 1-1 to major currencies and backed by reserves like cash and bonds.
The developments on Thursday came alongside a fintech festival organized by the Monetary Authority of Singapore, whose chief Ravi Menon described stablecoins as potentially playing "a useful role as digital money.”
Paxos Digital and StraitsX "substantively comply” with MAS’s upcoming stablecoin framework, Menon said in a speech at the festival. Those rules will apply to tokens pegged to the local dollar or any Group of 10 currency and cover areas such as reserve assets, redemption and disclosure.
A Paxos Digital spokesperson said the company plans to issue US dollar-based tokens. StraitsX intends to bring out a greenback-pegged token too and its existing Singapore dollar stablecoin would fall under the regulator’s purview.
Crypto Pillars
Stablecoins, linchpins of the crypto market, are used to park funds between trades and can be lent out to earn interest. But some have veered from their pegs, most notably the US$40bil collapse of the TerraUSD token, prompting regulators to step up scrutiny over concerns about the risks they can pose.
The stablecoin market is dominated by Tether Holdings Ltd., which has US$87bil worth of tokens in circulation, followed in second spot by Circle Internet Financial Ltd.’s USD Coin on US$24bil, according to CoinGecko data. While the market contracted following last year’s crypto crash, higher yields on reserve assets like Treasuries have bolstered the profitability of stablecoin operators.
Aside from Singapore, Japan and Hong Kong are also trying to position themselves as homes for stablecoin activity in Asia.
In Japan, banking giant Mitsubishi UFJ Financial Group Inc. said earlier this year that it was in talks with companies behind popular global stablecoins as well as other firms about issuing such tokens. The nation’s stablecoin law - one of the first among major economies - became operative on June 1.
Stablecoin rules are due by 2023-2024 in Hong Kong, which for the past year has been striving to develop a digital-asset hub as part of an effort to restore its image as a cutting-edge financial center.
US Clampdown
The growing clarity in Asia contrasts with slow progress toward crypto legislation in the US, as well as a clampdown by the nation’s regulators following the 2022 digital-asset rout and blowups like the bankruptcy of FTX.
For instance, PayPal Holdings Inc. unveiled its PayPal USD stablecoin in August. The token is issued by Paxos in the US. Earlier this month, PayPal received a subpoena from the US Securities and Exchange Commission related to its work on the dollar-linked token.
Back in February, the New York State Department of Financial Services said it had directed Paxos to stop issuing a stablecoin branded by crypto exchange Binance known as BUSD. Paxos is subject to regulatory oversight by NYDFS.
"This year brought all different types of adversity and challenges to the industry in the US,” said Walter Hessert, the chief strategy officer at Paxos. "As a response to that, we have seen businesses that want to deliver the standard that we have delivered in the US, but not necessarily from a US entity.”
