As Hong Kong embarks on its journey to regulate cryptocurrency stablecoins, industry experts are turning their gaze to Singapore for inspiration. In particular, Singapore’s XSGD token—currently the only stablecoin backed by the Singapore dollar—has emerged as a potential blueprint for effective cross-border payments and compliance strategies.
XSGD stands out as one of the leading non-US dollar stablecoins, and its issuer, StraitsX, advocates a strict adherence to local regulations while focusing on enhancing the efficacy of cross-border transactions. This model provides invaluable insights for Hong Kong, which is slated to roll out its first stablecoin licenses in 2024.
During Token2049 in Singapore, StraitsX CEO Liu Tianwei shared his thoughts on maintaining extensive collaboration with regulatory bodies and traditional banking institutions to facilitate international transactions. “It’s quite easy not to be legal,” Liu remarked at the conference, a pivotal event within the cryptocurrency arena. “If you want to get it done, you really need to do it within the right framework.”
According to Liu, establishing robust partnerships with banks is crucial for the sustainability of any stablecoin initiative. He emphasized that despite rapid technological advancements, stablecoins continue to rely on traditional banks and payment infrastructures for their backing and redemption processes. Such collaboration is vital for fostering stability and building consumer trust.
This perspective contrasts sharply with the views of Donald Trump Jr., co-founder of World Liberty Financial and the son of the former US president, who has championed USD1—a stablecoin backed by US Treasuries—as a vehicle to “dollarise” global finance. Liu, however, envisions stablecoins as complementary tools, enhancing existing financial systems rather than undermining them. He envisions a future where stablecoins facilitate quicker and more efficient cross-border settlements without eclipsing central banking authorities.
To illustrate his point, Liu cited a commonplace scenario: when a cardholder from Hong Kong taps their card at a Starbucks in Singapore, the transaction appears instantaneous. However, the backend settlement process can be prolonged, often hindered by traditional payment networks like Swift. Liu posits that incorporating stablecoins into this equation could substantially expedite the transaction timeline.
The prevalence of US dollar-pegged stablecoins complicates the landscape for financial hubs like Singapore and Hong Kong as they seek to establish their own regulatory frameworks. With Hong Kong’s recent stablecoin legislation taking effect in August, the groundwork for licensing and oversight has been laid, though the first licenses are not expected to be issued until 2026.
Meanwhile, Singapore continues to maintain a lead in this sector, having introduced XSGD back in 2020. Recently, its listing on Coinbase marks a significant milestone, potentially positioning it as a new standard for pricing Bitcoin, ether, and various other digital assets, thereby enhancing its role in the cryptocurrency marketplace.
In essence, stablecoins are designed to maintain a consistent value by pegging them to fiat currencies like the US dollar. Their stability makes them particularly useful for payment transactions and settlements, especially across borders.
(Photo by Pierre Borthiry – Peiobty)
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