Stablecoin Strategic Overview

Definition & Key Characteristics

What are Stablecoins?

Privately issued cryptocurrencies deployed on public blockchains that attempt to maintain a 1:1 peg to fiat currencies, serving as the bridge between traditional finance and digital assets.

Three Key Characteristics

Non-Native Token

Issued on existing public blockchains (mostly Ethereum), not native to the blockchain like BTC or ETH. Developers add them to existing chains to enable specific functions.

1:1 Fiat Peg

Designed to maintain stable value against fiat currencies, unlike volatile native crypto-assets (BTC: 80-100% annualized volatility vs S&P 500: 20%).

Private Sector Issued

Unlike CBDCs backed by sovereign credit or bank deposits with insurance, stablecoins resemble money-market fund balances without explicit deposit insurance.

Market Statistics

$625B

Monthly Transaction Volume

$2-3T

Projected Market Cap by 2030

80%+

Off-chain Collateralized

Market Growth Indicators

2x Growth

Q1 2025 volumes ($650-700B) doubled from two years prior

Regional Adoption

Strong growth in LATAM, SE Asia for remittances and inflation hedging

Institutional Interest

Major financial institutions piloting tokenized asset settlement

Taxonomy Models

Off-chain Collateralized

Model: Traditional financial assets backing on-chain tokens

Examples:

USDT (~$66B) - Oldest, launched 2014, cash + Treasuries
USDC - Circle & Coinbase, high transparency
BUSD - Binance, similar model

Backing: Cash, deposits, commercial paper, U.S. Treasuries

Revenue: Investment yield on reserve assets

On-chain Collateralized

Model: Crypto assets locked in smart contracts with over-collateralization

Example:

DAI (~$9B) - MakerDAO, backed by ETH/BTC

Mechanism: User deposits $100 ETH → mints 66.66 DAI (150% collateral ratio)

Backing: ETH, BTC, other mainstream crypto assets

Revenue: Stability fees on borrowed stablecoins

Algorithmic

Model: Partially/fully uncollateralized, algorithm-based stability

Mechanism: Mint-burn algorithms, elastic supply adjustment

Risk: History of failures (Terra UST collapse), high volatility

Backing: Algorithmic mechanisms, governance tokens

Value Propositions

24/7 Settlement Real-time vs 1-4 days SWIFT

Cost Reduction <1% vs 6% average remittance fees

Global Access Open access, no intermediaries

Programmability Smart contract automation

Competitive Advantages

Risk Mitigation

Bypass volatile crypto assets while maintaining on-chain benefits

Scalability

Enable high-frequency, low-value transactions economically

Interoperability

Bridge different blockchain networks and traditional finance

Application Scenarios

Cross-border Payments: The "Killer App"

Legacy System Pain Points

Average 6.62% fees for USD 200 remittance
1-4 days settlement via correspondent banks
Complex web of intermediaries
Limited operating hours

Stablecoin Solution

Near real-time settlement (minutes)
Up to 80% cost reduction
Direct peer-to-peer transfer
24/7 operation

Market Evidence & Success Stories

Retail Remittances

Millions in LATAM/SE Asia use USDT for overseas remittances. Philippines approved peso-pegged PHPC stablecoin pilot specifically for remittances.

B2B Payments

SMEs improve cash-flow with stablecoin invoice settlement. Export-import businesses slash settlement time from days to minutes.

Institutional Integration

Visa, PayPal integrate USDC into global networks. Stripe enables merchant USDC acceptance with lower fees than credit cards.

Flagship Success Cases

MoneyGram × Stellar USDC Corridor

<1% Average Cost

5 sec Settlement

24/7 Operation

MoneyGram's USDC corridor on Stellar blockchain demonstrates real-world remittance transformation with 80%+ cost reduction compared to traditional SWIFT rails.

PayPal PYUSD → EY Invoice Payment

Instant Settlement

0% FX Risk

B2B Ready

PayPal using its stablecoin PYUSD to pay EY invoices showcases corporate treasury adoption, eliminating traditional payment friction and FX uncertainty.

RedotPay NFC Terminal Integration

Millions Terminals

Apple Pay Compatible

Global Access

Crypto-backed cards enable stablecoin spending at millions of NFC terminals worldwide via Apple Pay/Google Pay, bridging digital assets to everyday purchases.

DeFi's Reserve Asset

Central Role as "Base Money"

Stablecoins provide the stable unit of account and store of value that enables sophisticated DeFi operations.

Lending Markets

Users deposit stablecoins on Aave, Compound to earn yield or borrow against volatile assets

DEX Liquidity

Pairs like ETH/USDC anchor deepest liquidity pools with low slippage

Safe Harbor

Traders swiftly move to stablecoins during market turmoil without slow fiat off-ramp

Corporate Treasury Management

Emerging Enterprise Applications

Global Payroll

Instant salary disbursement cutting fees and improving worker cash-flow

Tokenized Assets

Settlement layer for RWA transactions (real estate, private credit)

Corporate Treasury

Global liquidity management and instant intercompany funding

Programmable Treasury

Smart contracts enable automated payments based on predetermined conditions:

Goods delivery confirmation triggers payment
Inventory replenishment completion releases funds
Micro, high-frequency automated settlements

Banking Use Case Scenarios

Cross-border B2B Settlement

1. Corporate client submits USDC payout request

2. Compliance screening & fiat debit

3. Transaction construction & signing

4. On-chain broadcast & monitoring

5. Settlement confirmation & reporting

E-commerce Pay-in

1. Generate unique address per order

2. Customer transfers USDC to address

3. Chain monitoring confirms receipt

4. Webhook notification to merchant

5. Auto-sweep & settlement

Mass Payout to Gig Workers

1. Upload CSV with thousands of records

2. Debit total from settlement account

3. Execute bulk KRWb transfers

4. Instant credit to worker wallets

5. Automated reconciliation reporting

Regulatory Landscape

Global Regulatory Convergence

Regulations are converging toward a "bank-like" model with consistent pillars: 100% reserve backing, asset segregation, par redemption rights, and comprehensive AML/CFT compliance.

Key Jurisdictions Comparison

Jurisdiction	Legal Framework	Licensed Issuers	Reserve Requirements	Redemption Terms
United States GENIUS Act	Federal-state dual track system	Bank subsidiaries, licensed non-banks	1:1 HQLA, no re-hypothecation	Legal guarantee at par
European Union MiCA	Unified crypto-asset regulation	Credit/e-money institutions	1:1 HQLA (min. 30% bank deposits)	Par redemption on demand
Hong Kong Stablecoins Ordinance	HKMA mandatory licensing	HKMA-licensed entities	100% segregated trust backing	Within 1 business day
Singapore MAS Framework	Payment Services Act framework	MAS-licensed entities	1:1 HQLA (≤3 month gov bonds)	Within 5 business days
South Korea Digital Assets Basic Act	Building on Virtual Asset User Protection Act	FSC-licensed entities	1:1 HQLA with "bankruptcy remoteness"	KRW 500M minimum capital required

Monetary Sovereignty

EU restricts non-euro stablecoin circulation; South Korea's Digital Assets Basic Act explicitly encourages KRW-pegged stablecoins to prevent capital outflows from USD stablecoin proliferation

USD Advantage

US GENIUS Act creates global USD circulation channels while generating massive new demand for US Treasuries

Risk Management

Time-tested traditional finance risk practices applied to prevent bank runs and protect consumers

Southeast Asia: Fragmented but Rapidly Evolving Landscape

Regulatory Leaders

Singapore and Hong Kong are undoubtedly the regional front-runners, actively attracting global compliant stablecoin projects and crypto-finance companies through comprehensive, innovation-friendly regulatory frameworks, positioning themselves as regional or global digital asset hubs.

Application-Driven Regions

In Philippines, Vietnam etc., regulatory development is more driven by grassroots market adoption. Stablecoins' huge advantages in remittances and e-commerce have driven popularity, prompting local governments to explore issuing domestic-currency-pegged stablecoins (like Philippines' PHPC) and actively integrating into regional digital payment networks.

Asian Giants: China & India Restrictive Approach

In stark contrast to Southeast Asian diversity, China and India - the two largest Asian economies - have adopted restrictive approaches to privately issued stablecoins.

Key Concerns

Financial Stability: Risk of disrupting existing financial systems

Capital Controls: Potential for capital flight and currency undermining

Monetary Sovereignty: Preserving central bank control over monetary policy

Alternative Strategy

Both nations have imposed strict restrictions or outright bans on privately issued cryptocurrencies while vigorously advancing domestic CBDC projects - maintaining digital innovation under state control.

Market Ecosystem

Core Participants & Their Roles

Core Infrastructure Participants

Issuers

Circle (USDC), Tether (USDT) - ecosystem nerve centers handling minting/burning and reserve management

Revenue: Reserve asset yield

Custodians

BNY Mellon, State Street - value guardians holding reserves in segregated accounts

Revenue: Custody fees

Exchanges & Market Makers

Binance, Coinbase - liquidity providers ensuring market depth and tight spreads

Revenue: Trading fees, spreads

Blockchain Networks

Ethereum, Tron - infrastructure providing secure, programmable environments

Revenue: Transaction fees

Users

Retail & institutional users - demand drivers seeking payment solutions and inflation hedges

Drive: Transaction demand

Regulators

HKMA, MAS, U.S. OCC - rule-makers establishing legal frameworks and oversight

Role: Supervision & licensing

Payment Ecosystem Participants

Specialized participants creating the complete fiat-to-stablecoin-to-fiat payment loop

Merchants

E-commerce platforms & physical stores - payment end-recipients driving stablecoin payment demand

Reduced transaction fees No chargeback risk Global reach

Crypto Payment Gateways

Stripe, BitPay, CoinGate - key bridges between merchants and stablecoin networks

Generate payment addresses/QR codes Monitor blockchain confirmations Provide fiat settlement services

On/Off-Ramp Providers

MoonPay, Transak, Ramp Network - "highway ramps" connecting fiat and crypto worlds

On-ramp: Fiat → Stablecoin Off-ramp: Stablecoin → Fiat Seamless conversion

Wallet Providers

MetaMask (non-custodial), exchange wallets (custodial) - stablecoin storage and management

Non-custodial: User-controlled keys Custodial: Third-party managed Payment integration critical

Compliance-as-a-Service

Chainalysis - blockchain analytics for AML/CFT screening as regulation tightens

Transaction monitoring High-risk address identification Travel Rule compliance

Auditors & Attestation

Grant Thornton, BPM - trust arbiters providing independent reserve verification

Regular attestations Comprehensive audits Transparency reports

Multi-Directional Ecosystem Relationships

Unlike traditional linear payment flows, stablecoin ecosystems feature complex, multi-directional relationships where participants interact across multiple touchpoints:

Issuers ↔ Custodians ↔ Auditors: Trust triangle ensuring reserve integrity

Payment Gateways ↔ On/Off-Ramps ↔ Wallets: Seamless user experience triangle

Merchants ↔ Compliance ↔ Regulators: Regulatory compliance network

All Participants ↔ Blockchain Networks: Shared infrastructure dependency

4-Layer Ecosystem Architecture

Project Guardian Context

Initiative Overview: Project Guardian is a collaborative initiative between policymakers and the financial industry to enhance liquidity and efficiency of financial markets through asset tokenisation.

Reference Model: The initiative references this four-layered model to describe technology components in a digital asset network

Modular Approach: Each layer can be governed and implemented by different actors, enabling flexible ecosystem development

Future Vision: Supports the "Future of Financial Networks" through modular, interoperable architecture

Layer 4

Access & Identity Layer

User access, authentication, credentials management

Verifiable Credentials (VCs), Decentralized Identities (DIDs)

Trust anchors (regulated financial institutions)

Layer 3

Application Layer

User-facing applications interacting with Layer 2 protocols

Portfolio dashboards, trading interfaces, mobile wallets

App developers, fintech companies

Layer 2

Asset & Protocol Layer

Digital assets (tokens) and financial protocols (smart contracts)

ERC-20, ERC-721, ICMA BDT, DeFi protocols

Protocol developers, asset issuers

Layer 1

Base Layer / Shared Ledger

Core DLT capability for recording transactions and ownership

DLT protocols (Ethereum, Corda), GL1

Infrastructure providers, node operators

Key Insight: This layered model enables separation of concerns - infrastructure separated from financial logic, which is separated from user interfaces. Different companies can innovate simultaneously at different layers.

The "Stablecoin Sandwich" Model

Local Fiat (Origin)

Stablecoin (Blockchain Settlement)

Local Fiat (Destination)

End-users interact with familiar fiat currencies while stablecoins provide efficient back-end settlement infrastructure.

Banking Software Vendor Opportunities

Opportunity 1: "Translation Layer"

High Priority

Digital Asset Core Banking Integration - Banks' existing systems cannot directly interface with blockchains.

Specific Product Directions:

Stablecoin Payment Gateway

Function: Convert traditional bank payment instructions (SWIFT MT103/ISO 20022) into on-chain stablecoin transactions and vice versa.

Value: Banks achieve stablecoin payments without core system overhauls, dramatically reducing integration costs.

Unified Treasury Management

Function: Unified interfaces to simultaneously view and manage fiat and stablecoin positions, achieving unified liquidity views.

Value: Seamlessly incorporate digital assets into existing bank fund management processes.

Ledger Synchronization System

Function: Real-time, accurate synchronization between internal bank general ledgers and public blockchain records.

Value: Address banks' core financial and audit concerns, ensuring book-to-record accuracy.

Opportunity 2: "Control Tower"

Medium Priority

Institutional-Grade Management & Compliance Platform - Banks prioritize risk control and compliance above all.

Specific Product Directions:

Unified Risk & Compliance Dashboard

Function: Integrate on-chain analytics (Chainalysis) with banks' internal customer risk ratings for three-dimensional risk views.

Value: Bridge the anonymous on-chain world with identified internal world, providing single sources of truth.

Automated Compliance Policy Engine

Function: Visual rule editors for configuring stablecoin transaction compliance policies (sanctions screening, amount limits).

Value: Translate banks' existing risk control logic into machine-executable on-chain transaction strategies.

Bank's Strategic Position & Integration

Trust Hub & Service Integrator

Banks leverage brand reputation, customer base, and compliance systems to safely introduce stablecoin technology into traditional financial services.

Legacy System Integration

Core Banking System Real-time fiat account operations

Corporate E-banking Client interface and status tracking

FX Trading System Currency conversion and risk management

AML/Compliance Risk correlation and monitoring

An Empirical Analysis: Singapore

Executive Summary

Singapore has emerged as Asia-Pacific's leading stablecoin testbed, where regulatory clarity meets market innovation. The Monetary Authority of Singapore (MAS) has created a controlled environment for stablecoin experimentation, resulting in measurable real-world adoption. This empirical study examines concrete use cases, transaction data, and institutional initiatives that demonstrate Singapore's position as a global stablecoin laboratory.

Key Findings

$1B+ crypto merchant services volume (Q2 2024)

$8B+ XSGD cumulative transaction volume

Project Guardian institutional tokenization leadership

Dual Economy: USD institutional vs SGD retail

Market Applications: From Theory to Practice

Cross-border Payments & Remittances

Value Proposition: Stablecoins provide attractive alternatives to traditional cross-border payments. While conventional wire transfers typically take days and cost 6.62% globally, blockchain-based stablecoin transfers settle almost instantly at a fraction of traditional costs.

B2B Large-scale Settlements: Particularly pronounced in business-to-business large-scale settlements between Singapore and regions with underdeveloped banking infrastructure

Individual Remittances: Growing adoption for individual remittances, though in Singapore large-scale application is more evident in institution-led pilot projects rather than widespread retail adoption

DeFi Frontier: Liquidity Provision & Yield Generation

Role: Stablecoins serve as DeFi's lifeblood, functioning as the sector's primary medium of exchange, unit of account, and liquidity source.

XSGD Integration

SGD-pegged XSGD has been integrated into leading decentralized exchange (DEX) Uniswap. Users can conveniently swap XSGD for ETH, USDC and other mainstream crypto assets.

Uniswap liquidity pools participation Trading fee earning opportunities Concentrated liquidity mechanisms (Uniswap V3)

DeFi Protocol Integration

While specific XSGD support across mainstream DeFi protocols like Aave, Compound, and Curve is limited, these platforms constitute critical infrastructure for stablecoin core functions.

Lending protocol integration potential Yield generation opportunities Efficient swapping mechanisms

Corporate Treasury Management Transformation

Evolution: Corporates exploring stablecoins for treasury management to boost capital efficiency, achieve 24/7 liquidity management, and automate financial operations through programmable payments.

Programmable Treasury Concept

Through smart contracts, corporates can set predetermined conditions (goods delivery confirmation, inventory replenishment completion). Once conditions are met, payments execute automatically.

JPMorgan JPM Coin: Demonstrated enormous potential for driving micro, high-frequency automated payments

PayPal PYUSD: Used to pay EY invoices, showing growing market interest

Citigroup: Launched Citi Token Services for institutional payments

Singapore Status: Widespread adoption remains early-stage, currently driven mainly by crypto-native companies and large institutional pilots.

Tokenization Hub: RWA Settlement Layer

Next Frontier: Asset tokenization—digitally representing real-world assets like bonds, real estate, and fund shares on blockchains—viewed as the next financial market frontier.

Stablecoin Role in RWA

Settlement Medium: Provide stable, programmable, efficient transaction media for buying/selling tokenized RWAs

Atomic Settlement: Enable "atomic settlement" where payment and asset ownership transfer complete simultaneously on-chain (DvP)

Risk Reduction: Dramatically reduce counterparty risk through automated, trustless settlement

Market Intelligence: Data-Driven Insights

Transaction Volume & Market Growth

Global Stablecoin Market

$625B

Monthly Transaction Volume (May 2025)

$650-700B

Q1 2025 Stabilized Monthly Volumes

Growth vs Two Years Prior

$2-3T

Projected Market Cap by 2028-2030

Singapore Domestic Market

$8B+

XSGD Cumulative Transaction Volume

$200M+

XSGD Quarterly Volume (since Q3 2022)

Sustained

Robust Market Activity

User Segmentation: Institutional vs Retail Activity

Key Finding: Blockchain analytics from Chainalysis reveal significant usage pattern differences between USD-pegged and SGD-pegged stablecoins in Singapore.

USD Stablecoins (USDT, USDC)

Transaction Pattern: Dominated by large transfers exceeding $1 million

Primary Function: Bridges for institutional investors entering global crypto markets

Use Cases: Trading and liquidity management for institutions

SGD Stablecoins (XSGD)

Transaction Pattern: Broader distribution, dominating retail-level transactions under $10,000

Primary Function: Used in Singapore's smaller-scale local economic activities

Growth Pattern: Retail and professional user group year-over-year growth becoming increasingly significant

Market Structural Insight: While Singapore's crypto market has historically been institution-driven, retail and professional user groups are showing increasingly significant year-over-year growth, indicating market maturation and broader adoption.

Merchant Adoption & Payment Integration

Key Indicator: Merchant adoption is the most critical indicator of whether stablecoins are moving beyond crypto circles into the real economy.

$1B

Q2 2024: Cryptocurrency value received by Singapore merchant services approached $1 billion, far exceeding any previous quarter

Significance: Strongest signal that digital currencies are being used for purchasing real goods and services

Supporting Infrastructure

dtcpay

Specialization: Singapore-based provider specializing in crypto payment acceptance solutions for merchants

Multi-crypto support Merchant APIs Local compliance

Triple-A

Partnership: Partners with DCS Card Centre, enabling cardholders to top up accounts with stablecoins including USDC

Card integration USDC support Fiat conversion

Global Payment Integration

Visa & Mastercard: Integrating stablecoins into payment networks

Shopify: Support merchant stablecoin acceptance through plugins

E-commerce Platforms: Widespread plugin availability for crypto payments

Market Insight: The growth of local PSPs like dtcpay and Triple-A indicates infrastructure maturation, bridging crypto economy to real economy. This validates MAS's vision of stablecoins as "medium of exchange" becoming reality.

Project Guardian: MAS Innovation Laboratory

MAS-led collaborative initiative between policymakers and financial industry to enhance liquidity and efficiency of financial markets through asset tokenization. This represents the strongest empirical evidence for stablecoin applications in Singapore's institutional finance sector.

Key Participants & Roles

Global Investment Banks

JPMorgan JPM Coin integration, tokenized bond settlements

UBS Tokenized fund management, digital asset custody

Citigroup Citi Token Services, cross-border institutional payments

Regional Banks

DBS Digital asset platform, tokenized deposits

OCBC Blockchain-based trade finance solutions

Asset Managers & Exchanges

SBI Digital Asset Holdings Tokenized securities trading platform

Hamilton Lane Private market tokenization experiments

Pilot Use Cases

Tokenized Bond Trading

Using regulated stablecoins to settle tokenized government and corporate bond transactions with atomic DvP settlement.

Tokenized Fund Shares

Institutional investors trading tokenized fund shares using stablecoins as settlement currency, eliminating traditional clearing delays.

Cross-Border Institutional Payments

Bank-to-bank institutional payments using tokenized deposits and regulated stablecoins for near-instant settlement.

Strategic Implication

Project Guardian demonstrates that the most economically impactful stablecoin application is serving as settlement layers for institutional-grade tokenized financial assets, not just retail payments. This represents the convergence of traditional capital markets with blockchain technology and foreshadows stablecoins becoming the cornerstone of next-generation financial market infrastructure.

Singapore's Dual Stablecoin Economy

On-chain data and market dynamics clearly outline Singapore's stablecoin market's dual structure with two parallel stablecoin economies coexisting:

Global-Oriented Economy

Currency: USD stablecoin-dominated (USDT, USDC)

Users: Institution-driven capital market participants

Function: Liquidity channels for global crypto assets

Transaction Pattern: Large-scale institutional transfers

Local-Focused Economy

Currency: SGD stablecoin (XSGD)

Users: Retail and SME participants

Function: Diversified local application scenarios

Transaction Pattern: Smaller-scale, frequent transactions