Singapore dollar-backed stablecoin XSGD launches on Coinbase amid rising crypto adoption

SINGAPORE: XSGD, the only Singapore dollar-backed stablecoin, debuted on the largest United States-based cryptocurrency exchange Coinbase on Wednesday (Oct 1) amid increasing adoption of the digital asset in Singapore.

XSGD, which has been issued by StraitsX since 2020, is pegged to the Singapore dollar 1:1 and fully backed by reserve assets held by DBS and Standard Chartered banks.

Stablecoins are cryptocurrencies designed to maintain a constant value, usually pegged to a fiat currency like the US dollar. They are significantly less volatile than other cryptocurrencies.

Stablecoins make up about 7 per cent of the crypto market share, according to US multinational investment firm BlackRock.

Interest in blockchain-based stablecoins has surged, with many companies around the world looking at launching their own.

The appetite for risk assets like stablecoins is rising as global markets navigate shifting monetary policy with dovish signals.

Singapore has been competing for a slice of the stablecoin pie. The global stablecoin market recently reached a milestone value of US$250 billion and could expand to US$2 trillion by 2028, according to estimates by Standard Chartered.

In 2023, the Monetary Authority of Singapore (MAS) set out a regulatory framework for stablecoin issuers.

It is now working on legislative amendments to formalise the framework and will issue a public consultation later this year.

SINGAPORE “LEADING THE CHARGE”

In a press release, StraitsX said that XSGD’s launch on Coinbase “brings instant crypto-to-SGD transactions to businesses, tourists and digital platforms in Singapore”.

Millions of Coinbase users worldwide will also be able to transact in XSGD.

Usman Naeem, global head of derivatives sales and agency trading at Coinbase, told CNA that as cryptocurrency becomes more than just a trading asset, it is increasingly important to have “localised” stablecoins pegged to a country’s own currency.

“(This allows) local fiat to be on-ramped into the crypto economy without having to do an FX (foreign exchange) in between as well,” he said on the sidelines of cryptocurrency conference TOKEN2049, which is being held at Marina Bay Sands this week.

“That's the quickest way, in our opinion, to grow stablecoin transaction volume.”

As for whether this will erode growth in US dollar-backed stablecoins, Mr Naeem said he thinks the opposite. “It will grow the whole pie,” he added.

He noted that Singapore has been “leading the charge” in the region on cryptocurrency regulation and clarity.

“MAS is extremely forthcoming with engaging with corporates, including Coinbase, and I think that's also reflective (that) the local residents and corporates are very keen to transact in the digital economy,” he said.

FIRST STABLECOIN SCAN-TO-PAY SERVICE

On Tuesday, XSGD also became the basis for Singapore’s first stablecoin scan-to-pay service OKX Pay, launched by US-based cryptocurrency exchange OKX.

Customers can now make payments in stablecoins to merchants on ride-hailing operator Grab's payments platform. This marks the first time that GrabPay merchants in Singapore will accept direct stablecoin payments.

OKX Pay users can pay using USDC and USDT stablecoins by scanning SGQR codes – Singapore’s unified payment QR code.

USDC and USDT, both popular cryptocurrencies, are pegged one-to-one to the US dollar.

These payments will be converted to XSGD before merchants receive the amount in Singapore dollars.

OKX Singapore’s CEO Gracie Lin said the country has been a “really exciting space” for the company, citing its strong foundations in both traditional finance and digital assets.

OKX Pay allows merchants who do not know how to accept stablecoin to do so now, she noted.

“We built the bridge … and for users who have stablecoin and want to use stablecoin for daily use, they can. Then, the merchant doesn't have to change anything on their side,” Ms Lin told CNA.

“Singapore is a fantastic place to try and bridge everything together using stablecoin.”

Ms Lin also pointed out that global standards are increasingly being spelled out in major markets, as regulators consider measures to ensure stablecoin development continues in a sustainable and responsible way.

“(This is) whilst ensuring that it can bring the type of utility to payments, to FX conversion, to cross-border trade, settlement, all of these good things – while making sure that people who interact with stablecoins are going to be protected,” she said.

“That's why I feel like there's been this big global push towards high-quality asset-backed stablecoins.”

NEW US REGULATIONS

The market is also expecting that America's first major regulation on stablecoins, which was signed into law by US President Donald Trump in July, will spur interest and adoption of stablecoins and digital assets.

Under the GENIUS Act, stablecoins must be fully backed by liquid assets, including US dollars and short-term US Treasury bills. Issuers will be required to publicly disclose the composition of their reserves each month.

The move aims to provide certainty for the sector, spur innovation and attract mainstream adoption.

Finalised details of the Act will be implemented by January next year.

Ms Lin said that while this has been a boost to US dollar-backed stablecoins, they had already been on the rise.

“What I think is really important about the Act is that it now sets a very, very clear standard which is going to be adopted globally,” she added.

“That clarity is good for all players, including ourselves. Now we know which partners to work with and how to integrate that into the service (we are) offering for our users.”

Mr Naeem said the new US regulations will force existing players like Coinbase to “sharpen the pencil” and ensure it is doing the best thing for its users.

“I think we are unique in the way that we offer crypto to our clients, but we're also complementary to some of the other partners that are coming up, so we don't necessarily see them as bad competition,” he added.

“Competition is good, and we're just going to continue working together to grow the economy.”