Stablecoins have been on the rise within Singapore's financial ecosystem. Be it central bank digital currencies (CBDCs), the tokenized Singapore digital dollar, or various initiatives backed by government regulators, stablecoins are one of the most important developments in the world of cryptocurrency and blockchain technology.
As the name suggests, stablecoins are digital assets designed to maintain the stable value of a benchmark asset, such as the US dollar or gold.
This stability makes it an attractive option for investors and businesses looking to mitigate the risks associated with crypto volatility, offering the benefits of digital currencies such as fast transactions and low fees without the hassle.
Stablecoins can be backed by fiat currencies, commodities or other cryptocurrencies and offer a number of benefits, including faster and cheaper cross-border transactions, increased financial inclusion and the potential for programmable money.
This means that unlike many digital assets, whose practical applications may not be known for a long time (if ever), stablecoins are starting to show demonstrable real-world use cases.
In Singapore, stablecoins have taken a unique turn with the concept of “purpose-linked money” – companies like StraitsX have driven island-wide development from pregnancy to live testing, and soon even apps for tourists to make payments in Singapore. using the local payment application.
For Liu Tianwei, Co-Founder and CEO StraitX his interest in the cross-border potential of digital money was fueled by his time as a young engineer at Amazon, who couldn't figure out how to quickly and securely receive payments back to Singapore for Amazon Kindle Fire units, solving a real-world problem. problem was the primary motivation behind the payment technology startup.
Stablecoins bring Blockchain benefits to cross-border payments in Singapore
StraitsX, formerly known as Xfers, is a payment infrastructure provider in Singapore and Southeast Asia. Founded in 2015, the company has been at the forefront of regional stablecoin development, focusing on real-world applications and pragmatic solutions.
Liu Tianwei
“We are technologists at heart, but at our core we are also a pragmatic payment infrastructure. We're not really interested in speculative stuff on a personal basis, but we're always trying, from a technology standpoint, to see how this can be used in real-world applications.”
Tianwei explains.
StraitsX's journey to stablecoin began with the recognition of the potential benefits of blockchain technology in cross-border payments.
Tianwei notes that traditional payment systems involve a two-part process: communication and settlement, which can take days or weeks when moving money across borders.
With stablecoins, however, the process is much more efficient, as Tianwei points out:
“To get payment confirmation, I'm literally transferring the use of a token that was in my wallet to your wallet, on the regular blockchain.
So once the token reaches your wallet, what happened is you don't have to wait say three, four days for the money to come. It has already arrived.”
The company has developed its own stablecoins, including XSGD, a stablecoin backed by the Singapore dollar; XIDR, a stablecoin backed by the Indonesian Rupiah; and XUSD, a stablecoin pegged 1:1 to the US dollar.
StraitsX became one of the first two entities get approval in principle from Monetary Authority of Singapore (MAS) to issue stable currencies that will join the central bank The new stablecoin regulatory framework.
Goal Connected Money: Piloting interoperable real-world payments
While stablecoins offer advantages in theory in terms of speed and efficiency, StraitsX has taken the concept a step into reality with the development of purpose-linked money (PBM).
In collaboration with MAS, the company has participated Project Orchidan initiative aimed at exploring the concept of PBM and its interoperability with e-wallets, payment systems and blockchains to be able to distribute money for commercial purposes.
Project Orchid, and the 1st use of funds tied to the objectives, in partnership take it. Source: StraitsX
PBM, as Tianwei explains, is essentially a programmable version of stablecoin that can be used for specific purposes, such as government aid or bonds.
“The idea here is, you know, we've been talking about this whole blockchain, asset programmability thing for almost 15 years. It's been talked about, and it's very exciting today, but we haven't seen the real-world application.
So we came at the invitation of MAS to think, 'Can we build a real-world example of stablecoins working in the hands of a consumer or retailer?'”
Under the auspices of MAS's Project Orchid, the first version of PBM was a digital voucher system (Community Development Council or CDC Vouchers) that mimicked the CDC voucher concept (Community Development Council or CDC Vouchers) for spending at participating local merchants and vendors and for Singaporeans to helps them cope). daily expenses) users can hold the vouchers in “any wallet of their choice” and spend them at participating merchants.
StraitsX, in collaboration with Grab, piloted the use of these digital vouchers At Singapore Fintech Festival 2022 F&B outlets, as well as participating Grab merchant partners.
At the Singapore Fintech Festival 2023, StraitsX rolled out this pilot by working with Grab and UOB To introduce Singapore's industry pilot Pitstop Pack, allowing users to purchase PBM vouchers fave.
In the last iteration vouchers could be used Grab Web3 Wallet To pay at 200 merchant outlets across the island, and not just on the convention floor.
Process flow for using StraitsX XSGD at Singapore Fintech Festival 2022. Source: StraitsX
The future of PBM: Programmable and enforceable by design
The project has since expanded to include cross-border payments, with the involvement of major international payment providers such as Alipay. Tianwei announced that in August 2024, tourists from China and Hong Kong will be able to use their own. Alipay app to pay at a wider set of participating outlets, including Grab and Grab-enabled merchants Pay Nowas well as vendor centers.
“(Chinese tourists to Singapore) can enter how much they're paying in Singapore dollars – the typical in-app payment experience they're very used to – then they'll get a real-time FX code, so find out how much in local currency, Chinese yuan, and hit confirm,”
says Tianwei, specifying that at the receiver's end the merchant sees his payment as a result of the receiver's payment, such as GrabPay or PayNow, while the Chinese traveler is making a simple Alipay transaction.
The CEO of StraitsX believes that this approach will remove barriers to adoption by providing a seamless payment experience that is popular, without requiring knowledge of the underlying technology and payment processes.
In fact, Tianwei has stated that by working closely with MAS to meet the guidelines of the new stablecoin framework from regulators, the smart contracts governing these blockchain transactions will come baked with all the restrictions to ensure that the transactions are AML (anti-money laundering). laundering) and fraudulent claims, and that funds are issued only for certain goods and services.
This is what StraitsX envisions for the next iteration of PBM, says its founder.
“That you can create a programmable payment ecosystem, very similar to what we're all used to, but in a cross-border environment.
However, make sure that all the rules and regulations will be implemented by design so that any wallet that wants to participate can immediately access them, and immediately ensure that they are followed by design.”
StraitsX rolled out the pilot at SFF 2023 in partnership with Grab and UOB to introduce the Pitstop Pack industry pilot in Singapore, allowing users to purchase Fave's PBM vouchers. Source: StraitsX
Security and Privacy in the Age of Stablecoins
As with any new technology, even more so those with financial utility, stable currencies and PBMs raise security and privacy concerns. Tianwei acknowledges these concerns, but notes that the open source nature of public blockchain technology can improve security.
“The real value of this type of innovation living on a public blockchain, not a private one, is that a public blockchain allows everyone to participate and, more importantly, everyone to innovate in their own way.”
Additionally, the programmable nature of the PBM allows compliance with regulations and privacy measures using the aforementioned smart contracts.
“Many of these rules, regulations, privacy concerns can be embedded by default, and as a result, all players involved in cross-border payments will have to comply with the design.”
says Tianwei.
Encouraging innovation
For Tianwei, the motivation behind StraitsX's work in stablecoins and PBMs is rooted in a desire to solve real-world problems and enable innovation.
“Technology has moved on, and in the last few years, we really feel like blockchain is being considered as a game changer again.”
says, just as AWS has become synonymous with the cloud technology that underpins many product innovations.
“We're building the blockchain infrastructure that will enable us to build the next generation of products, which keeps us motivated.”
As Singapore continues to set the pace for fintech innovation, the development of stable currencies and purpose-linked money is poised to change the way Singaporeans think about digital payments and financial inclusion. And with companies like StraitsX leading the way in implementing real-world solutions, the use of stable currencies for cross-border transactions may be a reality sooner rather than later.
