According to data provided by Chainalysis, Singapore’s stablecoin transaction volume surged to an unparalleled high of almost $1 billion in the second quarter, mainly due to transactions at merchant outlets.
This is a significant increase from the $161 million transactions recorded in 2023. Eric Jardine, Chainalysis Cybercrimes Research Lead, cited the “efficiency and low cost” of stablecoins launch for merchants.
StraitsX digital assets platform announced it had secured a major payment institution license from the Monetary Authority of Singapore, thereby enabling the issue of stablecoins such as XSGD pegged to the Singapore dollar and US dollar-denominated XUSD. This simultaneously declined in line with MAS’ promise of a new regulatory framework concerning Stablecoins.
Apart from this surge, a Bloomberg report says stablecoin usage still accounts for a small fraction of overall payment volumes. However, proponents favor the technology because of its advantages over more conventional modes of payment, including nearly instant transactions, much lower fees, and fewer intermediaries. The stable nature of such coins, usually pegged to stable assets, allows seamless business transactions.
Singapore’s Regulatory Strategy for Cryptocurrencies
Singapore is highly praised for its proactive approach to digital assets. A local fintech expert, Jason Tay claimed that the nation is striking a perfect balance between innovation and strict regulations to keep the industry safe from any impending risks.
This is underlined by StraitsX, which found its place after going through very strict scrutiny with regard to financial soundness, compliance frameworks, risk management practices, and governance. Such requirements show only MAS’s commitment to a safe cryptocurrency space that is also effectively regulated and has the highest degree of control against anti-money laundering.
Stablecoins are digital assets pegged to the values of currencies and other real-world assets; they serve predominantly as a vehicle in crypto trading. At the same time, they have been called out for their potential in illegal transactions. Despite that, stablecoins make up only a small fraction of total payment volumes.
By comparison, traditional forms of payment still prevail in Singapore, where retail card payments totaled $73.2 billion, about $56.2 billion, in the second half of last year. Stablecoins have entered the scene against this conventional financial backdrop.
On the other hand, Singapore is eager to use stablecoin not just as one more digital asset, but rather as a strategic lever that will help stamp its status as a digital finance powerhouse. This also covers an overview of blockchain technology for institutional use in the hope that this could further streamline and make financial transactions even more cost-effective.
Merchants in Singapore are slowly adopting cryptocurrencies into their daily financial activities. For example, in March, the ride-hailing app Grab started allowing users to top up their e-wallets through cryptocurrencies in cooperation with the payment firm Triple-A, which helped facilitate the businesses.
Investor Confidence in Singapore’s Stablecoin Market
According to the Chainalysis research, the clear regulations make investors more confident, especially when it comes to the Singapore stablecoin market. The study says that this rise in trust comes after the Monetary Authority of Singapore (MAS) made a number of changes to its regulations.
In August 2023, MAS tightened the rules on stablecoins by adding strict requirements for producers. These included detailed rules for keeping customer assets separate and safe. MAS
added more crypto custody and licensing rules in April 2024, making the regulatory system even stronger.
Around the same time these steps were taken, there was a major rise in cryptocurrency activity worldwide. The index score went from 0.39 in the previous quarter to 0.8 in the first quarter of 2024. Since the third quarter of 2021, this is the major peak.
The value of all Bitcoin transactions in North America and Western Europe has also increased significantly since Bitcoin exchange-traded funds (ETFs) were introduced in the US.
Relatedly, Singapore’s central bank recently permitted Paxos to offer digital payment token services. This means it can issue stablecoins that align with the country’s rules. With this approval, Paxos becomes a major payment institution under Singapore’s strict financial rules.
