Industry Insider: Can stablecoins redefine Asia’s financial frontier?
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From crypto trading tools to pillars of modern financial infrastructure, stablecoins are reshaping payments and treasury management, particularly across trade-heavy Asian economies.
By combining the price stability of traditional fiat currencies with the efficiency of blockchain, transaction volumes have steadily increased, reflecting stablecoins’ growing use in everyday economic activities.
For institutional investors, the rise of stablecoins demands attention — not necessarily as a new asset class, but as a transformative force in the financial infrastructure they increasingly rely upon.
UTILITY IN EMERGING MARKETS
A stablecoin is a digital currency designed to maintain a stable value, typically pegged to fiat currencies such as the US dollar or Hong Kong dollar. Unlike volatile cryptocurrencies like bitcoin, stablecoins offer price stability alongside fast, global, and programmable transactions.
The value proposition is clearest in emerging markets, where stablecoins address challenges like volatile local currencies, inflation, and limited international banking access. A primary use case is cross‑border commerce in Asia, where high trade-to-GDP ratios create demand for efficient multi-currency transactions.
USD-pegged stablecoins like USDT and USDC dominate nearly 99% of the market, offering a practical alternative for underbanked populations and informal labour sectors. For businesses, stablecoin settlements reduce working capital burdens by eliminating costly bank intermediaries and shortening settlement times from days to near‑instant transactions.
The trajectory of Tether, the world’s largest issuer of USDT founded in Hong Kong, exemplifies this scale. Facilitating remittances to markets like the Philippines, it has since become one of the largest holders of US Treasury securities, with $127 billion as of mid‑2025, demonstrating stablecoins’ growing integration into mainstream financial systems.
LOCAL CURRENCY STABLECOINS AND REGULATION
Understanding stablecoins requires navigating their distinct risk profiles. They range from lower‑risk, fiat‑backed stablecoins like Circle’s USDC and commodity‑backed stablecoins like Paxos Trust Company’s PAX Gold, to crypto‑backed versions such as MakerDAO’s DAI and highly volatile algorithmic types like Terra USD.
While fiat‑backed stablecoins require segregated, audited reserves, commodity‑backed coins are exposed to custody and audit risks of physical assets, and crypto‑backed stablecoins remain vulnerable to smart contract exploits. Meanwhile, algorithmic stablecoins represent high risk, especially in market stress, evidenced by TerraUSD’s collapse in 2022.
Built on blockchain technology — a decentralised, tamper‑proof distributed ledger — stablecoins leverage cryptographic security to ensure data immutability and resilience against single points of failure. However, this immutability is under discussion: Circle has recently proposed enabling transaction reversals to better manage errors and fraud, highlighting the tension between blockchain’s immediate settlement and practical operational needs.
The key risks — technical vulnerabilities, liquidity shortages causing “de-pegs,” and operational challenges — make transparency, market trust, and regulatory oversight critical for broad adoption.
While USD‑pegged stablecoins dominate, demand for local currency alternatives is growing amid concerns over monetary sovereignty, payment innovation, and capital flow management.
Rather than leading the charge, Asian jurisdictions are developing their own regulatory approaches to stablecoins, reflecting regional priorities and monetary considerations.
Japan, an early pioneer, in August licensed a yen‑backed stablecoin JPYC, fully backed by yen deposits and Japanese government bonds, targeting institutional clients on public blockchain platforms.
South Korea followed in September with its own won‑pegged KRW1, also fully backed 1:1 by won deposits.
Hong Kong, positioning itself as a regional hub, introduced its August Stablecoin Ordinance, which covers a broad remit — including full backing requirements, one‑business‑day redemption obligations to ensure liquidity, strict licensing criteria (such as a local presence and minimum capital of HK$25 million / US$3.2 million), and flexible provisions allowing the HKMA to expand oversight to other stablecoin types or central bank digital currencies as needed.
With 77 institutions expressing intent to apply — including a joint venture between Standard Chartered, Animoca Brands, and Hong Kong Telecommunications (HKT) — Hong Kong is creating a controlled environment for innovation.
The joint venture aims to issue a Hong Kong dollar (HKD)‑backed stablecoin. Separately, the multi‑peg design of Hong Kong’s Stablecoin Ordinance opens potential for future offshore yuan‑backed stablecoins, though these remain conceptually distinct from the HKD initiative.
CONTRASTING REGULATORY APPROACHES AND CBDCs
The stablecoin landscape exists alongside developments in central bank digital currencies (CBDCs). Stablecoins are private‑sector digital tokens facilitating payments, whereas CBDCs are sovereign digital legal tender issued by central banks.
Asia showcases a spectrum of approaches: China operates both retail and wholesale variations of the e‑CNY, while Hong Kong is exploring a two‑tier model spanning retail and wholesale CBDCs. In contrast, Singapore, Japan, Malaysia, and the Philippines are prioritising wholesale CBDC pilots for financial modernisation and cross‑border payments.
This coexistence underscores a balance between private stablecoin innovation and sovereign currency control.
For many Asian economies, this creates a strategic duality: local currency stablecoins act as flexible innovation catalysts, while CBDCs provide central banks with policy tools for monetary oversight — all amid continued debates over US dollar dominance.
Rodney Gollo, Founder of Rhodes Point Advisors, draws on global experience—including his tenure as Head of Risk for Bupa in Hong Kong—to analyse the investment landscape. He translates complex global risks into clear, actionable, and commercial insights.
He welcomes your feedback and ideas on LinkedIn.