Why are stablecoins so important in Asia today?

Why stablecoins matter in Asia right now

A stablecoin is often described as a "digital dollar," but in Asia it functions more like plumbing. It helps people transfer money, settle payments, and keep stable value exposure when local rails are slow, costly, or fragmented across countries.

 

That demand is structural. Asia is home to some of the world's largest remittance corridors, export-heavy supply chains, and mobile-first consumers who expect money services to work instantly.

 

When traditional cross border payments feel like a paperwork exercise, stablecoins aim to behave like cash that moves at internet speed, even across time zones.

 

What is a stablecoin?

A stablecoin is a type of digital asset designed to maintain a stable value by referencing a specific asset, most commonly a fiat currency such as the U.S. dollar. The target is simple: one token stays close to one unit of the reference asset, so users can move "stable" value without relying on bank transfer windows.

 

In practice, stablecoins sit at the intersection of payments and markets:

• For stablecoin users active in trading, stablecoins reduce friction versus constantly wiring funds back to a bank account.
  
  

• For households and businesses dealing with FX risk, fiat-backed stablecoins can act like portable dollar exposure without opening a foreign bank account.
  
  

• For institutions, stablecoin issuance raises questions that look a lot like money market funds and short-term settlement: what are the reserve assets, where are they held, and can redemptions happen on demand?

 

Stablecoins also differ from most cryptocurrencies because they are meant to avoid the day-to-day swings of volatile tokens. That is why stablecoins issued at scale tend to market themselves as payment instruments, not speculative investments.

 

Four types of stablecoins

Stablecoins are not all built the same. The mechanism matters because it determines how "stable" the stable value promise really is.

1)  Fiat-backed stablecoins

Fiat backed stablecoins are issued by a stablecoin issuer that holds reserve assets intended to match the outstanding coins one-to-one.

 

Reserve assets often include cash, treasury bills, and other short-term, high-quality liquid holdings, which is why comparisons to money market funds show up so often.

 

Examples include: Tether (USDT), USD Coin (USDC), StraitsX Singapore Dollar (XSGD), Coins.ph Philippine Peso Coin (PHPC).

2)  Crypto-backed stablecoins

Crypto-backed stablecoins are typically overcollateralized with other cryptocurrencies. They rely on smart contracts and liquidation mechanics rather than bank-held reserves.

 

Examples include: Dai (DAI).

3)  Commodity-backed stablecoins

Commodity-backed stablecoins track a commodity such as gold and are backed by claims on physical reserves. These are "stable" relative to the commodity, not relative to fiat currency.

 

Examples include: Paxos Gold (PAXG), Tether Gold (XAUT).

4)  Algorithmic stablecoins

Algorithmic stablecoins try to hold a peg via incentives and supply adjustments, often without full reserves. This model is the most politically and regulatorily toxic in Asia after TerraUSD.

 

Why banks and financial institutions have not adopted stablecoins at scale in Asia

Stablecoins are heavily used by retail and market participants, but bank-grade adoption is slower in Asia because the trade-offs are sharper here than in many developed markets.

1. Fragmented rules across borders

A bank operating across multiple jurisdictions cannot scale one stablecoin product if the legal treatment changes at every border.

 

Some regulators treat stablecoins as payment instruments, others treat them as crypto assets, and some still operate in ambiguity. This slows product rollout and forces compliance teams to build country-specific controls.

 

Hong Kong's approach is a clear example of tightening the perimeter: the Hong Kong Monetary Authority (HKMA) implemented a licensing regime under the Stablecoins Ordinance (SO) effective August 1, 2025, making issuance of fiat-referenced stablecoins a regulated activity that requires a license.

 

2. Deposit substitution and digital dollarization fears

In parts of Asia, stablecoin demand is not only about convenience. It is also about access to USD exposure. For policymakers, that raises a fear: deposits leave local banks, weaken monetary policy transmission, and accelerate "digital dollarization". 

 

This is one reason central banks such as the Reserve Bank of India (RBI) have repeatedly warned about stablecoins and pushed central bank digital currency as the preferred path for digital money.

 

3. Stablecoins are not deposits and usually are not insured

Banks and consumers understand deposits, interest-bearing accounts, and protection regimes. Stablecoins sit outside that comfort zone.

 

Even in the U.S., where the Federal Deposit Insurance Corporation (FDIC) is a common reference point, payment stablecoins are not bank deposits and are not insured like deposit accounts.

 

The GENIUS Act reinforces that payment stablecoins sit in a distinct category with reserve and disclosure rules. That difference affects disclosures, marketing rules, and investor expectations.

 

It also affects how banks see their liability structure. Deposits fund lending. If stablecoins pull deposits away, banks lose a cheap funding base.

4. Reserve assets create a different balance sheet discussion

When a stablecoin issuer holds mostly treasury bills and cash equivalents, the reserve assets may look conservative. But redemption behavior can create run dynamics. Risk committees care about the "what if everyone redeems at once" scenario, especially during stress when liquidity matters.

 

This is also why modern stablecoin rulebooks push for high-quality reserve assets, segregation, governance, audits, and clear redemption timelines.

 

The Monetary Authority of Singapore (MAS) finalized a stablecoin regulatory framework in 2023 focused on single-currency stablecoins pegged to Singapore dollar or Group of Ten currencies, emphasizing value stability and robust backing.

5. Compliance and money laundering exposure is reputational risk

Banks are accountable for screening and reporting. Stablecoin flows can move quickly across wallets and intermediaries, which increases the burden of money laundering controls. In Asia, the compliance problem is amplified by high cross-border volume and uneven supervision across on-ramps and off-ramps.

 

As a result, banks often prefer models where compliance is built into issuance and redemption gates, not bolted onto open circulation.

6. Tokenized deposits can feel like the safer institutional path

Many Asian banks are exploring tokenized deposit models because they keep the deposit relationship inside the bank while gaining programmable settlement rails. For banks, tokenized deposits can deliver modern payment services without handing monetary credibility to an external stablecoin issuer.

 

Prominent stablecoin development in Asia

From October 2025 through January 2026, stablecoins shifted from "market tooling" to "policy and infrastructure."

 

The difference was visibility: more jurisdictions clarified issuance rules, more local projects launched, and more regulators signaled how they want stablecoins to fit into the financial system.

 

Below is what exists today by market, including stablecoins issued and the tickers that matter.

Singapore

Singapore's stablecoin direction is regulated, reserve-first payments infrastructure.

• StraitsX Singapore Dollar (XSGD): Singapore dollar (SGD) fiat backed stablecoin

• StraitsX US Dollar (XUSD): USD fiat backed stablecoin

• StraitsX Indonesian Rupiah (XIDR): Indonesian rupiah (IDR) fiat backed stablecoin

 

Singapore's MAS framework emphasizes high-quality reserve assets and timely redemption, which is why Singapore-issued stablecoins are often positioned closer to money market funds risk posture than to "other cryptocurrencies". 

Hong Kong

Hong Kong is building a licensing-first stablecoin market.

• First Digital USD (FDUSD): USD fiat backed stablecoin associated with a Hong Kong trust structure

Hong Kong's stablecoin issuer licensing regime under the Stablecoins Ordinance became effective August 1, 2025, and the HKMA has been explicit that early licenses will be limited, with first approvals expected in 2026.

Mainland China

China is the clearest outlier in Asia because it rejects private stablecoins as payment infrastructure and instead pushes state-controlled digital money.

Mainland policy context:

• The People's Bank of China (PBOC) reaffirmed a crackdown posture in late 2025 and explicitly flagged stablecoins as a concern due to customer identification gaps and anti money laundering weaknesses, warning about fraud and unauthorized cross-border fund transfers.
  
  

• In parallel, China continues to promote its central bank digital currency, the digital yuan (e-CNY), and expand controlled cross-border testing. The PBOC has described cross-border e-CNY technical testing between the mainland and Hong Kong, including exploring interconnectivity between the e-CNY system and Hong Kong's Faster Payment System (FPS).

Cross-border infrastructure angle:

• Project mBridge (mBridge) is a multi-central bank digital currency platform originally involving the HKMA, the Bank of Thailand (BOT), the Central Bank of the United Arab Emirates (CBUAE), and the PBOC Digital Currency Institute, supported by the Bank for International Settlements (BIS) Innovation Hub. BIS noted mBridge reached minimum viable product stage in mid-2024.
  
  

• Reuters reported BIS stepped away from mBridge in 2024 as the project matured for the participating central banks to continue, underscoring that China's preferred cross-border approach is CBDC-based and permissioned.

Hong Kong spillover:

A key late-2025 tension was Beijing's sensitivity to private stablecoin issuance even in Hong Kong. The Financial Times reported that major Chinese technology firms paused Hong Kong stablecoin plans after Beijing intervened, reflecting concerns about control and the relationship with e-CNY strategy.

Offshore Chinese yuan stablecoin (outside mainland rails):

• Tether CNH₮ (CNHT): Offshore Chinese yuan (CNH) referenced stablecoin, launched as CNH₮. This is an offshore product and does not change the mainland’s prohibition posture.

China's practical message for Asia is blunt: private stablecoins are not acceptable money inside the domestic financial system, while CBDC-style rails and controlled settlement infrastructure are.

Japan

Japan is pushing stablecoins into payment-grade categories with clearer legal treatment.

• JPYC (JPYC): Japanese yen (JPY) fiat backed stablecoin launched October 27, 2025, structured under Japan's revised payment framework and backed by yen-denominated assets including Japanese government bonds

This is a key late-2025 milestone because it pulled attention toward non-USD stablecoins and showed how a local currency stablecoin can be designed around conservative reserve assets and governance.

Philippines

The Philippines is a demand-heavy market where stablecoins are positioned for practical payments and remittances.

• Philippine Peso Coin (PHPC): Philippine peso (PHP) stablecoin pegged 1:1 and described as backed by cash and cash equivalents held in Philippine bank accounts

This matters because it frames stablecoin issuance as a regulated rails upgrade for everyday money services, not only a trading instrument.

Indonesia

Indonesia illustrates the gap between user demand and regulatory clarity.

• Rupiah Token (IDRT): IDR-pegged stablecoin described as fully collateralized 1:1 by fiat rupiah, with backing held in Indonesian bank accounts

Indonesia is also a good example of why banks worry about cross-border compliance: an IDR stablecoin can exist on-chain globally even if local rules about payments and reporting differ by platform and counterparty.

Malaysia

Malaysia's stablecoin story in late 2025 was about ringgit visibility and trade positioning.

• RMJDT (RMJDT): Malaysian ringgit (MYR) ringgit-backed stablecoin launched in December 2025 by the Regent of Johor, positioned to support cross-border trade settlement and wider ringgit use

Vietnam

Vietnam has local stablecoin activity, but it is not yet a unified, regulator-blessed standard across the banking sector.

• VNDC (VNDC): Vietnamese dong (VND) referenced stablecoin described as pegged 1:1 to VND

The practical takeaway is that Vietnam has stablecoin usage, but the institutional layer is still being defined.

Thailand

Thailand's trajectory has leaned toward controlled experimentation rather than open retail stablecoin adoption.

• The Bank of Thailand (BOT) has been consulting on a framework for baht-backed stablecoins, while regulated sandbox projects explored programmable payment units backed by Thai baht deposits.
  
  

• Separately, Thailand's finance ministry has publicly discussed plans for a government bond-backed baht stablecoin concept, signaling interest in a model closer to tokenized government securities than open retail stablecoins.

Taiwan

Taiwan’s regulators have signaled that a domestic stablecoin could arrive after legal and supervisory groundwork, with timelines pointing into 2026.

India and South Asia

India remains publicly cautious about stablecoins, with policymakers emphasizing sovereignty and systemic risk concerns. No major widely adopted INR-pegged stablecoin ticker in mainstream regulated channels is comparable in visibility to SGD, JPY, or PHP examples.

 

India’s posture matters regionally because it reinforces the idea that stablecoins are not just payments tech, they are monetary policy tech.

South Korea

South Korea’s conversation is often about structure and gatekeeping: who should be allowed to issue stablecoins, and under what banking oversight. No single dominant KRW-pegged stablecoin ticker has emerged as the clear national standard in the same way as XSGD or JPYC.

United Arab Emirates (UAE) corridor relevance

Even though the UAE is not in Asia, it is inseparable from Asia’s remittance and trade corridors.

• AED-pegged stablecoin projects (in rollout and approval stages) tied to regulated payment token rules

For Asia, this matters because Gulf-to-South Asia routes are among the most active cross border payments corridors in the world.

 

How stablecoins differ from central bank digital currencies and tokenized deposits in Asia

In Asia, stablecoins compete and collaborate with two other forms of digital money: central bank digital currency (CBDC) and tokenized deposits.

 

A CBDC is central bank money in digital form. It is a direct liability of the central bank, designed to be legal tender inside the issuing jurisdiction. In Asia, CBDC work often focuses on wholesale settlement, domestic retail payments, or cross-border pilots.

 

A tokenized deposit is different. It is still a bank deposit, still a claim on a commercial bank, but represented as a token on a ledger so it can move with programmable conditions. Banks like this because it keeps deposits inside the regulated bank perimeter.

 

Stablecoins sit in the middle. They can deliver always-on settlement for digital assets and cross-border transfers, but the user's claim depends on the stablecoin issuer, reserve quality, and redemption mechanisms, plus regulatory oversight in the issuer's home jurisdiction.

Comparison table between stablecoins, CBDCs, and tokenized deposits

 

 

Stablecoin risks, scams, and enforcement realities

Stablecoins reduce volatility, not risk.

Reserve trust, de-pegs, and fraud

The main failure modes repeat: reserve trust, de-pegs, and fraud. Algorithmic stablecoins are Asia's clearest warning, with TerraUSD (UST) showing how a stable value promise can collapse when stability depends on confidence instead of hard reserves.

 

For fiat backed stablecoins, the more common stress event is a temporary de-peg driven by reserve uncertainty, banking stress, or redemption bottlenecks.

Fraud and money laundering

Fraud and money laundering are the other major categories The United States Department of Justice (DOJ) filed a civil forfeiture complaint seeking to seize roughly $225 million in cryptocurrency, largely Tether (USDT), traced to "pig butchering" investment scams.

 

Victims were groomed online, routed to fake trading platforms, and pressured to send stablecoins to addresses controlled by criminal networks. The complaint described how proceeds were laundered through a wide web of blockchain transactions to obscure origin, and authorities pursued seizure to return recovered funds to victims.

 

Reporting has also linked parts of this scam economy to Southeast Asia-based operations using trafficked labor, which is why Asian compliance teams treat stablecoin flows as a frontline risk area.

 

Regulators have responded by tightening rules on stablecoin issuance, disclosures, and gatekeeping at the on- and off-ramps. The stablecoin direction in Asia is clear: less tolerance for opaque reserves, more insistence on licensed issuance and strong compliance.

 

Will stablecoins become Asia's payment rails in 2026?

From late 2025 into early 2026, Asia's stablecoin story became less about speculation and more about infrastructure.

• More local fiat backed stablecoins are appearing, but USD stablecoins still dominate real usage.

• Banks are moving carefully, preferring tokenized deposits and regulated settlement pilots while they wait for clearer regional alignment.

• Regulators are converging around a simple message: stablecoin issuance must be backed by high-quality reserve assets, with reliable redemptions and enforceable compliance.

In other words, stablecoins are no longer trying to "replace banks". The more realistic path is that stablecoins become a regulated settlement layer for cross border payments and digital assets, while banks keep the customer relationship and the insured account.

 

If you want to track what matters next, watch out for the three signals below:

1. Which jurisdictions approve licensed issuers

2. How reserve assets are defined and audited

3. Whether banks embrace stablecoins directly or scale tokenized deposits as the safer institutional alternative