The Race for Stablecoins in Asia: Balancing Growth and Oversight

The global expansion of stablecoins is accelerating, prompting countries across Asia to adapt their regulations for these digital assets. Authorities in the region are taking varied approaches, balancing the growth of bank-backed, domestic currency-linked tokens with stablecoins pegged to the U.S. dollar. In Japan, Singapore, and Hong Kong, policies are being updated to define the role of stablecoins in each economy and clarify how these digital assets can function alongside traditional financial systems.

Stablecoin Initiatives and Regulatory Trends Across Asia

In Asia, the development of stablecoins reflects a balancing act between allowing private players to innovate in national monetary systems and maintaining control over capital flows. This is evident in recent developments, with a consortium of Japanese banks planning a new stablecoin while China has restricted Hong Kong-based projects, showing the limits faced by private issuers under existing regulations.

John Cho, vice president of partnerships at Kaia DLT Foundation, explained that regulators and lawmakers in the region are moving quickly to establish clear legal frameworks for cryptocurrencies and stablecoins. He added that policymakers are divided: some believe only established banks should handle stablecoin issuance and reserve management, while others are concerned that such restrictions could hinder innovation and adoption in the sector.

Japan, Singapore, and China: Diverging Paths for Stablecoins

In Japan, MUFG Bank, Sumitomo Mitsui Banking Corporation, and Mizuho Bank plan to issue a stablecoin through the infrastructure of Tokyo-based fintech company Progmat. The initiative will begin with a yen-backed token, followed later by a U.S. dollar version. After completing a proof-of-concept trial, the banks expect the stablecoin to be in practical use by the end of the current fiscal year in March. At the same time, Japan is updating its crypto regulations to prevent illicit activity, including measures aimed at insider trading in digital currencies, as reported by Cointribune.

Meanwhile, Singapore has focused on clarity and infrastructure. StraitsX operates a Singapore dollar–backed stablecoin under full supervision of the Monetary Authority of Singapore (MAS). Tether has also extended its operations in the region, including making USDT available for use through South Korean ATMs via the Kaia blockchain.

MAS’s regulatory framework, introduced in 2023, sets standards for issuers of stablecoins pegged to the Singapore dollar or other G10 currencies, requiring audited reserves, sufficient liquidity, and the ability to redeem tokens within five business days. Only compliant issuers may be recognized as “MAS-regulated stablecoins.”

China, in contrast, is taking a restrictive stance, as it has instructed Ant Group and JD.com to suspend their Hong Kong-based stablecoin initiatives. The People’s Bank of China and the Cyberspace Administration of China warned against allowing private companies to issue currency-like digital assets. Hong Kong, while exploring enterprise applications, remains subject to these central restrictions, limiting its flexibility in the sector.

Outlook for the Region

Industry observers Brian Mehler, CEO of Stable, and Dermot McGrath, co-founder of Ryze Labs, see Japan, Singapore, and Hong Kong following distinct paths in stablecoin development. Here is their view:

• Mehler said Japan could lead in institutional stablecoins because of early initiatives and the momentum of its banking consortium, while Dermot McGrath added that progress in the country is expected to be steady and carefully managed.
• In Singapore, Mehler noted the country is likely to remain a hub of innovation due to clear regulatory frameworks, and McGrath highlighted that it is focusing on creating a few benchmark issuers to guide the market.
• According to Mehler, Hong Kong is concentrating on enterprise-focused applications where compliance is critical, and McGrath pointed out that development there remains sensitive to Beijing’s regulations.
• Both Mehler and McGrath emphasized that across the region, regulators are maintaining control while financial institutions aim to stay active and avoid falling behind in stablecoin adoption.

Thus, as stablecoins continue to grow, Asia is emerging as a central area for their development. Banks, regulators, and technology companies are exploring how these digital assets can integrate with existing financial systems. The coming years will determine which approaches succeed and how innovation and regulation can coexist in this developing digital finance ecosystem.