30/05/25

ASIA: Asia Moves to Regulate Stablecoins Amid Growing Adoption

As published on: fintechnews.sg, Friday 30 May, 2025.

In Asia, stablecoins are gaining significant attention, prompting governments to step in with efforts to regulate the sector. While the region’s approach remains fragmented, progress is unmistakable, according to a new report by global crypto research firm Four Pillars, released in April 2025.

The report, released in April 2025, explores Asia’s rapidly evolving stablecoin landscape, noting that different countries are taking varied approaches to stablecoin integration. While jurisdictions like Japan, Singapore, and Hong Kong are actively developing regulations, others like China and India are taking a restrictive stance, favoring central bank digital currencies (CBDCs) over private stablecoins.

Singapore leads in stablecoin adoption
Singapore is a regional leader in “regulated innovation.” In 2023, the Monetary Authority of Singapore (MAS) introduced a regulatory framework for stablecoins pegged to currencies like the Singapore dollar (SGD), mandating issuers to maintain 100% reserve backing, allow redemption at par, and adhere to stringent disclosure and audit requirements.

This clarity has enabled licensed institutions to launch stablecoins linked to the SGD. A leading example is XSGD, the Singapore dollar-backed stablecoin issued by StraitsX in 2020. This stablecoin has a market capitalization of more than US$10 million, according to Coinmarket cap, and has seen over US$8 billion in transaction volume. This makes XSGD one of the world’s largest non-USD stablecoins.

Government-led regulation in Japan
Similarly, Japan has taken a government-driven approach to stablecoin regulation, providing a clear legal framework that distinguishes stablecoins from other crypto assets.

Although Japanese law does not define “stablecoins” explicitly, it regulates them under two main categories: digital money-type stablecoins and crypto asset-type stablecoins. Digital money-type stablecoins are pegged to legal fiat currencies and are treated as electronic payment instruments under the Payment Services Act, requiring issuance by licensed entities.

Crypto asset-type stablecoins, on the other hand, are regulated either as crypto assets or securities under the Payment Services Act or the Financial Instruments and Exchange Act, depending on their structure.

Additionally, entities engaging in intermediary activities involving stablecoins are required to register with the Financial Services Agency (FSA) and comply with regulations similar to those governing crypto asset intermediaries, including anti-money laundering and countering the financing of terrorism (AML/CFT), user protection, and operational safeguards.

Japan’s stablecoin regulations came into effect in June 2023, following amendments to key laws including the Payment Services Act (PSA) and the Banking Act.

Most recently, a new bill has been submitted to update the PSA to better regulate cryptocurrencies and payment services. These changes include new government powers to prevent crypto assets from leaving the country, more flexible reserve requirements for stablecoins to boost competitiveness, and a new brokerage category to lower barriers for crypto intermediaries.

Hong Kong establishes licensing regime
Hong Kong, which is positioning itself as a crypto-friendly hub, is crafting a regulatory regime for fiat-backed stablecoins, with new laws requiring issuers to be licensed in the city.

On May 21, 2025, Hong Kong’s legislature passed the Stablecoins Bill, requiring any entity issuing fiat-backed stablecoins in or referencing Hong Kong dollars, whether domestically or abroad, to obtain a license from the Hong Kong Monetary Authority (HKMA).

Licensed issuers must meet strict requirements in areas such as reserve asset management, redemption at par value, AML/CFT compliance, risk management, and auditing standards. Only stablecoins issued by licensed entities may be marketed to retail investors, and all advertisements must be from authorized issuers to prevent fraud.

To support innovation, Hong Kong is also running pilot programs and regulatory sandboxes, allowing select issuers and projects to experiment ahead of formal regulations. Several local businesses and banks have already taken advantage of these schemes, including Standard Chartered Bank, Animoca Brands, Hong Kong Telecommunications, and RD InnoTech.

No room for stablecoins in China and India
Meanwhile, China has banned cryptocurrencies like bitcoin and ether, citing concerns over the potential risks posed by digital currencies to its financial system, capital controls, and monetary sovereignty. This ban covers not only the trading and use of these assets, but also their mining.

Stablecoins are viewed with similar skepticism. Hence, no Chinese tech company has launched RMB-pegged crypto stablecoins for public use. Instead, the emphasis has been on the Digital Currency Electronic Payment (DCEP) system, China’s official CBDC.

However, offshore Chinese yuan-pegged stablecoins do exist, including the CNH Tether (CNHt), which has a market capitalization of about CNY 20.5 million (US$2.8 million).

Similarly, India’s position on stablecoins is characterized by a cautious approach. The Reserve Bank of India (RBI), the nation’s central bank has shared concerns that stablecoins, particularly those pegged to foreign currencies like the US dollar, may pose a threat to India’s monetary sovereignty. The authority has advocated for a comprehensive ban on stablecoins.

In tandem, India is advancing its own CBDC initiative. Launched in pilot phases for wholesale and retail segments in late 2022, the digital rupee is envisioned as a state-controlled digital currency that offers the benefits of digital transactions while preserving monetary sovereignty.

The rise of stablecoins
Stablecoins have grown into a massive market over the past years. In May 2025, the average supply of stablecoins in circulation reached US$225 billion, marking a 41% increase from 2024 and a 77% increase from 2023, according to Visa’s Onchain Analytics Dashboard.

Total transfer volume has also surged. Monthly trading volume reached US$625 billion in May 2025, representing an increase of 53% from 2024 and 125% from 2023.

The Citi Institute predicts that this market could soar by up to 1,500% and exceed US$3 trillion by 2030. This surge would be driven by rising adoption, institutional interest, and emerging use cases, including interbank settlements, B2B transactions, remittances, and tokenized securities.

Stablecoins could also see increased adoption in the public sector, notably for real-time tracking of public spending, transparent aid distribution, and digital identity systems, the research unit predicts.

Tags

Asia Stablecoins Regulation