DBS boosts digital asset push with first stablecoin tie-up
This comes amid Singapore’s efforts to promote productive uses of underlying blockchain technology
DBS will, for the first time, custody stablecoin reserves and offer related cash management services, in a tie-up with the local unit of cryptocurrency issuer Paxos.
The lender said the development deepens its wide-ranging involvement in the digital asset ecosystem, making the announcement after Paxos’ operation in the country received a licence from the Monetary Authority of Singapore.
“We look forward to partnering leading stablecoin issuers for their cash management and reserve custody needs if they meet the regulatory requirements,” Evy Theunis, head of digital assets at the institutional banking group at DBS, said on Tuesday (Jul 2).
Singapore looks to foster productive uses of crypto’s underlying blockchain technology to augment its status as a global financial hub. Advocates of stablecoins argue they will make inroads into traditional finance because they make payments easier, faster and cheaper, a claim yet to be proven at scale.
Stablecoins are typically pegged 1-1 to major currencies and backed by reserves such as cash and bonds. For now, they are mainly used to park funds to deploy in crypto trading, and can also be lent out to earn interest.
There are some US$162 billion worth of stablecoins in issue, dominated by Tether’s USDT token with a 70 per cent market share, DefiLlama data showed.
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Circle Internet Financial’s USDC token is in second spot at 20 per cent of market share. Paxos, a smaller player, issues USDP tokens, as well as PayPal’s PYUSD.
Some stablecoins in the past veered from their pegs or collapsed altogether – most notably the US$40 billion wipeout of Do Kwon’s TerraUSD project, an implosion that buffeted Singapore, where Kwon had a base.
Duelling hubs
Singapore, Dubai, Hong Kong, Japan and Europe are among the markets that subsequently developed digital asset regulations to protect investors and spur innovation, in case blockchain technology gains mainstream traction.
Both the local operations of Paxos and Circle Internet Financial now have Singapore permits. Under the country’s stablecoin rules, issuers must meet capital, reserve and disclosure requirements.
A spokesperson for Paxos said last year that the company plans to issue US dollar-based tokens in Singapore.
Cantor Fitzgerald acts as a custodian for Tether. In the US, the Bank of New York Mellon plays that role for Circle, while BMO Bank, State Street Bank and Trust, and Customers Bank are among the institutions Paxos may use.
Many crypto companies struggled to access banking services because of the digital asset industry’s history of volatility and scandal. The outlook has improved due to evolving regulations. Higher global interest rates also spotlighted the commercial opportunities stemming from reserve management.
By working with stablecoin companies, “banks are not only diversifying their offerings but also effectively managing the inherent risks associated with cryptocurrencies”, said Grace Chong, head of the financial regulatory practice at Drew and Napier. BLOOMBERG
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