For Asia’s digital currency reign, consider consumers, competition, cohesive regulations

With its “natural” advantages, Asia is poised to become the world’s centre of digital currencies – if it can avoid fragmented regulation to create a cohesive regional approach.

The conditions are ripe for success. Consumers in the region are adept at using payments technologies. Fintech firms are proliferating, creating stiff competition. And regional financial hubs including Singapore, Hong Kong and Japan are vying for leadership in the digital asset space, with regulators moving at a pace once seen only in the private sector.

“Asia is going to be the defining region for how these (digital payments) innovations reach scale,” said Dante Disparte, chief strategy officer and head of global policy at Circle Internet Financial.

“The US does not have a financial services super app of any kind. All the value is not just going to Silicon Valley,” he observed. “We’re seeing developers, unicorns, and a new generation of tech titans emerging all over the world, and in Asia especially.”

Through its licensed entities, Circle issues USDC, a stablecoin backed by US dollars, and its euro equivalent EURC, both of which are regulated. A stablecoin is a digital currency that keeps its value pegged to traditional assets like fiat money.

The US-headquartered fintech firm opened its regional office in Singapore in May 2023 and obtained its local payments licence from the Monetary Authority of Singapore a month later.

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Through partnerships in the region, Circle has made payments with USDC possible on Singapore super app Grab and on Sonieum, the blockchain set up by Japanese conglomerate Sony to make decentralised Web3 services more accessible to the public.

The ubiquity of fintech firms and mobile money networks are harbingers that Asia, faster than any other region, will likely define the race among digital currencies to achieve a billion users of their stablecoin or cryptocurrency, Disparte said.

The barrier? A lack of coordinated regulations.

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Harmonious regulation

Moving beyond the pilot projects of past years, Circle has seen a rise in the use of stablecoins as digital currencies in the real world, as more users seek to benefit from instant business and cross-border payments around the world.

With their peg to real-world currencies, stablecoins are preferred over the more volatile option of cryptocurrencies, said Disparte, while central bank digital currencies are for use within an economy and not suited for foreign money transfer.

“In order to get access to all the features of (digital payment) innovations, you need stablecoins in your digital wallet… What we see right now is an enormous amount of institutional adoption.”

With this, Circle expects stablecoins – both USDC, as well as emerging Asian equivalents – to proliferate across the region. On the back of this uptake, governments looking to regulate digital currencies must find ways to do so “in a harmonised manner”, so as not to “fragment the innovation or the market”, he adds.

“The region will be better served if the products stay open and don’t become siloed.”

Regardless of its numerous countries and currencies, Asian users demand seamless digital payment connectivity across the region, and fintech firms are designing towards that need.

“Where there will be fragmentation is in the protectionist tendencies of countries and regulators,” Disparte said, observing that there are various national positions in the region – some leaning towards pro-innovation and openness, others more protectionist and closed.

“That’s a tension that will stand in the way of the ‘all ships rising’ vision that could be achieved in Asia.”

Unlocking potential

Drawing an analogy to the aviation industry, he suggests governments create regulatory “airports”, where fintech players can “land and expand and build their competitive advantage.”

Unlike sandboxes, which can be restrictive and often have uncertain commercial outcomes, regulatory airports can offer fintech companies real-world access to markets, sustained support, and the infrastructure needed to grow.

“We need to figure out how to have the harmonisation, equivalence, and passportability of regulatory regimes.”

Perhaps broader national incentives lie beyond institutional benefits and with the retail user. Disparte points to millions of enterprises, particularly micro-businesses in geographically dispersed regions such as the Philippines and Indonesia, that could transform their prospects with the use of digital currencies via mobile phones.

“All of a sudden, that business has the opportunity to transact and conduct their commerce at world scale with instant settlement,” he said.

This was produced in partnership with the Monetary Authority of Singapore and the Global Finance & Technology Network.

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