DBS boosts digital asset push with first stablecoin tie-up
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The move comes amid Singapore’s efforts to promote productive uses of underlying blockchain technology.
PHOTO: ST FILE
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Singapore - Singapore’s largest bank DBS Group Holdings will for the first time provide custody for stablecoin reserves and offer related cash management services, in a tie-up with the local unit of US-based cryptocurrency issuer Paxos Trust.
The lender said the development deepens its wide-ranging involvement in the digital-asset ecosystem, making the announcement after Paxos’ operation in the city-state 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,” Ms Evy Theunis, head of digital assets at the institutional banking group at DBS, said in e-mailed responses to questions on July 2.
Singapore is seeking 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 one-to-one to major currencies and backed by reserves like cash and bonds. For now, they are predominantly used to park funds to deploy in crypto trading and can also be lent out to earn interest.
There are some US$162 billion (S$220 billion) worth of stablecoins in issue, dominated by Tether Holdings’ USDT token with a 70 per cent market share, according to DefiLlama data. Circle Internet Financial’s USDC is in second spot with 20 per cent. Paxos, a smaller player, issues USDP, as well as PayPal Holdings’ 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.
Duelling hubs
Singapore, Dubai, Hong Kong, Japan and Europe are among the jurisdictions 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 Republic’s stablecoin rules, issuers must meet capital, reserve and disclosure requirements.
A spokesperson for Paxos said in 2023 that the company plans to issue US dollar-based tokens in Singapore.
Cantor Fitzgerald acts as a custodian for Tether. In the United States, Bank of New York Mellon has that role for Circle, while BMO Harris Bank, State Street Bank and Trust and Customers Bank are among the institutions Paxos may use.
Many crypto companies had 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 Ms Grace Chong, head of the financial regulatory practice at Drew and Napier in Singapore.
Separately, Paxos named Ms Jeannie Lim, who was most recently head of messaging payments at Meta Platforms in Singapore, as its executive director at Paxos Singapore.
“Jeannie will be responsible for developing and driving Paxos’ strategic vision and goals for the Asia-Pacific region,” a spokesperson wrote in an e-mail.
“She’ll oversee new business opportunities and partnerships, as well as manage continued engagement with key clients, partners, regulators and the like throughout the region,” the spokesperson added. BLOOMBERG
