Moving currencies cross-border is more complex than it seems. “If you were, say, TrueMoney in Thailand, you would need to have some integration with the banking network in Thailand. And likewise, GrabPay in Singapore would have to be integrated with the local banking sector.
To then move Thai baht cross-border to Singapore dollars requires bank-to-bank integration; the settlement needs to be handled, and the more consumer and merchant wallets you add, the crazier the numbers get,” says Kenny Chan, head of StraitsX, a stablecoin issuer.
A solution, Chan says, is to use stablecoins. In the earlier example, the Singapore dollar-pegged XSGD issued by StraitsX can be assigned as a token to consumer wallets or merchant addresses wherein the foreign exchange (forex) settlement happens directly.
He continues: “With this, you won’t necessarily need to deal with all the banking integrations in the back-end. If you want to add another consumer wallet, you won’t have five banking integrations that you would have in the past, making this much quicker-to-market and much more scalable once we’ve built up the infrastructure.”
First announced at the Singapore Fintech Festival (SFF) 2023, the company received in-principle approval (IPA) in November 2023 from the Monetary Authority of Singapore (MAS) to issue XSGD as well as its US dollar-pegged counterpart, the XUSD.
Prior to that, XSGD was available for minting and redemption via StraitsX’s own platform.
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The cryptocurrency player further received Major Payment Institution (MPI) licences on July 17, notably including domestic and cross-border money transfers along with digital payment token services.
Since then, StraitsX has been building up the infrastructure for XSGD to be scalable, with hopes for cross-border payments to be enabled in the next month.
Chan shares: “We have started the testing process and the flow is looking even better than expected. We haven’t announced the official launch of when this will go public, but it’s coming soon, and that’s what we’ve been working towards, to make sure that when we do fully launch this, all the kinks have been ironed out.”
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A steady rise
Despite MAS only finalising the stablecoin regulatory framework in August 2023, the cryptocurrency has grown in popularity as a payment method. A report launched in September by blockchain data platform Chainanalysis found that stablecoin use hit a record high of almost US$1 billion ($1.31 billion) in the second quarter of this year.
Significantly, more than 75% of the value of StraitsX’s XSGD transferred during the period were within US$1 million or below, while around 25% of transfers were under US$10,000, suggesting a strong base of retail activity.
The overwhelming majority of StraitsX’s 200,000 users are currently personal and retail users. “They go to the platform and they’re either looking to mint or redeem stable coins, maybe do a forex swap. That’s generally the use case that we see from our retail users. Our retail users are primarily based in Singapore but we do have users broadly, not just in Asia, but from across the world with a very similar use case,” Chan explains.
Institutional users include other fintechs, payment providers and commercial acquirers. “We have a few crypto-native businesses as well. Crypto exchanges, market makers, over-the-counter (OTC) providers tend to be a bit of the institutional players that we have on our platform. We also have some e-commerce players that tend to have to do a lot of global cross-border settlement.
“The product suite is actually pretty similar on the enterprise side as it is on the retail side. Just that instead of moving a few $1,000 around, we’re talking hundreds or even millions of dollars on the institutional side,” adds Chan.
A wider reach
StraitsX also announced at SFF 2023 its partnership with mobile technology company Grab and digital technology solutions provider, Alipay+. The collaboration aimed to enable GrabPay merchants to easily integrate with Alipay+ solutions, which includes more than 1.4 billion consumer accounts.
The partnership was launched under MAS’s Project Orchid, a multi-year, multi-phase exploratory project running since October 2022 which examines the various design and technical aspects pertinent to a digital Singapore dollar or a retail central bank digital currency (CBDC) system for Singapore.
Objectives of the project include developing the technology infrastructure and technical competencies necessary for a CBDC system, as well as potential use cases for programmable money in Singapore. The project’s first phase included the exploring of purpose-bound money (PBM), a protocol that specifies the conditions upon which an underlying digital currency can be used.
This could include a consumer’s PBM use being restricted to a particular merchant under specific terms, akin to a voucher. Once released to the merchant, however, the PBM can be usable without constraint. It could also deliver an escrow-like function between buyer and seller.
“There have been many sub-branches under this project, with different collaborations between government players, such as Temasek, and different kinds of commercial players — one of which is ourselves — to explore what we could do with a digital Singapore dollar. There are many different parts of Project Orchid but this problem of cross-border payments is what we’ve always focused on,” says Chan.
He continues: “[In] Southeast Asia, when you go from one country to another, it’s generally hard to do local payments. QR code-based systems are great domestically but they don’t work at all in a cross-border sense because of the need for a local number.”
On March 20, StraitsX further announced that Grab had now authorised digital payment tokens as an additional option for users to recharge funds on the platform’s GrabPay Wallet. These include digital assets such as Bitcoin, Ethereum and XSGD, with adopters of XSGD as a payment method able to enjoy a one-to-one exchange without any hidden fees.
What’s next
According to Chan, the company is working on having a proper public launch for its partnership with Grab and Alipay so that the product will be ready to go live by this year’s SFF.
He adds that with the conversion of the in-principle licences granted by the MAS to full licences, StraitsX can now offer a wider suite of products today.
Chan continues: “We launched the XUSD earlier this year, and over the last six months, we’ve launched a public contract. There’s at least one major exchange that we’re listed on, but a lot of the XUSD capabilities that we’ve been building up are going to come out over the coming months.”
“To be able to sell and settle in US dollars, especially within the Asian market, is something that some of our competitors have not been able to do as well, so that’s something we’ve been working on a lot. You’re going to see a lot more utility built into our XUSD point in the coming months.”
Overall, the name of the game for StraitsX this year has been the ironing out and refining of finer details.
For the last near-decade of the company’s history, operations have been more focused on local enterprises in Singapore. With the growth and assurance of StraitsX’s regulatory status, however, Chan is eyeing a global status.
He concludes: “If you swing by our booth at SFF this year, we’re planning on having a couple of fireside chats with our partners who have signed up over the last few years. These are very global names, and that’s kind of the direction that we want to bring this; we want to work with larger and more institutionalised clients, more global clients.”
