Singapore’s DBS Group Holdings Ltd., the nation’s largest bank, will now provide custody services for stablecoin reserves, according to a recent Bloomberg post. Additionally, they will offer related cash management services through a partnership with Paxos Trust Co.’s local unit. This move signifies DBS’s deeper involvement in the digital-asset ecosystem, following the granting of a license to Paxos by the Monetary Authority of Singapore (MAS).
Evy Theunis, head of digital assets at the institutional banking group at DBS, expressed enthusiasm about partnering with leading stablecoin issuers for cash management and reserve custody. However, such partnerships are contingent on meeting regulatory requirements. Stablecoins, typically pegged 1-1 to major currencies and backed by reserves like cash and bonds, are seen as a bridge between traditional finance and the crypto world. Advocates argue they could streamline payments, making them easier, faster, and cheaper, though this remains to be proven at scale.
Singapore aims to leverage blockchain technology to enhance its status as a global financial hub. The local unit of Paxos and Circle Internet Financial have received Singapore permits, requiring issuers to meet capital, reserve, and disclosure standards. Last year, Paxos announced plans to issue US dollar-based tokens in Singapore.
Globally, there are approximately $162 billion worth of stablecoins in circulation, with Tether Holdings Ltd.’s USDT holding a 70% market share, followed by Circle Internet Financial Ltd.’s USDC at 20%, according to DefiLlama data. Paxos, a smaller player, issues USDP and PayPal Holdings Inc.’s PYUSD. Historical volatility, such as the collapse of Do Kwon’s TerraUSD project, which significantly impacted Singapore, underscores the need for robust regulations to protect investors.
Singapore, along with jurisdictions like Dubai, Hong Kong, Japan, and Europe, has developed digital-asset regulations to foster innovation and safeguard investors. These evolving regulations have made it easier for crypto companies to access banking services. For example, Cantor Fitzgerald LP acts as a custodian for Tether, while Bank of New York Mellon serves Circle in the US.
Ripple Partner Uphold Announces Delisting of Major Stablecoins by July 2024According to Bloomberg, higher global interest rates have highlighted commercial opportunities arising from reserve management. As a result, banks are partnering with stablecoin firms to diversify offerings and manage the risks associated with cryptocurrencies. Grace Chong, head of the financial regulatory practice at Drew and Napier LLC in Singapore, noted that such partnerships allow banks to diversify their services while effectively managing the risks inherent in the cryptocurrency industry.
