Asia’s Stablecoin Race: Banks vs. Innovation Hubs

Japan is positioning itself as an institutional leader in Asia’s stablecoin race through a landmark collaboration between its three mega-banks. Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Financial Group (SMBC), and Mizuho Bank are joining forces to issue a yen-pegged stablecoin through MUFG’s Progmat platform, targeting a March 2025 launch according to Nikkei reports. This institutional approach represents one of the most significant developments in Asia’s transition from stablecoin policymaking to real-world implementation.

The banking consortium’s initiative comes as Japan expands its financial rulebook to cover digital assets comprehensively. Proposed regulations include a ban on crypto insider trading that would empower securities regulators to investigate illicit activity, demonstrating the country’s commitment to building robust oversight frameworks. This measured approach reflects Japan’s strategy of leveraging existing traditional financial institutions to drive stablecoin adoption while maintaining regulatory control over monetary systems.

While Japan pursues its bank-led model, Singapore is establishing itself as Asia’s regulatory benchmark through its oversight of StraitsX’s Singapore dollar-backed XSGD token. Operating under full Monetary Authority of Singapore supervision, XSGD achieved a significant milestone in late September when it became listed on major cryptocurrency exchange Coinbase. This development underscores Singapore’s strategy of creating a regulated innovation hub that attracts global players while maintaining financial stability.

According to Dermot McGrath, co-founder of Ryze Labs, Singapore aims to ‘crown a few reference issuers’ as it uses its trust benchmark to bring stablecoin products to market. The city-state’s approach represents what Brian Mehler, CEO of Stable, describes as the ‘laissez-faire or Switzerland model’—creating clear regulatory frameworks that enable innovation while ensuring proper oversight. This balanced position allows Singapore to leverage its infrastructure and regulatory clarity to attract global cryptocurrency players.

Hong Kong’s stablecoin ambitions face significant headwinds from Beijing’s intervention, creating a stark contrast with Japan and Singapore’s progress. China recently ordered major tech firms to halt their stablecoin plans in Hong Kong, despite the city’s newly instituted digital assets framework. This development came just months after players including Standard Chartered, Animoca Brands, and HKT Group formed Anchorpoint Financial in August to apply for stablecoin issuer licenses.

The Chinese blockade exposes what observers describe as the ‘regulatory ceiling for private issuers’ in the region. As McGrath notes, Hong Kong remains ‘sensitive to Beijing’s red lines,’ forcing the territory to carve out its place in ‘enterprise-focused applications where compliance is paramount.’ This conservative framework, built around state oversight and compliance requirements, represents the third major approach emerging in Asia’s stablecoin competition.

Asia’s stablecoin landscape is crystallizing around three distinct regulatory approaches that reflect different balances between innovation and control. As Brian Mehler explains, these include ‘the mega-bank consortium model, the laissez-faire or Switzerland model, and the traditional conservative model.’ Japan exemplifies the first approach, Singapore represents the second, while Hong Kong’s Beijing-influenced framework demonstrates the third.

John Cho, vice president of partnerships at Kaia DLT Foundation, identifies a fundamental ‘divide’ among Asian regulators regarding stablecoin issuance. One side argues that ‘stablecoin issuance and reserve management should only be in the domain of existing traditional institutions,’ while the other contends that ‘this will limit innovation and speed of growth and adoption.’ This tension between institutional control and innovation velocity underpins the region’s competing models.

Meanwhile, global stablecoin giant Tether continues expanding across Asia, deploying USDT on the Kaia blockchain for South Korean ATMs in July and integrating with LINE’s regional ecosystem. This expansion highlights how U.S. dollar-denominated stablecoins maintain significant presence alongside domestic currency initiatives, creating additional complexity in Asia’s monetary landscape.

The stablecoin competition across Asia represents a fundamental test of how far governments will allow private infrastructure to reshape national money systems without losing control over capital flows. As Kevin O’Brien, founder and CEO of Verdicti Ventures, notes, these developments appear to be a ‘natural modernization forced in part by the ISO 20022 structured and hybrid address implementation deadline that we are on the cusp of seeing come into effect.’

McGrath captures the central tension driving Asia’s stablecoin evolution: ‘Regulators don’t want to lose control, but financial institutions don’t want to be stuck in neutral for too long either.’ This balancing act between modernization and monetary control will determine how cryptocurrencies ultimately coexist with traditional monetary policies across the region, with each jurisdiction developing ‘its own local nuanced consideration and approaches’ while technical adaptability remains ‘early in its innovation’ compared to generalist public stablecoins.