Q&A with StraitsX
Earlier this year, we announced that a new stablecoin had joined the Wirex family: XSGD. XSGD is the very first Singapore Dollar-pegged stablecoin, and today we've got some insights from the creators.
How has the popularity of stablecoins changed in the past year?
The market cap of stablecoins has grown exponentially from around US$1 billion in 2018 to more than US$160 billion by the end of 2021. The market cap of stablecoins currently stands at $183 billion, hitting an all-time high of dominating 10% of the total cryptocurrencies market cap.
What makes XSGD different from other stablecoins?
XSGD is fully collateralized by cash. As compared to one of the top stablecoins - USDC which is only 61% collateralized by cash. XSGD is fully transparent with its reserves and is regulatory compliant and issued under the e-money issuance framework.
How has crypto adoption in Singapore changed since XSGD was created?
XSGD was created and launched publicly in October 2020. A year later, XSGD processed over $2 billion in digital assets-related transactions. This led to XSGD rising to become one of the top non-USD denominated stablecoin.
A study on Singapore Crypto Adoption created by Gemini, CoinMarketCap and Seedly in 2021 revealed that 67% of respondents hold cryptocurrency in their portfolio. Among non-crypto holders, 34% are planning to purchase their first cryptocurrency in the next 12 months.
Why did XSGD choose to adopt the Financial Action Task Force’s recommendations?
The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. StraitsX places high importance on complying with the FATF as we believe that it is crucial to tackling such problems that plague the digital assets industry.
StraitsX has built a Travel Rule compliance program from the get-go while working closely with travel-rule compliance firm Notabene to ensure compliance with the travel rule at scale. The travel rule recommendation from the FATF requires that the originators and beneficiaries of all transfers of digital funds must exchange identifying information, which is aimed to help enhance the audit trail when virtual assets are transferred between entities such as exchanges and wallets.
Travel rule compliance benefits the end-user as financial authorities are better able to detect and prevent money laundering activities involving digital assets and will also help deter criminals by reducing the number of virtual asset service providers (VASPs) through which they can move funds.
What are the benefits of holding XSGD over Singapore Dollars?
As XSGD runs on open-sourced protocols, the token is interoperable and can be used as a form of payment across different ecosystems, including the Zilliqa and Ethereum blockchains. For instance, XSGD can be sent almost instantaneously across borders or swapped for other stablecoins at competitive rates. XSGD is also counted out to six decimal places, enabling micropayments while addressing a challenge faced by fiat-based digital payment systems.
Furthermore, XSGD can be used on DeFi applications on the blockchains that it supports. Use cases include being a liquidity provider for trading pools and in turn, users can earn up to 13% yield on XSGD. Users can also use XSGD to trade NFTs on the Arky marketplace which is on the Zilliqa blockchain. XSGD is looking to expand into different blockchains in the near future, enabling users to have more opportunities to use XSGD on dApps.
Who can benefit from XSGD and why? Is it useful for tourists and travellers as well as those living in Singapore?
Everyone who transacts or does business in SGD can benefit from XSGD. Singapore has the largest forex market in Asia Pacific and third-largest globally after London & New York. Forex traders can benefit from XSGD as it allows for quick swaps to other stablecoins denominated in other currencies. XSGD can also be sent almost instantaneously across borders at low costs.
What do you think the future holds for XSGD and other stablecoins more generally?
At StraitsX we believe that the future of money is both diverse and exciting, as we believe that money will be run on a very wide variety of infrastructures and networks in the future.
The future of XSGD is extremely exciting. Our intention is to make money available on many different infrastructures to support both financial inclusion and optimal user experience. Users can expect XSGD to be supported on other prominent blockchains and dApps. Furthermore, we are expanding our product offerings to provide our users with an all-in-one experience for their digital assets.
In general, the future of stablecoins remains bright. Stablecoins allow for payments to be cheaper, traceable, real-time, and frictionless compared to traditional finance. With stablecoins, businesses can accept payments globally in real-time and governments can run stimuli or taxation programs more effectively. As more merchants and businesses start to accept digital currencies, we envision consumer adoption rates will continue to increase over time.
Do you think other countries will follow suit and start issuing stablecoins supported by the government?
The MAS has also organised the Global CBDC challenge to invite financial institutions, Fintechs, technology solutions to present and develop a retail CBDC solution, where StraitsX has been named one of the 15 finalists, out of over 300 submissions from 50 countries.
The Global CBDC Challenge sought to address multiple problem statements through a variety of technology approaches including hardware wallets, digital identity and asset tokenisation solutions, invited financial institutions, FinTechs and technology solution providers to address 12 problem statements relating to CBDC Instrument, CBDC Distribution, and CBDC Infrastructure while concurrently covering topics such as inclusivity, interoperability and programmability.
In the proposed solution, the Central Bank (MAS) will leverage StraitsX’s existing integration on different payment networks to issue CBDC while the underlying customer's fund will be held in the central bank. The CBDC tokens will be generated on the central bank network and issued by Financial Institutions like StraitsX. In this model, StraitsX would participate in the distribution of CBDCs while maintaining the required regulatory compliance safeguards. The XSGD smart contract is embedded with functions to terminate suspicious and illicit activities. To achieve privacy, performance and scalability, a layer-2 blockchain solution with Zero-Knowledge Proof (ZKP) can be used.
StraitsX is the pioneering payments infrastructure for digital assets space in Southeast Asia developed by Singapore-based FinTech Xfers, which is a Major Payment Institution licensed by the Monetary Authority of Singapore for e-money issuance. StraitsX offers personal and business accounts to mint and redeem StraitsX stablecoins, manage payments as well as connect their accounts to digital asset platforms. Business accounts can also access B2B API-enabled payments rails for digital asset platforms and issue the Singapore Dollar-backed stablecoin, XSGD.
For more information, visit straitsx.com.