StraitsX Sessions

StraitsX Sessions #4: StraitsX with Breaking Banks Asia Recap

June 28, 2024

In this latest series of StraitsX Sessions, Tianwei Liu, CEO and Co-Founder of StraitsX, and Group Deputy CEO of Fazz sits down with Breaking Banks Asia for Episode 32 as he deep dives into the StraitsX journey and stablecoins’ role in the future of payments. Tianwei also shared his insights on the importance of collaboration with both public and private industry players to create payment revolutionary innovations and how stablecoin-powered blockchain payment can improve the outlook of cross-border payments.

Breaking Banks Asia is a fintech podcast series that covers the latest innovations and technological changes that are setting the standard for the rest of the world. Led by host Rachel Williamson, they speak to people across Asia about how their ideas came together, what innovations they are bringing to fintech, and the shifts in customer behaviour that are forecasting what will happen in the rest of the world.

Get a recap of the highlights from Tianwei’s conversation with Breaking Banks Asia here.

What are your plans for expanding into other Asian markets? What’s next for you?

Tianwei Liu, StraitsX: Last year's recognition by MAS itself is a major milestone. It gives us now the regulatory framework and also assurance to our clients and customers that there will be a regulatory regime that will fully safeguard the funds and make sure that everything is fully compliant.

Our bread and butter for the last 10 years is in payments. A key part of what we do is focusing on the looks into cross-border payment in the next phase of growth. And that's where we believe very strongly, that a stable coin-powered blockchain-based cross-border solution will bring about faster settlement, better liquidity and also much more programmability is needed in this industry itself. So that's where the expansion is looking. So we have both Singapore dollar and Rupiah stablecoins [XSGD and XIDR] already live. We will be launching our US dollar stablecoin [XUSD] in the coming months.

It [XUSD] will go live officially while looking to start focusing on the Southeast Asia corridors that we are specifically residing and focusing on. So, stay tuned for the rest of the coin that will come that way…..More specifically, we are a Southeast Asia-focused country. So, the markets that we are looking at are the 10 ASEAN Southeast Asian countries. So we're talking about the Philippines, Thailand, Malaysia, Indonesia itself. So those are the areas that we will probably spend a lot more of our effort on. 

How important are partnerships in this space? Who are your biggest partners?

Tianwei Liu, StraitsX: For this advancement to happen in terms of technology, it requires both public and private collaboration. So over the last few years, we are very fortunate to be working closely first with a regulator like MAS, [the Monetary Authority of Singapore] on Project Orchid. Under that project, Purpose-bound Money is launched with the concept of bringing real-world usage of blockchain technology, whereby you can encapsulate business and regulation needs onto the money itself, whilst still keeping it interoperable and transferable on the digital ledger asset.

That partnership requires both the public and private. In the case of the public side, Temasek and MAS were fully involved in this discussion. We also managed to get banks like UOB and DBS as our partners. On the private side, Grab, the Southeast Asia ride-hail giant, has been a key partner over the last two years and the partnership continues this year as we move towards more real-world use cases. 

We announced in last year's [Singapore] Fintech Festival that Ant International has since also joined us on this next phase of partnerships with u;, which we are hoping to achieve in this coming later part of this year. There will be a large-scale cross-border payment trial where you're going to start seeing the Alipay International or Ant International app, which is called the Alipay+ network of Users or e-Wallet users who come to Singapore can scan any Grab Merchant QR and simply make a payment. 

The vision here is we need to stop talking about blockchain technology. Like the way I've been explaining that we should stop talking about the internet….it's a backend innovation. That's where I feel we are also at the crux of how this will happen on the blockchain side. When the Alipay users are scanning and paying at a Grab merchant… nobody's going to talk about blockchain and crypto, but on the backend, what is going to happen is that Alipay will be transmitting and sending XSGD, which is a stablecoin issued by us, directly to the blockchain address that is embedded in the QR code of the Grab merchant. That will trigger a real-time settlement and payment can be done completely on the chain. FX and settlement will also be done in real-time.

That is the benefit of blockchain-based technology where settlement is now together with the payment itself. As I’ve mentioned, we've been in payments for the last 10 years and traditionally payments happen in two flows… And when that is being done cross-border, it introduces delay and foreign exchange risks which brings about higher costs. We believe the blockchain settlement and communication being done in the same transaction itself will help to bring down this cost which will benefit the consumer. However, it should be obfuscated to the end user that there is blockchain involved. It's simply just a scan and pay experience. So, importantly, a lot of players need to come in to work together. 

What do you see as the main point of difference when it comes to cross-border payments using your technology?

Tianwei Liu, StraitsX: I think RTP [Real-time Payment] has been increasing its efficiency on the domestic side. If you look at Singapore, for example, we have PayNow. In Indonesia, there's QRIS and there's DuitNow [Malaysia]. All these things have made interbank domestic payment pretty seamless and very low-cost. But the problem with that is now, how do we then join up the countries? What if you are a traveller from Singapore going to Malaysia or Indonesia? Will you be able to use your native e-wallet or banking apps that you're used to simply scan and pay at the domestic rails that the country supports? It has made some progress there. You see Singapore partnering with Indonesia and Thailand with the Promptpay initiative, making that cross-border seamless. But you then also see the challenge.

First and foremost, the integration that is done over there requires a bilateral G2G [government-to-government] collaboration. When you bring G2G, things will never be as seamless as you think. It'll probably take a couple of years. It also requires a huge effort to get both sides to come in. So that's the first layer of challenges when we are trying to breach the connection between countries. 

Another point is - let's say we integrate with Thailand and Singapore. Singapore then was integrated with Indonesia. But it doesn't mean to say that Thailand can rely on the connection to Singapore and then make payments to Indonesia. They will have to repeat this bilateral G2G partnership and this integration. It's an end square problem. You can't solve it by having everyone integrate with everyone. That is just not efficient from a technology approach. 

But the blockchain approach solves both of that. First and foremost, no one has to be integrating with anyone. They just communicate on the same protocol & chain and transactions can happen seamlessly. The next problem with that is also when you are introducing cross-border payments, the typical approach from a payment perspective is communication followed by a settlement. When you do that with FX being involved- let's say you’re traveling from Australia or New Zealand, you're paying in a different currency. If the settlement happens two days later, there's an FX fluctuation risk. Because of that, the service provider will have to buffer that into his cost. That's why people always complain about the FX rate. If you are promising to pay for a $5 product and only make that payment two days later, it might be $6. So that makes it very difficult for them to give you a very good FX rate unless they know there's finality introduced during the formal transaction.

That's the second part of why we think the blockchain side brings about real-world use cases and improvements. When a stablecoin is transferred, it is both a communication and a settlement itself. The FX is locked. That's why we're talking about it for the trial. All travelers - regardless of which countries they come from - the merchant receives a regulated Singapore dollar-backed stablecoin (XSGD) and settlement is final. There will not be actual FX fluctuation anymore. 

The interoperability and the programmable nature of a blockchain will also open up competition. There are so many different ways you can get this FX rate. You can, of course, get it through us. We provide it as an FX code. You can get it from the traditional FX channel through the bank side and purchase a Singapore dollar stablecoin at cost. There's no fee for minting a Singapore dollar stablecoin. Alternatively, you can tap on an exchange that's providing that liquidity. For example, a blockchain exchange or DeFi platform. That will provide you with an FX rate from a stablecoin to a stablecoin swap. These optionalities provide competition, which hopefully brings about lower costs and benefits everyone involved.

How are you helping to build trust in stablecoins as a reliable currency?

Tianwei Liu, StraitsX: If you think about it, trust takes time. That's one of the fundamental things about trust. If you look at Bitcoin and the innovation around that, it's trying to create a trustless ecosystem You don't trust anybody. You trust the software and the math that is behind it. That this token is final and the transaction is true. When we try to bring the stablecoin side, we're trying to introduce stability in terms of pricing. That is achieved of course through regulations, which is what the government in Singapore has done… With the so-called ‘stamp of approval’ coming from the regulators, we now know that there's a proper regulation regime that will safeguard the underlying assets that are backing up this stablecoin.

In the event of insolvency or any problem, the assets have to be fully one-to-one backed. Furthermore, part of the regulation right now requires us to do two monthly attestations. One is a periodic one in which we have to showcase that every dollar of assets that we claim to have on-chain will be fully backed by high-quality legal assets of 12 weeks or less from our banking partners or the treasury bill in the same currency. At the same time, in the event of insolvency,  there will be a trust that we set up to ring-fence funds from all insolvencies and ensure all the holdings of this token will get fully compensated.

But with regulation, [it] also gives more trust to the [stablecoin] ecosystem that this itself will be as good as the e-money regime. The concept of stablecoin itself is the same as e-money. When e-money was first introduced about 10-20 years ago, we had similar concerns. “Is this money going to be real?” “What happens when they are insolvent?” I think that is a very good way to look back into history to see how this is transforming it into the Web3 world we are seeing. There are no major changes here. It's just the technology that has evolved. But from regulation and the lens perspective, we should view it as e-money which has proven to work over the last 20 years or so. 

Listen to the full podcast here.

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