Singapore’s largest bank, DBS Group Holdings Ltd., has announced that it will, for the first time, custody stablecoin reserves and offer related cash management services in collaboration with the local arm of cryptocurrency issuer Paxos Trust Co. This move marks a significant expansion of DBS’s involvement in the digital asset ecosystem.
The bank’s decision follows the recent licensing of Paxos’ Singapore operations by the Monetary Authority of Singapore (MAS), which regulates the city-state’s financial sector. DBS’s head of digital assets at the institutional banking group, Evy Theunis, stated, “We look forward to partnering with leading stablecoin issuers for their cash management and reserve custody needs if they meet the regulatory requirements.”
Singapore has been actively promoting the adoption of blockchain technology, underpinning cryptocurrencies as part of its strategy to maintain its position as a leading global financial hub. Proponents of stablecoins argue that these digital assets, typically pegged to major currencies and backed by reserves such as cash and bonds, could revolutionise traditional finance by making payments more efficient and cost-effective. However, the full potential of stablecoins in mainstream finance remains to be demonstrated.
Currently, stablecoins are predominantly used within the cryptocurrency trading ecosystem to hold funds temporarily and for lending to earn interest. According to DefiLlama data, there are approximately US$162 billion (S$219 billion) in stablecoins in circulation, with Tether’s USDT commanding a 70% market share, followed by Circle’s USDC at 20%. Paxos, a smaller player in the market, issues the USDP token as well as PayPal’s PYUSD.
The stability of some stablecoins has been questioned, with instances such as the US$40 billion collapse of TerraUSD, a project led by Do Kwon, who had operations in Singapore. This event, among others, prompted several jurisdictions, including Singapore, to introduce digital asset regulations aimed at protecting investors and fostering innovation.
Both Paxos and Circle have now secured the necessary permits to operate in Singapore under the island’s stablecoin regulations, which mandate stringent capital, reserve, and disclosure standards. Paxos has indicated plans to issue US dollar-based tokens within Singapore.
Globally, banks have been cautious in engaging with the cryptocurrency sector due to its history of volatility and controversy. However, with evolving regulations and rising global interest rates highlighting the profitability of reserve management, financial institutions are gradually exploring the commercial opportunities presented by stablecoins.
In a statement, Grace Chong, head of the financial regulatory practice at Drew and Napier LLC in Singapore, noted, “By working with stablecoin firms, banks are not only diversifying their offerings but also effectively managing the inherent risks associated with cryptocurrencies.”
This partnership between DBS and Paxos signals a growing confidence in the regulated integration of digital assets within traditional banking systems, reflecting Singapore’s commitment to leading in financial innovation.
