This article first appeared in The Business Times on December 18, 2025.

A calibrated strategy is needed to harness their efficiency while safeguarding monetary sovereignty

For over a decade, the crypto asset landscape has been defined by extreme volatility: periods of speculative frenzy followed by sharp contractions. Yet, amid these cycles, stablecoins have emerged as an innovative bridge between the decentralized crypto ecosystem and traditional finance.

With the recent adoption of the GENIUS Act in the US, the global landscape is shifting. The ASEAN+3 Macroeconomic Research Office’s (AMRO) latest policy paper, Stablecoin: Implications for the ASEAN+3 Region, looks past the headlines to ask a fundamental question: Is this technology a viable evolution of our financial architecture, or merely a risk to monetary sovereignty?

The answer depends on the rigor of our regulatory response and lies in how we choose to build the future.

Old wine in new digital bottles

To understand the policy implications, we must first demystify the instrument. Conceptually, fiat-pegged stablecoins are not an entirely new monetary species. They are best understood as “e-money tokens”—essentially, old wine in new digital bottles.

Much like the balance in a digital wallet such as GrabPay or Alipay, a stablecoin represents a claim on a private issuer, backed by assets. The distinction lies in tokenization, which allows the stablecoins themselves to be programmable and portable across different platforms and borders without relying on the traditional correspondent banking network.

However, this portability introduces significant complexity; while it offers efficiency, it also allows these assets to move faster than current regulatory perimeters can often track.

The “Google Translate” effect

For Asia, the proliferation of stablecoins raises legitimate concerns regarding “digital dollarization”. This is a serious risk, especially for economies struggling with high inflation and exchange rate volatility.

However, the assumption that US dollar-denominated tokens must inevitably dominate currency trade ignores the potential of the technology itself.

Historically, the US dollar has been the world’s vehicle currency for the same reason English is the global lingua franca. Just as it is often easier for Thai and Japanese speakers to converse in English than to learn each other’s language, it is currently cheaper to swap currencies via the greenback than to trade directly.

Stablecoins, and digital money more broadly, could allow us to bypass this intermediary. Functioning like a universal translator—such as Google Translate—they utilize automated liquidity pools to enable direct exchange between local currencies, such as the baht and yen, at a fraction of today’s cost.

This reduces the need for the US dollar middleman, paving the way for Asian currencies to interact more easily without a dominant vehicle currency.

Real-economy applications

For regional stablecoins to be adopted, they must serve the real economy. Two use cases show particular promise.

  • Programmable Supply Chains: As a global manufacturing hub, the region stands to benefit from “programmable money”. Imagine a smart contract that automatically releases payment to a Vietnamese supplier the minute a shipment arrives at a South Korean port.
  • Tokenization of real-world assets: Digital platforms integrating tokenized financial assets and tokenized foreign exchange could be a promising avenue for integrating Asia’s financial markets. Imagine an Indonesian firm issuing commercial bills directly on a blockchain accessible to investors from Hong Kong and Singapore.

“Stable” is a tall order

Despite these potential benefits, we must remain clear-eyed about the risks. History has demonstrated that maintaining a fixed value—the “stable” in stablecoin—is a tall order. Even major stablecoins have faced deviations from their pegs in secondary markets.

For these instruments to be safe for widespread use, the regulatory bar must be set exceptionally high.

The most prudent approach is the “narrow bank” model, requiring issuers to hold 100 percent reserves in high-quality, liquid assets—ideally central bank money or short-term government securities. Without such stringent backing and transparency, stablecoins remain susceptible to run risks, resembling the “wildcat banknotes” of the 19th century, rather than modern money.

A pyramid built on the “singleness of money”

AMRO envisions a multi-layered monetary system where different forms of money play distinct, complementary roles.

  • The bedrock: Central bank money—including central bank digital currencies (CBDCs) and tokenized reserves—provides the ultimate safety and settlement finality.
  • The workhorse: Commercial bank deposits—including their tokenized forms—handle the bulk of corporate flows and credit creation.
  • The supplementary layer: E-money and stablecoins serve as agile settlement assets for specific retail and supply chain contexts.

However, the stability of this pyramid rests on the “singleness of money”. A US dollar or rupiah must hold the same value regardless of whether it is a CBDC, a deposit or a token.

To prevent fragmentation, regulators must ensure that any authorized stablecoin is convertible to central bank money at par, instantly and without question.

The path forward

The integration of stablecoins into the Asian financial system is not without peril. It requires a calibrated strategy: bringing regulatory clarity to foreign tokens to mitigate substitution and stability risks, while cautiously exploring the issuance of local currency-pegged tokens.

Innovation must not come at the cost of stability. By establishing rigorous guard rails today, policymakers can harness the utility of tokenization while safeguarding the region’s monetary sovereignty.