StraitsX, a Singapore startup focused on developing stablecoins, has recently gone live with a Singapore-dollar-linked token that connects AliPay+ users with merchants on Grab.
Liu Tianwei, the co-founder and deputy CEO of StraitsX, says the company is planning to launch a similar initiative in Indonesia this spring.
He helped set up StraitsX in 2020 as a side project while also running Xfers, a payments fintech, that eventually folded into StraitsX.
In tune with the Monetary Authority of Singapore, Liu argues that the innovations of blockchain and stablecoins are about infrastructure, and that this was more valuable than speculative cryptocurrencies. The question was how to put this innovation to work.
“The magic of technology is not having to explain it, but having it behind the scenes,” he told DigFin.
From APIs to stablecoins
StraitsX was a natural evolution from Xfers. The first business, which emerged from the Y-Combinator program, focused on payments infrastructure for Southeast Asia, building APIs to enable various applications for merchants who don’t accept credit cards.
In 2020, Indonesian fintech PayFAZZ – another Y-C startup – invested $30 million into Xfers. Two new companies were born out of that deal: StraitsX, and FAZZ Financial Group, where Liu is also group deputy CEO. FAZZ runs an agent-driven banking network, relying on human agents to connect many rural, remote and unbanked people and microbusinesses with digital wallets and bank transfers.
That business evolved to serve fintechs with API layers on top of the banking business – which in turn led to deals with crypto exchanges such as Gemini and Coinbase, to enable their users to use Xfers’ API to move money between their crypto accounts and their bank accounts.
The transition to StraitsX followed the agenda laid out by MAS for a crypto-native solution to moving money between traditional finance, crypto exchanges, and the emerging world of decentralized markets. MAS also wanted a solution that was priced in Singapore dollars.
Supporting MAS
In 2022, MAS launched Project Orchid, to promote a digital and programmable Singapore dollar – what the MAS terms ‘purpose-bound money’ – and to explore and build the necessary infrastructure. MAS wanted to trial this for government vouchers and payouts, for starters, while setting the stage for more commercial uses.
StraitsX focused on supporting that project. Liu and his team developed pilots to enable such money transfers, with a crypto custody wallet tied to a Visa debit account.
For Project Orchid, StraitsX issued NFT vouchers with a SGD stablecoin that people could scan and pay at offline kiosks at the Singapore Expo. The money came with daily limits but also a deadline to be usable. Importantly, the service was designed to be used across various crypto wallets, so long as they supported Ethereum-chain applications.
In July 2024, the company acquired a Major Institution Payment license in Singapore and a similar e-money operating license in Indonesia. It also secured licenses as a merchant acquirer and for digital-token payments. It launched both Singapore- and US-dollar backed stablecoins, built on Ethereum.
Entering the real world
Now StraitsX has taken these steps and created a real-world pilot with AliPay and Grab. Grab set up a crypto-available wallet within GrapPay, so that users can receive vouchers and use them across 200 offline payment outlets where StraitsX is the merchant’s acquirer. The service is aimed at tourists visiting Singapore.
“Bubble tea shops are the most popular” places where visitors are using AliPay to buy things from merchants using GrabPay for acceptances.
AliPay+, whose network includes local payment wallets such as DANA in Indonesia, Kakao in South Korea and Touch’n’Go in Malaysia, is also part of the pilot. AliPay users from overseas don’t need to download the Grab app. They can simply pay on site at StraitsX’s merchants using AliPay, by scanning the merchant’s GrabPay QR code, and pay in their local currency. The SGD stablecoin handles the currency exchanges as the monies are debited from the user’s domestic account to pay the Singaporean merchant.
“We handle FX in real time,” Liu said. AliPay sends StraitsX’s ‘XSGD’ stablecoin to Grab’s blockchain address. The Singaporean merchant converts this back to Singapore dollars within the GrabPay app, so local merchants also don’t need to add new payment methods: the stablecoin handles all of that.
Convenience versus cost
StraitX has two jobs for each transaction. First is the communication between the mode of payment – say between a customer’s debit or credit card, and the merchant’s point-of-sale terminal. Second is settlement of the trade, which requires enough liquidity to match market rates – and so changes in FX rates or available liquidity in a given currency pair will impact the merchant’s discount rate they pay.
This suggests a higher MDR for merchants – in other words, they have to pay more for using stablecoins. On the other hand, they are getting convenience, as they don’t need an additional payment methodology. They are also enabling convenience on the customer’s side – someone from Shanghai or Jakarta just needs their good ol’ AliPay wallet. That should translate into attracting more customers.
The merchant is also receiving money in real time.
Liu says over time, MDRs should come down. “It’s about understanding FX markets,” he said. “That’s where the fees come in. If we add more liquidity, those fees come down, so we can charge a lower fee to merchants.”
That liquidity is within StraitsX’s own treasury. This means it needs to rapidly acquire more merchants. “Acquiring is key to our revenue,” Liu said. “It’s not really about accruing interest on the stablecoins we manage.”
This is different to pure-play stablecoin operators like Tether or Circle. They must back those reserves fully. In theory they can’t on-lend those reserves (as a commercial bank does), but they can generate interest on the reserves.
Plans for 2025
So the key to StraitsX’s prospects is growing the merchant base, which means finding more partners. Part of its strategy was to put this service on the Avalanche blockchain, not Ethereum, because it is considered more agnostic about applications. StraitsX also tested the service on Solana, but Liu says AliPay preferred Avalanche for its controls on privacy and its approach to cybersecurity risk.
Now StraitsX is looking to expand this nascent business to Indonesia, which Liu says will launch in the second quarter of this year. It’s also going to serve Grab’s local merchant base, leveraging domestic payment rails. And it will also grow beyond AliPay to serve the national QR codes of other Southeast Asian countries, including Thailand and the Philippines.
Liu is also considering a Hong Kong-dollar denominated stablecoin. “Swapping between HKD and SGD stablecoins will generate new applications,” he said.
