The Taiwan Banker

From global payments to local applications, stablecoins are not merely a technological innovation but also a challenge and dialogue with the traditional financial system. Pegged 1:1 to fiat currencies or physical assets, these digital assets act as a hedge and store of value amid the volatility of the crypto market. Nevertheless, the true potential of stablecoins lies in their ability to become the cornerstone of future finance, particularly for cross-border payments, corporate settlements, and emerging digital economies. Diverse and imaginative applications are emerging. Taiwan’s over 800,000 Southeast Asian migrant workers often rely on costly, slow, and cumbersome conventional channels such as banks or Western Union traditional cross-border remittances to send their salaries home. Although Western Union provides fast transfers, its fees are high, and the exchange rates are often unfavorable, eating into an essential source of income for migrants’ families. Imagine an Indonesian migrant worker in Taiwan using an app that supports stablecoins: they could convert their New Taiwan Dollar (NTD) salary into a stablecoin pegged to the Indonesian Rupiah and send it to their family’s digital wallet in minutes. The family could then use it directly in local partner stores, or cash it out at designated points, eliminating multiple layers of bank fees, ensuring exchange rate transparency, and maximizing the value of their hard-earned salary. This is not merely a technical optimization, but a tangible realization of financial inclusion. However, this vision still faces challenges in practical implementation. Wu You-xun, founder and CEO of Eastern Union Interactive, cautions that while funds can move rapidly once within the digital asset ecosystem, the on-ramps and off-ramps remain costly and complex. Stablecoins are equally promising for multinational businesses. Internal transaction settlement using blockchain-based stablecoins would eliminate lengthy and expensive interbank processes, and stablecoin settlements could also allow fast-growing global startups like PayPal or Square to capture markets quickly. In the long term, a high-efficiency, low-cost stablecoin clearing network would offer unparalleled competitive advantages. The future of stablecoins depends not only on technology but also on regulation, operational costs, and market competition. Taiwan stablecoin regulation is gradually taking shape, treating them as digital assets. Issuance rights may be limited to banks, and a 1:1 fiat reserve requirement will likely be imposed to ensure stability. Any bank adopting a stablecoin model must carefully evaluate its cost-effectiveness. The costs fall into three major categories. Conversion costs: the largest expense, involving exchange spreads and transaction fees between fiat and the blockchain Technology and compliance costs: building blockchain clearing systems and ensuring know your customer (KYC) and anti-money laundering (AML) compliance across jurisdictions Liquidity management costs: maintaining sufficient reserves to guarantee the ability for users to redeem fiat at any time This presents both opportunities and challenges for existing financial institutions. If total costs exceed those of traditional systems, users will be reluctant to switch, which explains why many players typically first test the waters in overseas markets, with more flexible regulatory and commercial environments. Market competition is intensifying, as issuers such as Tether and Circle have already established wide ecosystems. For latecomers, collaboration with existing giants may be wiser than starting from scratch, enabling quicker market entry and access to existing infrastructure. Still, true competitiveness lies in differentiation. Companies with strong niche advantages, such as those focused on Southeast Asian remittance corridors, possess valuable assets in the form of user data and trust. Even without their own coins, they can deliver superior user experiences through strategic partnerships. Stablecoins function as digital cash in the highly volatile cryptocurrency market. When markets fluctuate – say, Bitcoin prices plunge sharply – investors no longer need to withdraw assets to banks and wait days for their deposits to appear. Instead, they can instantly convert their Bitcoin to stablecoins like USDT or USDC, safely storing their funds in digital wallets. Thanks to their stability, stablecoins are ideal intermediaries for asset trading, helping investors lock in profits or mitigate losses. Taiwan’s pivotal role in the global semiconductor and AI server industries presents a unique strategic opportunity for a New Taiwan Dollar (NTD) stablecoin. Wu You-xun suggests that if such a stablecoin were integrated into the core industrial supply chain – used in chip transactions, for example – it could effectively reduce foreign exchange risks and help internationalize the NTD. Moreover, stablecoins could drive innovation in financial products, such as tokenization of offline fixed-income instruments for blockchain-based trading and settlement. Achieving these visions will require proactive government support and industry collaboration – a new mindset more than a technological shift. The core value of stablecoins lies in their price stability, freeing them from speculation, and enabling them to function as genuine payment tools and stores of value. They could quietly transform the financial landscape, not replacing fiat, but creating a stable digital highway allowing money to move across borders faster and cheaper. Stablecoins serve a similar purpose in today’s digital era as so-called “flying money” did during China’s Tang and Song dynasties, enabling fast, borderless transfer of value through technology rather than paper. Flying money was an early remittance instrument, a kind of proto-bank draft that allowed merchants to transfer value across long distances without physically moving coins, marking one of the world’s first experiments in paper-based or trust-based value exchange. For Taiwan to realize its vision of “digital flying money,” collaboration between the government, financial institutions, and startups will be crucial. Regulators can draw lessons from other countries by establishing clear legal frameworks, encouraging NTD-pegged stablecoin issuance, and requiring reserves to be held by reputable banks. Meanwhile, banks and fintech startups can jointly develop compliant clearing systems, focusing on high-quality user experiences. No longer a distant concept, stablecoins are reshaping global finance at astonishing speed. What Taiwan needs is not rejection or hesitation, but an embrace of innovation with risk management in mind. When that day comes, stablecoins will be more than the digital “flying money” of finance – they will become everyone’s portable, borderless wallet. The author is Editor-in-Chief of the Taiwan Banker