Stablecoins are everywhere in the news and not just in crypto circles. Around the world, governments, financial institutions, and fintech innovators are actively exploring their use in payments. Just in the past few weeks, we’ve seen multiple announcements:
Stripe & Paradigm launching a new blockchain project for stablecoin payments.
Ripple & BNY Mellon securing custody for stablecoin reserves.
Finastra & Circle enabling stablecoin settlement in cross-border payments.
Citi exploring stablecoin payments.
Visa expanding support for stablecoin rails.
Paxos and AllUnity respectively deploying new USD- and Euro-backed tokens.
US state of Wyoming introducing its own USD-pegged stablecoin.
JPYC Inc. preparing to issue Japan’s first stablecoin.
Hong Kong announcing plans to issue its first stablecoin licenses in early 2026.
The Genius Act offering a regulatory framework for stablecoins in the US.
This wave of momentum signals a clear trend: stablecoins are evolving from speculative crypto assets into practical instruments for payments.
While traditional payment systems are advancing rapidly (e.g. instant payments, PIX, UPI, Wero..), they still face persistent challenges - delays, high costs, lack of transparency, and limited global availability. Stablecoins present a compelling alternative, combining the reliability of fiat currency with the speed and programmability of blockchain.
Stablecoins are a unique type of cryptocurrency designed to maintain stable value by being pegged to reference assets - usually fiat currencies like the USD or Euro, or occasionally commodities like gold. In short, they represent programmable, borderless cash for the digital economy. Their potential to become the backbone of global payments is increasingly evident.
To understand why stablecoins are gaining so much attention, it’s worth comparing them to other major options:
Swift: the Swift network of different correspondent banks is still the global leader in cross-border payments. Swift processes around $5 trillion daily, compared to $20–30 billion for stablecoins (a number growing fast). Despite improvements through Swift gpi, including faster processing and better tracking, challenges remain: high costs, slow execution, and limited transparency. Yet, Swift’s global reach, reliability, and secure infrastructure are unmatched.
Crypto-currencies: crypto-currencies like Bitcoin and Ethereum are promoted for their decentralization and speed resulting in instant, low-cost global payments. However, they struggle with scalability, lack of support, and most critically, extreme volatility - making them impractical for everyday business transactions. Regulatory uncertainty also continues to deter mainstream adoption.
Visa B2B Connect: Visa has extended its traditional card payment network to support cross-border B2B payments. While it benefits from Visa’s global infrastructure, the solution shares many of the same limitations as SWIFT: high costs, strict operational rules, and a strong dependency on a dominant US player - one that has often been criticized for leveraging its market power.
Wise (and similar services): Wise offers faster and cheaper cross-border payments by maintaining local bank accounts worldwide. Money isn’t moved across borders per transaction; instead, it’s paid out from local liquidity pools. This model is user-friendly, cheap and efficient, though it depends on domestic infrastructure (with batch windows and delays) and struggles with high-volume corporate payments due to liquidity requirements.
Stablecoins address many of these issues directly. On-chain transfers are fast, cheap, and global (no need for local pre-funding). Their programmability enables seamless integration with smart contracts and automated financial workflows (e.g., escrow, automation payouts, supply chain financing). Additionally in high-inflation economies like Argentina, Turkey, or Nigeria, stablecoins offer businesses a more stable alternative to local currencies.
However, many of these advantages diminish when the sender or recipient still prefers to operate in local currency - a likely scenario while stablecoins remain outside the mainstream. This creates a need for on- and off-ramps, introducing additional frictions such as FX conversions and related costs. The promise of financial inclusion - such as bypassing local banking systems - is also weakened, as onboarding and offboarding typically require a bank account and compliance with KYC/AML regulations. That said, bulk conversions could help streamline these processes at scale.
Yet, adoption is accelerating:
Banks (e.g. JPMorgan, Citi, Société Générale, Deutsche Bank) are piloting stablecoins.
Corporates use them for global invoices, payroll, and supplier payments.
Emerging markets are turning to stablecoins as a hedge against local currency volatility.
Payment companies like Visa, Mastercard and Fiserv are embedding stablecoins into trusted payment networks for mass adoption.
At this pace, stablecoins could surpass legacy rails like Swift within a decade. Currently, around $250 billion in stablecoins are in circulation, with Tether ($155B) and Circle ($60B) leading the market. These support $20–30 billion in daily real-world payment activity, but exponential growth is expected. Market analysts project that stablecoin supply could grow to $2 trillion, with a daily payment activity of around $250 billion, by the end of 2028.
But despite their success, stablecoins face also real challenges:
Regulatory uncertainty (licensing, audits, AML), though new regulatory frameworks like the Genius Act in the US and MiCA (Markets in Crypto-Assets Regulation) in the EU are introducing necessary clarity.
Transparency and trust are critical. Mismanagement or lack of audits erodes trust (as seen in Tether controversies).
Scalability: Liquidity and robust fiat on/off ramps remain key bottlenecks.
Competition from CBDCs: CBDCs are state-issued digital currencies and differ from stablecoins: they are legal tender, centrally issued (by Central Banks), and typically operate on permissioned networks. In contrast, stablecoins are privately issued on public blockchains and backed by reserves. Question remains whether both models can co-exist.
Lack of global stablecoin standard: One major obstacle is the lack of a global stablecoin standard. Interoperability between various stablecoins introduces complexity (e.g. settlement between the two stablecoins) and costs. But a single global stablecoin issued by one private entity (e.g., Tether or Circle) would never be politically acceptable (too influential and creating a monopoly). Similarly, a USD-backed stablecoin as a default could face resistance from other major economies (China, India, EU, etc.) due to geopolitical and monetary concerns.
Stablecoins are no longer theoretical - they’re operational, expanding, and reshaping global payments. The next few years will define whether they become a supporting tool or the primary engine of value transfer in a digital-first economy.
Comments
Post a Comment