The payments industry is on the verge of a seismic transformation. Recent projections from the management consultancy McKinsey & Company place the annual value of cross-border payments at $195 trillion in 2024 and expect the figure to ascend to $320 trillion by 2032.
This dramatic increase will be driven by many different factors, one of them being the increasing use of stablecoins—cryptocurrencies that are pegged to an asset such as the U.S. dollar. Stablecoins are rapidly becoming the medium through which global payments are made.
Major players in the industry—Visa, PayPal, Coinbase, and Ripple—are putting considerable resources into stablecoins. These companies understand that stablecoins could revolutionize international payments by making them quicker, safer, and cheaper. Stripe, a major player in online payments, also seems keen on stablecoins. It recently spent $1.1 billion on a company called Bridge to enhance its stablecoin capabilities. All this attention on stablecoins (and their underlying technologies) from such prominent companies gives them a kind of instant credibility.
No stable link. The fast ascent of stablecoins is no coincidence. They have, over the past year, anchored themselves as a key part of the global financial ecosystem. Among digital currencies, stablecoins allow for a level of certainty and predictability that is crucial for payments—especially when you need to send money across national borders. They do what regular cryptocurrencies like Bitcoin and Ethereum cannot: hold their value in a steady way. Stablecoins have, therefore, become the predominant digital currency used in international payments.
Stablecoins have experienced a huge influx just over the past week. The total value of stablecoins, like USDT and USDC, on the Ethereum network has seen an impressive increase of $2.43 billion. Meanwhile, on the Tron network, the same stablecoins have enjoyed a value uptick of $2.08 billion. This sharp upturn emphasizes the intensifying need for stablecoins as a way of doing borderless business.
Growing stablecoin adoption on networks like Ethereum and Tron reflects their rising prominence in the financial system. Digital currencies typically have three characteristics that give them an edge over traditional finance: speed, efficiency, and a lack of founding authority. We can discuss the first two as features that make stablecoins work better than existing monetary systems. Stablecoins are faster and more efficient than the ancient, horse-and-buggy-like systems that we currently rely on for most of our transactions. “Horse and buggy” is, of course, a metaphor.
The rapidly increasing number of stablecoins on blockchain networks like Ethereum and Tron highlights a more significant development—the increasing prominence of decentralized finance (DeFi). DeFi platforms enable direct interaction between users and financial services, cutting out the intermediaries with the help of blockchain technology and smart contracts. In this ecosystem, stablecoins are crucial. They allow for the very creation of decentralized payment systems, lending platforms, and similar constructs.
The most prominent companies in finance and tech are putting considerable money into stablecoins, grasping the huge promise this new digital asset class holds. Visa, PayPal, Coinbase, and Ripple are all making sizable wagers on the future of stablecoins, with these new instruments being viewed as a key part of the payments ecosystem of the future.
For instance, Visa has been working to integrate stablecoins into its payment network, and allows users to make minimal-fee cross-border payments with them. PayPal, another payments-industry giant, also offers stablecoin support and allows its users to send and receive that type of currency across borders. Meanwhile, Ripple, which is known for its payment platform RippleNet, has also been working on stablecoins and has been using them in experiments to see if they can enhance RippleNet’s cross-border payment capabilities.
The growing prominence of stablecoins in payment processing is underscored by Stripe’s recent $1.1 billion acquisition of Bridge. Bridge is a payment infrastructure provider that specializes in stablecoins. By buying the company, Stripe obviously believes in the potential of stablecoins, and it’s now working on a way to integrate Bridge’s technology into its own platform. What’s fascinating is the larger context in which this payment processing powerhouse is making a major move into the digital currency space.
The increase in the use of stablecoins is likely to push even more businesses, financial institutions, and payment processors to adopt them as a means of modernizing and economizing the way they do cross-border payments. The huge uptick in stablecoin usage over just the past week is really only a first step. As the user and business base of the payment asset broadens, the next big jump in the total value of stablecoins will push even further into the global payments market.
The $320 trillion cross-border payment market could see stablecoins become a major player by 2032. Companies like Visa, PayPal, Coinbase, and Ripple are leading the adoption of stablecoins, and their implementation is set to increase dramatically. As the financial sector itself looks to integrate stablecoins into its systems, the tech around stablecoins may be primed to evolve further, which in turn could see the barriers to sending and receiving money, well, dropped.
In the final analysis, the potential of stablecoins to disrupt and reshape the international payment system is considerable. They could be used by businesses and individuals to effect payments across borders in a manner that is easier, faster, and much less expensive than the way we do it now. This isn’t something that’s going to happen in five or ten years, though. The future of payment systems is going to be influenced a lot more by the growing use of “stablecoins” than by bitcoin, and it’s going to happen a lot sooner than most people think.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.
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