How Stablecoins Are Transforming Global Payments and Remittances

Liam Thomson
• Publilshed
September 6, 2023

Traditional banking systems have struggled to keep pace with the ever-evolving demands of our globalised world. As individuals, companies and countries transition to accept and adopt digital currencies, stablecoins have emerged as a game-changer. 

Have you ever wondered how to send money across borders faster, cheaper, and more securely? Stablecoins provide practical solutions to the long-standing problems of high fees, sluggish transaction times, and limited accessibility in international payments and remittances. 

What are Stablecoins?

To understand how stablecoins are changing the landscape of global payments, it helps to know what they are and how they work. 

Stablecoins are a type of cryptocurrency designed to maintain a stable value by maintaining a “peg” with a reserve asset, typically a fiat currency like the US dollar. This stability is achieved through mechanisms such as collateralisation (think money in a bank account) or holding government treasuries.

Stablecoins like USD Coin (USDC) and USDT (Tether) owe their existence to reputable issuers who play a critical role in ensuring the stability and reliability of these digital assets.

If you want to know more about stablecoins, check out our blog post for more info.

What is USDC?

USDC is issued by Centre, partially owned by cryptocurrency exchange Coinbase. USDC maintains a peg to the US dollar and is available across multiple blockchains, including Ethereum, Algorand, Solana, Stellar, and TRON, making it versatile. 

What is USDT?

USDT, issued by Tether, also aims to maintain its value close to that of the US dollar. USDT is available across an extensive list of blockchains, including Bitcoin, Ethereum, EOS, Tron, Algorand, and the OMG Network, highlighting its importance in facilitating quick transfers and hedging against crypto volatility.

How can stablecoins be used in global payments and remittances?

There are many advantages of stablecoins over traditional methods of payments, including:

  1. Low Transaction Fees: Traditional cross-border transactions often come with exorbitant fees charged by banks and intermediaries. Stablecoins eliminate these intermediaries as the transaction is completed over a blockchain - resulting in significantly cheaper transaction costs. 
  2. Fast Cross-Border Transactions: Conventional international transfers can take several days or even weeks to clear. With stablecoins, transactions are executed within seconds, irrespective of geographical boundaries, making them an ideal choice for time-sensitive payments and remittances. 
  3. Reduced Exchange Rate Risk: Stablecoins are designed to maintain a steady value, shielding users from the volatility associated with cryptocurrencies like Bitcoin or Ethereum, or even local currencies that may experience inflation. This means recipients get the expected amount of value, without worrying about currency fluctuations. 
  4. Enhanced Security: The blockchain technology underpinning stablecoins ensures transparency and security in every transaction. This reduces the risk of fraud and ensures that payments and remittances reach their intended recipients.
  5. 24/7 Availability: Unlike traditional banks, stablecoins operate 24 hours a day, 365 days a year. This means you can send or receive money anytime without being constrained by banking hours or holidays.

What are the top stablecoins?

Several stablecoins have gained prominence in the world of international transactions. The top stablecoins by market capitalisation are:

These stablecoins each offer unique features and benefits, catering to different user preferences and needs. 

Are there non-USD stablecoins?

Euro Coin (EUROC) is a recent addition to the stablecoin market, diversifying the currencies available. Like USDC, Euro Coin is issued by Circle and is backed by Euro reserves, offering users confidence in its stability.

Its compatibility with the Ethereum and Avalanche blockchains enhances its accessibility and usability for international transactions and remittances, opening up the potential for a multi-currency digital finance ecosystem.

As more stablecoins like Euro Coin enter the market, users can expect increased diversity and innovation in stable digital assets, further transforming the industry. 

Could national currencies become stablecoins?

Imagine a future where an increasing number of nations decide to issue their currencies as stablecoins, much like the USDT, USDC and EUROC. This scenario would likely have several profound implications for the world of finance and global transactions:

  • Greater Accessibility and Inclusivity: Stablecoin national currencies would empower individuals in underserved regions to participate in the global economy. 
  • Increased Efficiency in International Trade: International trade could benefit, with businesses benefiting from faster settlement times, reduced currency conversion costs, and enhanced liquidity.
  • Interoperability and Standardisation: The emergence of stablecoin national currencies would catalyse the development of industry-wide standards and protocols for cross-chain and cross-currency transactions. This standardisation would simplify and streamline global finance, promoting interoperability among diverse blockchain networks.

In fact, this is currently happening - with many reserve banks and governments around the globe exploring the use of local currencies on blockchains as Central Bank Digital Currencies, or CBDCs.

CBDCs could give rise to new economic models and financial instruments, potentially reshaping the global financial landscape. More countries' adoption of stablecoin national currencies represents a fascinating and potentially transformative future for international finance.

While it offers numerous benefits regarding accessibility, efficiency, and stability, it also poses challenges requiring careful regulation and oversight.

What's next for stablecoins?

Stablecoins are rapidly reshaping the way we conduct international payments and remittances. They offer a reliable, cost-effective, and efficient alternative to traditional banking systems. As we move into the digital age, embracing stablecoins can unlock a world of possibilities for individuals and businesses alike, enabling seamless global transactions and financial inclusion on a scale never seen before. 

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