Applications and Use Cases

Global Stablecoin Transactions Anticipated to Surge

July 12, 2023

Revenue in the cryptocurrency market is expected to exceed $64 billion by 2027, according to research from Statista. Emerging as an asset class within the growing cryptocurrency space are stablecoins, as they address the inherent volatility that has often plagued traditional digital currencies.

Unlike their counterparts like Bitcoin and Ethereum, stablecoins provide stability by pegging their value to a fiat currency or a tangible asset such as gold. This pegging mechanism ensures that stablecoins maintain a consistent value, making them an attractive option for individuals and businesses seeking a reliable medium of exchange and a store of value.

In fact, a recent report by Juniper found that stablecoins are making rapid progress in the cross-border market in particular, with them representing a way to bypass slow, expensive, and difficult-to-track existing cross-border payment rails. Even more specific regarding the value of stablecoins, the report predicts that the value of payment transactions powered by stablecoins will exceed $187 billion globally by 2028, up from $53 billion in 2023.

The expected 2028 value of cross-border stablecoin payments will represent almost 73% of total stablecoin payments transaction values globally, only further showcasing the dominance of cross-border use cases. However, there is one main obstacle for further growth, which is being even more widely accepted, with stablecoin rollouts needing new networks to be built and scaled.

Unlike traditional cryptocurrencies, stablecoins often require dedicated infrastructures to ensure stability and efficiency. This involves developing blockchain architectures that can support pegged values, collateral management and scalability. Additionally, regulatory compliance and gaining acceptance among businesses and consumers pose challenges.

Stablecoin growth also faces challenges from the emergence of Central Bank Digital Currencies, or CBDCs. CBDCs are digital currencies issued by central banks and are pegged to a nation's fiat currency.

Although CBDCs are still in early development stages, they hold potential for facilitating cross-border transactions. One advantage CBDCs have over stablecoins is their central bank backing, which can potentially accelerate their adoption.

However, considering the vast scope of cross-border transactions and the nascent stage of CBDC development, stablecoins continue to hold promising prospects for growth in parallel with CBDCs.

"Stablecoins have vast potential to unlock the flow of money across borders, but payment platforms need to roll out acceptance strategies for this to progress,” said research author Nick Maynard. “MTOs can leverage stablecoins in a wholesale manner, but this will need networks to be built across wide geographic footprints.”

Long story short, unlocking the potential of stablecoins requires the rollout of acceptance strategies. But, once that potential is unlocked, stablecoins can address the volatility that has plagued traditional digital currencies. Stablecoins remove stages in the cross-border process, increase speed of transactions and settlements and improve traceability.

Edited by Alex Passett

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