Stablecoins, as the name suggests, offer the benefits of cryptocurrencies without the volatility.
And as Visa launched the Visa Onchain Analytics Dashboard on April 25 to showcase how fiat-backed stablecoins move around the world via public blockchains, CFOs and treasurers The stablecoin category is increasingly becoming a top concern for investors.
That’s because while the story surrounding cryptocurrencies is often overshadowed by scandal and volatility, amidst all this noise, stablecoins are emerging as a promising solution for mainstream transactions.
A stablecoin is a type of cryptocurrency that is designed to maintain a stable value by pegging its value to fiat currencies such as the US dollar or euro, or other assets such as gold or commodities. Unlike traditional cryptocurrencies such as Bitcoin, which are notorious for price volatility, stablecoins offer roughly the same level of stability as traditional currencies.
Direct benefits for businesses include being able to streamline cross-border transactions and serving as a new tool to manage liquidity more efficiently.
But stablecoins, which have been around for some time and come with their fair share of controversy, may be a viable way for Web3 participants to reframe assumptions about the use of blockchain-based applications in traditional finance and payments. mosquito?
Read more: Are blockchain-based smart contracts a smart option for global finance?
Addressing barriers to cryptocurrency adoption
Stablecoins allow businesses to access instant payments and liquidity without relying on intermediary banks or payment processors. This optimizes cash flow management and reduces dependence on traditional banking infrastructure.
Additionally, the fact that all transactions made using stablecoins are recorded on the blockchain, providing immutable auditing, helps CFOs and treasurers strengthen compliance, reduce fraud, and audit It helps to streamline.
As PYMNTS wrote in February of this year, proponents of blockchain’s underlying technical capabilities are keen to dissociate the technology from its association with cryptocurrencies. That’s part of the reason why, as the digital economy continues to grow, the adoption of stablecoins in mainstream payments appears to be growing along with it.
On April 25th, Stripe re-entered the cryptocurrency payments space after a six-year hiatus and will begin supporting global stablecoin payments as early as this summer, with instant and automatic on-chain payments. announced that it plans to begin transactions that will convert it into fiat currency.
The news comes on the heels of an April 19 announcement that stablecoin issuer Tether has partnered with the TON Foundation to enable customers to send cryptocurrency payments using the encrypted messaging service Telegram. Ta.
Also in April, PayPal and cross-border money transfer service Xoom partnered to allow users to make international transactions using PayPal’s USD stablecoin (PYUSD). PayPal launched the PayPal USD stablecoin in August and made it available to users of its Venmo payment service a few weeks later.
It’s not just PayPal. On April 4, blockchain and cryptocurrency company Ripple unveiled its own plans to issue a dollar-pegged stablecoin that will be 100% backed by U.S. dollar deposits, short-term U.S. Treasury securities, and other cash equivalents.
Observers believe that recent market movements around stablecoins have revealed increased participation and interest from traditional financial institutions, indicating broader acceptance of blockchain technology. are.
Read more: ‘Cryptofinance’ may be replaced by ‘cryptocurrency’, but Bitcoin is still untrustworthy
Capturing the usefulness of cryptocurrencies
The shift from awareness to adoption of cryptocurrencies in payments represents a potentially pivotal moment in the evolution of financial services, but it certainly hasn’t happened yet.
However, according to Visa’s dashboard, stablecoin USDC had a trading volume of $456 billion last week, compared to $89 billion for Tether’s USDT stablecoin. These large sums represent real financial activity and can be difficult for even the most traditional financial insiders to ignore.
According to Coinbase CEO Brian Armstrong, there are three pillars to the adoption of cryptocurrencies in a traditional financial environment, as he wrote in his latest letter to shareholders.
The first pillar looks at cryptocurrencies as an asset class and is centered around core trading and store of value use cases. That pillar has been achieved.
Importantly, the second pillar considers cryptocurrencies as an update to the financial system, centered around things like stablecoins and staking services. This seems to be the state of financial services and payments today.
The third pillar sees cryptocurrencies as app platforms centered around a variety of applications, from decentralized services to cloud services and commerce. That future is probably a little further away.
And the rise of stablecoin trading comes as governments on both sides of the Atlantic grapple with regulating cryptocurrencies that are (usually) pegged to the dollar.
Last fall, the British government announced plans to bring fiat-backed stablecoins under the jurisdiction of the Bank of England, the Financial Conduct Authority and the Payment Systems Regulator, and U.S. senator Kirsten Gillibrand (D.N.Y. ) and U.S. Sen. Cynthia Lummis (R), Wyoming has introduced legislation to regulate the use of stablecoins. According to the senators, the legislation would create state and federal regulatory regimes for stablecoin issuers, support a “dual banking system,” and require stablecoin issuers to receive 1:1 reserves. Mandatory maintenance. Ban unbacked algorithmic stablecoins. Similarly, it prohibits “illegal or unauthorized” use of stablecoins by issuers and users.
More information: B2B, B2B payments, blockchain, Brian Armstrong, CFO, Coinbase, commercial payments, cross-border payments, cryptocurrency regulation, cryptocurrencies, digital assets, fiat-backed cryptocurrencies, news, on-chain analytics dash Board, PayPal, PayPal USD, PYMNTS News, Ripple, Stablecoin, Tether, TON Foundation, Visa, xoom
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