‘Treasurers need to start prepping’ for stablecoin boom

credit: Shutterstock
credit: Shutterstock

Stablecoins have often been hailed as the saving grace to bridge the gap between fiat and digital currency. However, adoption rates, much like the overall crypto sector, have been slow over the last several years. 

This is due to a myriad of factors. There will always be sceptics of crypto, whether it be for its high volatility to consumers, or the risks it poses to the traditional financial system to global regulators. 

But with stablecoins being pegged 1:1 with a fiat currency, such as the US dollar, is crypto’s answer to create a currency that can viably exist alongside fiat currencies and become a more secure person-to-person transaction method. 

According to a recent research report by AllianceBernstein, the Solana blockchain network has the most stablecoin transactions across all networks. This can be attributed to USDT and USDC’s market capitalisation of the stablecoin market. 

Tether’s USDT and Circle’s USDC are comfortably the two largest digital currencies in the market, controlling 75% and 22% respectively. However, the arrival of two other players is making the stablecoin market much more competitive, as well as adding two other alternatives to USDT and USDC’s control. 

Last August, PayPal became the first financial institution to launch its native stablecoin with PYUSD and more recently, cryptocurrency exchange Ripple Labs also announced it intends to launch a stablecoin this year. 

Despite adoption being slow, in recent times, stablecoins are now undergoing a period of rapid growth. With the arrival of PYUSD and Ripple Labs, the market is currently valued at $150bn and is forecasted to reach $3trn in the next five years. 

Financial service companies like PayPal and Visa have been taking a liking to stablecoins due to their capabilities to facilitate cross-border payments and at a much quicker pace. 

Laurent Descout, CEO and Co-Founder of Neo, believes that due to stablecoins accelerating at a rapid rate, it is now time for treasurers to prepare for its potential arrival to the wider mainstream. 

He said: “Stablecoins are becoming an increasingly viable payment option for goods and services in the real economy. Many see the huge potential that they could bring from bypassing the inefficient and slow processes of traditional payments to the increased security, recordkeeping and transparency.

“While it’s too early to say if stablecoins will eventually replace traditional forms of payments, treasurers need to start preparing. They should read up and stay abreast of the latest developments and start having conversations about their viability and digital wallets which allow them to hold and utilise them. Those who don’t, risk being left behind.”

Regulation rules everything in the payments and financial industry, and stablecoins hold no exception. 

US Chair of the House Financial Services Committee, Patrick McHenry, has outlined a timeline for the Committee to agree to a stablecoin bill before he retires at the end of his term on 3 January 2025. 

There has been much opposition to the wider crypto sector from numerous US Congresspeople, in particular Maxine Waters, who raised concerns about stablecoins and crypto in regards to the launch of PYUSD. 

The UK on the other hand has been progressing much further along with its crypto regulatory plans, aiming for the issuance of legislation in 2025.