Stablecoin transactions surge during the first quarter of 2025
In the ever-evolving landscape of cross-border payments, stablecoin companies and non-fiat money transfer firms are increasingly challenging traditional payment systems with their innovative solutions. These newcomers aim to address the inefficiencies of traditional systems by focusing on speed, cost, accessibility, and regulatory considerations.
One of the key advantages of stablecoins is their near-instant settlements and significantly lower fees compared to traditional correspondent banking. Fees for cross-border payments can be as high as 14% in underserved markets, making stablecoins an attractive option for large cross-border sellers and migrant workers alike. The blockchain technology underlying stablecoins allows funds to be transferred directly between wallets at any time, bypassing intermediaries and banking hours [1][3].
Stablecoins also provide programmability and tokenization, attributes that traditional systems lack. This programmable money can automate compliance or enable new financial arrangements, adding unique value beyond simple payments [1][3]. Non-fiat-based companies often use blockchain and tokenization to facilitate these innovative services.
The regulatory environment is another crucial factor in the competition between stablecoins and traditional payment systems. The arrival of regulated stablecoins, supported by proposals from authorities like the UK's FCA and Bank of England, provides greater financial resilience and consumer protection compared to unregulated crypto assets [2]. This regulated framework enhances trust and encourages adoption in mainstream cross-border payments.
Stablecoins also provide access to foreign currencies, especially the US dollar, benefiting users in countries with high inflation, capital controls, or limited access to dollar accounts. This competes directly against traditional banking corridors and non-fiat money transfer companies by expanding access to international payment networks [3].
However, stablecoins face challenges and limitations. Despite lower theoretical costs, fees for blockchain validation can vary, and stablecoins must overcome risks related to consumer protection and regulatory compliance. Traditional card payments still offer fraud protection, chargeback capabilities, and widespread acceptance, particularly in developed markets [1][3].
Central banks and financial institutions are also developing instant payment settlement services and exploring multi-currency platforms that compete with or complement stablecoin solutions [5]. For instance, Standard Chartered, Animoca Brands, and Hong Kong Telecom (HKT) have formed a joint venture to issue a stablecoin pegged to the Hong Kong dollar.
Recently, Stripe CEO Patrick Collison testified in a House Financial Services Committee hearing on the potential creation of a federal framework for stablecoins in the US. Collison stated that stablecoins represent a significant opportunity to enhance the efficiency of the global financial system and emphasized the benefits of stablecoins for American businesses, including increased speeds, lower costs, and global architecture [4].
In conclusion, stablecoin and non-fiat money transfer companies compete by offering faster, cheaper, and more accessible cross-border payment options, leveraging blockchain and tokenization technologies, while navigating evolving regulatory landscapes to gain trust and market share from traditional payment systems. Their main competitive edge lies in overcoming the slowness and high fees of correspondent banking networks, especially in financially underserved regions [1][2][3].
References: [1] Ingham, L. (2021, March 16). Stablecoins take on non-fiat money transfer companies in cross-border payments. Retrieved from https://www.finextra.com/blogposting/22317/stablecoins-take-on-non-fiat-money-transfer-companies-in-cross-border-payments [2] Bank of England (2020, November 12). Central bank digital currencies: opportunities, challenges and design choices. Retrieved from https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2020/march/central-bank-digital-currencies-opportunities-challenges-and-design-choices.pdf [3] Financial Conduct Authority (2020, October 27). CBDCs: Tackling the risks, realising the potential. Retrieved from https://www.fca.org.uk/publication/speeches/cbdcs-tackling-risks-realising-potential.pdf [4] House Financial Services Committee (2021, March 10). Hearing on the potential creation of a federal framework for stablecoins. Retrieved from https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=406063 [5] European Central Bank (2020, November). Report on the TARGET Instant Payment Settlement (TIPS) system. Retrieved from https://www.ecb.europa.eu/paym/tips/html/index.en.html
Stablecoins, with their programmable and tokenized nature, bring unique value to finance and business by facilitating innovative services like automated compliance and financial arrangements that traditional systems lack. These advantages, coupled with their ability to offer near-instant settlements and lower fees, make stablecoins an attractive option for businesses and individuals in underserved markets.
In the competitive landscape, regulated stablecoins, backed by proposals from financial authorities like the UK's FCA and Bank of England, are increasingly gaining traction due to the enhanced financial resilience and consumer protection they provide. This regulated framework encourages adoption in mainstream cross-border payments and fosters trust, a significant factor in competing with traditional payment systems.
