It's time for banks to play the stablecoin game...

Friday 24th September 2021

There are US$ 113 billion worth of stablecoins in use with a daily volume of US$ 63 billion. Banks share in this - near zero! It's time for banks to enter the stablecoin business...

Fiat-backed stablecoins are blockchain assets that are backed 1:1 with fiat currency.

As of today, there are US$ 113 billion worth of stablecoins in use with a daily volume of US$ 63 billion.

Stablecoins are a technological as well as a financial innovation and they combine the benefits of a blockchain (transparency and speed), WITHOUT the inherent volatility risk of crypto-currencies.

Stablecoin features:

  • they enable fast financial processes,
  • they have low processing fees,
  • they are transparent, borderless, and programmable.

Stablecoins benefits:

  • they reduce counterparty and settlement risk,
  • they decrease capital requirements,
  • they enable instant value transfer.

Stablecoin use cases as per Stably:

  1. Safe Haven Asset
  2. Trading
  3. Payments
  4. Cross-border payments and remittance
  5. Payroll
  6. 24x7 settlements
  7. Automated escrows
  8. High-yield borrowing and lending
  9. Alternative Banking
  10. Powering Decentralized Applications

Stablecoin mind-map

Conventional payment systems involve the movement of E-money across multiple private databases (of banks, money transfer organizations, etc.). This is why typical cross-border payments involve high costs and time.

Blockchain technology removes the characteristic of infinite reproducibility from a digital asset. It confirms that each unit of value was transferred only once, solving the long-standing problem of double-spending.

A stablecoin runs on a blockchain, and not in private databases, and that is why the movement of stablecoins can happen in real-time at near-zero cost.

The United Nations recognizes 180 currencies across the world – Indian Rupee, US dollar, Euro, Japanese Yen, etc. E-money is a digital representation of fiat currency used to electronically transfer value denominated in fiat currency. E-money is a digital transfer mechanism for fiat currency – i.e. it electronically transfers value that has legal tender status.

Stablecoins are E-money and not virtual or cryptocurrencies.

Earlier this year, the United States Comptroller of the Currency clarified national banks' and federal savings associations' authority to use stablecoins to conduct payment activities and other bank-permissible functions.

If you are a banker looking to experiment with stablecoins, get in touch with us now!