Stablecoin Applications in Blockchain Technology

I'm getting more excited about stablecoins the more I learn about them. Not because of crypto hype, but because of the real business applications I keep seeing. Last week's Supra session with three industry leaders opened my eyes to just how fast this space is moving: ↳ Ben Reid (Head of Stablecoins, Bitso) ↳ Avinash Chidambaram (Founder & CEO, Cybrid) ↳ Alex McDougall(President, Stablecorp Inc.) Here's what's got my attention: 1/ The cost arbitrage is massive Traditional cross-border payments cost 4-5% and take days. Stablecoins do the same thing for ~10 basis points in real-time. That's not incremental improvement - that's 90% cost reduction with instant settlement. Alex shared an example: Brazilian students paying Canadian tuition through stablecoin rails instead of international wire transfers. 2/ Real-world infrastructure is already here This isn't theoretical anymore. Bitso processes cross-border payments across Latin America using peso stablecoins. Cybrid provides APIs that let any fintech embed stablecoin payments. Major wireless carriers are exploring real-time settlements for roaming charges - eliminating billions in reconciliation overhead. 3/ AI agents + instant payments = new business models The most fascinating use case: AI agents making authorized payments based on business logic. Your ERP detects low inventory → AI gets CFO approval → payment executes → supplier ships immediately. No more "we'll start manufacturing once your wire clears in 3-5 days." 4/ Regulatory clarity is accelerating adoption The GENIUS Act and similar frameworks are giving enterprises confidence to integrate this technology. Banks are now asking stablecoin companies to help them issue deposit tokens. JP Morgan has their own consortium working on this. 5/ Global harmonization advantage Unlike traditional rails that require different systems in each country, stablecoins work identically everywhere. Build your payment infrastructure once, deploy it globally. This is why every fintech is becoming a crypto fintech - whether they realize it or not. The tipping point feels closer than I expected. What stablecoin applications are you most excited about?

I am often asked by friends who are not as familiar with Crypto what the “real” applications are - here is my typical answer! 🖖 In Developed Markets - Gambling / Speculation In countries like the US and the UK, Crypto has found product market-fit in speculation/gambling because: 1. Most token prices are very volatile going up and down very quickly 2. This creates news headlines and FOMO, so people think they can get rich quick. Obviously, this often goes wrong, just like gambling in a casino. Inevitably, people look down on gambling but humans are drawn to it and have been for a long time. As far back as 1916, $268m was wagered on the outcome of the US Presidential Election [1]. Whether it is ethical or not is a different question. 👉 In Developing Markets - Holding US Dollars In markets like Turkey and Argentina, Stablecoins (i.e. tokens that can be redeemed for a fixed amount of fiat currency like $1) are increasingly owned. Consumers want to hold US dollars to ensure the value of their savings don’t get eroded - by inflation or government policy. Stablecoins combined with blockchain settlement help them tackle two problems: 1. Local currency inflation: In 2023, inflation in Argentina and Turkey was 211% and >60% respectively [2]. The value of consumers’ local currency savings fall quickly so they want to own USD, which has much lower inflation. 2. Capital restrictions: In these countries, governments have confiscated assets and put restrictions on sending money abroad and how much foreign currency you can own. If assets are stored in self-custody blockchain wallets, a government can’t freeze your account like they can in a bank or exchange. In Turkey, I’ve seen 80 year olds on the street wearing Binance hats - holding stablecoins is not niche. It is common practice to buy USDT and store it on Binance or in a self-custody wallet. This market is already sizeable and growing fast [3]: 1. In 2022, >$11 trillion in stablecoin transactions were settled, dwarfing PayPal volumes ($1.4 tn) and comparable with Visa ($11.6 tn). 2. Supply of stablecoins has grown from $3bn five years ago to >$120bn in mid-2023. 3. >2/3 of stablecoins are held in self-custody wallets i.e. outside exchanges like Binance. 4. There are 25 million blockchain addresses holding stablecoins and 5 million sending stablecoins each week. As this market grows, we’re seeing business opportunities in areas like remittances. If you’ve seen other Crypto use cases in action now - I’d love to hear from you! [1] Historical Presidential Betting Markets - $165m in 2002 dollars converted to 2022 dollars: https://lnkd.in/gaGnh397 [2] 2023 Inflation in Argentina: https://lnkd.in/gNBdKvJF [3] Brevan Howard - The Relentless Rise of Stablecoins: https://lnkd.in/gSdAivei

I am referring to a recent article of the WSJ about banks panicking that stablecoins might siphon funding (deposits) away from banks. But, banks themselves could embrace stablecoins as an alternative deposit product offering, because stablecoins could be used to fund lending activities, similary as in decentralized finance (DeFi) + centralized finance (CeFi). How Stablecoins Can Fund Lending Activities - In DeFi platforms (like Aave, Compound): Users deposit stablecoins (like USDC, USDT, DAI) into lending pools. Borrowers take loans from those pools by posting collateral. Lenders earn interest; borrowers pay interest. All is governed by smart contracts with algorithmic interest rates. - In CeFi (Centralized Finance) platforms (like BlockFi, Celsius – though these have collapsed): Users deposited stablecoins. Platforms lent them to institutional borrowers (e.g., hedge funds) at higher rates. Yield was shared with depositors. - In microfinance and fintech ecosystems: Some companies in developing economies accept stablecoins from global investors or donors. LThese are then converted into local currency and lent out to small businesses or individuals. Lower cost of capital, faster settlement, and fewer FX risks are the key benefits. Risks and Challenges: - Regulatory Uncertainty: Are stablecoin-funded loans legal? Are stablecoin deposits considered “banking activity”? In the U.S., for example, this is a gray area. Some regulators see this as shadow banking, and may crack down. - Redemption Risk: What if the stablecoin (e.g., USDT) loses its peg or can’t be redeemed 1:1? - Lending activities backed by unstable stablecoins could face a liquidity crisis. - Counterparty Risk in CeFi: If centralized platforms mismanage funds, depositors may not get their money back (as seen in the 2022 crypto collapses). - No Deposit Insurance: Unlike traditional banks, stablecoin lending platforms do not offer deposit insurance (FDIC, etc.). Regulatory Perspective: - Basel Committee has warned that stablecoin use in lending can lead to credit creation outside traditional banks. - U.S. regulators (Fed, OCC, SEC) are assessing whether stablecoin issuers should be regulated like banks. - Some suggest narrow bank models, where stablecoins must be backed 1:1 by reserves and cannot be re-lent. Implications for Banks and Credit Markets: - Disintermediation risk: If stablecoins are widely used for lending, traditional banks may lose deposit base and credit market share. - Competition and innovation: Fintechs could offer faster, cheaper loans using stablecoin rails. - New liquidity channels: Particularly useful in cross-border lending, remittances, and crisis regions with weak currencies. Stablecoins can and already do fund lending activities, especially outside the traditional banking system. This opens opportunities for efficiency, inclusion, and disintermediation — but it also brings regulatory, legal, and systemic risks that policymakers are still grappling with.

Visa + Stablecoins = a new paradigm for payments via *public* blockchain infrastructure. Crypto has struggled to point to obvious mainstream use cases for years. Part of the challenge derives from the fact that crypto/public blockchains are infrastructure tech — making it harder for the average consumer to see and experience its benefits. But if you're a merchant receiving online payments, accepting stablecoins via public blockchain rails has obvious benefits: - instant and final settlement - no reversals/fraud/chargebacks - no credit card expirations (and lost revenue for subscription businesses) - no onerous reconciliation between banks - lower costs on the backend = lower fees for merchants - global, shared settlement network The bottom line is that when you tap your card or make a payment online today, you kick off a maze of complexity under the hood amongst issuer and merchant banks and payment service providers. Public blockchains and stablecoins eliminate most of this complexity by leveraging a shared & secure settlement network and bearer digital assets. ---- **Key Takeaway: Visa and other payment infrastructure companies are integrating services on *public* blockchains. You won't see them trying to create their own blockchain or a consortium of blockchains. Why? Because the settlement network is already built for them. Stablecoins such as USDC are already in the market. A network of shared standards around wallets, programming languages, data oracles, and tokens already exists. And they can connect to 8 billion people via these shared standards. ---- 🤔 If the world's largest payment providers are integrating with *public* blockchains, you might be wondering why central bank digital currencies are being tested on *private* blockchains. Naturally, it seems reasonable to project that CBDCs will ultimately be deployed on *public* blockchains. Of course, this would imply that the global digital economy will eventually collapse onto *public* blockchain infrastructure. I covered these concepts and much more in the latest issue of #thedefireport See the first comment for free access.

This week, the GENIUS Act passed on a bipartisan basis and was signed into law. GENIUS creates a framework for how we can use and issue stablecoins in the US. A lot of my friends are crypto skeptics, but if you care about a more accessible financial system and a stronger dollar, you should care about stablecoins. This is a monumental change in how money will move globally and an opportunity to re-entrench the dollar as the world’s reserve currency. Here are some implications of a new stablecoin regulatory regime: Cheaper, faster remittances: 10% of remittances from the US to Mexico are already in stables. Stablecoins cut out high middlemen fees and make it simpler to reach family members who don’t have easy access to a Moneygram location or bank, and send them money 24/7. Cross-border/global payments: Uber and Airbnb are exploring stablecoins to simplify global payouts, making it faster and cheaper for gig-workers and freelancers to access their earnings. Nonprofits and NGOs like Mercy Corps and the World Food Program are exploring stablecoins to make it easier to move money between offices in different countries, cutting operational overhead and making it faster to deliver funds where they’re needed most. Increasing global access to and reliance on dollars: As Americans, we’re privileged to have never experienced serious currency volatility. Countries like Turkey and Argentina have some of the highest stablecoin adoption rates in the world, because people use USD-pegged stablecoins as a savings mechanism and a protection against volatility. (Stablecoin purchases in Turkey represent 3.7% of GDP). GENIUS helps ensure that the dollars they hold are truly worth real dollars, helping maintain US-dollar dominance - critical for American national and economic security. TLDR: Don’t let your crypto skepticism let you ignore the impact of stablecoins on the global economy or American security. No bill is perfect, but we often spend too long letting the perfect be the enemy of the good when it comes to tech regulation. Stablecoin legislation is a long overdue step in helping us lead the world in technology, establish clear rules for stablecoin issuance, and create a more open, accessible financial system. (A good read on stables adoption in emerging markets, if you're curious: https://lnkd.in/eAy5r4DN)

Stablecoins are creating new possibilities for banking partnerships in Latin America. 71% of stablecoin adoption in LATAM is for real-world cross-border payments. Forward-thinking banks across the region are asking the right question: "How do we enable this for our customers?" Instead of building everything from scratch, they're partnering. We've seen regional banks integrate stablecoin rails alongside their traditional services, allowing customers to benefit from both options. They understand that businesses need real-time settlements for cross-border trades, not just domestic wire transfers. Now, banks can offer what their customers actually want: the speed of digital currency with the trust and compliance of established banking relationships.

I haven't posted on current affairs in real estate or web3 in a little bit - the latest interest rate hike and the subsequent Fitch downgrade was not the news I wanted to hear, but I understand the circumstances. Amidst the troubling news, I heard that Paypal was launching a new stablecoin - for a large payments platform like Paypal, there were three choices: (a) pretend that this is all a bad dream and it will eventually go away (like many other incumbents are doing), (b) stay curious enough to set up a small team to look into it, but not make any major business changes, or (c) embrace the future, cannibalize your own business by creating a new disruptive product that will define the future or payments and global settlement. I am glad to see that Paypal picked option c. Additionally, rather than spend years reinventing the wheel, in terms of legal structure, regulatory licensing, infrastructure and so on, they partnered with Paxos, an NYDFS licensed and time tested structure. The result - PYUSD! At Roofstock onChain, we have been building a proof of concept to allow the instantaneous sale and settlement of rental properties using USDC, a stablecoin issued by Circle. As I work with Huma Finance on a variety of global specialty finance and private credit use cases, once again, instantaneous global settlement and onchain verification are enabled by stablecoins. It is clear that stablecoins are one of the strongest use cases in web3 and they will result in exponential innovation across financial services and global capital markets. Stablecoins will likely (more or less) replace fiat currencies in smaller countries/emerging markets. In developed countries where currency is already mostly digital in nature, stablecoins will still have a big role in business and commerce. This technology is here to stay - we can either embrace and regulate it here or follow other countries that take on a leadership role. Fortunately, the U.S. House Financial Services committee has advanced a bill to establish a federal regulatory framework for stablecoins and there may finally be bipartisan support on something! https://lnkd.in/g7UCiYqM

Visa will send stablecoin USDC over Solana to help pay merchants in crypto. This announcement ranks among the most significant of the year. It's a monumental development. Stablecoins are poised to emerge as the primary interbank settlement solution through card networks. “By leveraging stablecoins like USDC and global blockchain networks like Solana and Ethereum, we're helping to improve the speed of cross-border settlement and providing a modern option for our clients to easily send or receive funds from Visa’s treasury,” said Cuy Sheffield, Head of Crypto, Visa. “Circle built USDC to provide a functional digital dollar that could move at the speed of the internet to facilitate secure, reliable payments. Expanding the pilot exemplifies how pairing USDC with Visa’s innovation opens up the future of payments, commerce and financial applications,” said Jeremy Allaire, Co-founder and CEO, Circle. “Visa's USDC settlement capability enables Worldpay to bring more of our treasury operations in-house and allows us to offer merchants more choices for receiving funds,” said Jim Johnson, President of Worldpay Merchant Solutions, FIS. “Stablecoins like USDC are cutting edge payments technology that can enable online businesses around the world to accelerate their growth,” said Philip Fayer, Chair and CEO, Nuvei. “Optimizing cross-border transactions is only one use case where stablecoins can benefit businesses." Visa is taking a big next step in modernizing cross-border money movement.

Are you ready to dive into the world of on-chain payments and stablecoins? 🌐💰 As a financial professional, you might be wondering why I get so excited when I see news about on-chain payments. Let me break it down for you. Traditionally, when we make transactions, there are multiple intermediaries involved, resulting in fees and delays. But with on-chain payments, powered by stablecoins like USDC, the game is changing! 💪 Imagine this scenario: You walk into a coffee shop and instead of using your credit card, you pay with a debit card linked to your crypto wallet. The transaction is processed using USDC, a stablecoin worth a dollar, and settles almost instantaneously. No more waiting for days or dealing with high processing fees! ☕💳 But here's where it gets even more exciting. With on-chain payments, you can keep more assets in your crypto wallet, potentially earning interest or yield while they sit there. Plus, the coffee shop receives their payment immediately, allowing them to pay their suppliers and employees without any delays. It's a win-win situation! 🚀 But the benefits don't stop there. On-chain payments open up a world of possibilities for that coffee shop. They can participate in protocols that offer interest on their assets, borrow funds for business needs at lower interest rates, and even streamline payments to suppliers and employees. It's a game-changer for merchants! 💼💸 And the best part? The adoption of on-chain payments by major players like Visa, PayPal, and Shopify is driving the growth of the ecosystem. More users mean more value for the network and its tokens like ETH and SOL. 📈💼 I get excited about the value of the crypto networks, and the adoption of more efficient systems. I also want financial professionals to understand the adoption is coming in more ways than simply investing in crypto assets, and the value of the crypto assets will start to be derived from fundamentals. https://lnkd.in/gtSCDFfZ

Web3 technology, particularly stablecoins, are becoming increasingly vital for Web2 teams hiring globally, marking a shift from luxury to necessity. As businesses expand across borders, the need for a stable, reliable, and efficient payment method is paramount especially in regions that lack tradfi infrastructure. Stablecoins are perfectly suited for this task. Here's why: Global Payroll Simplified: Stablecoins provide a consistent value exchange, eliminating the complexities of currency conversion and fluctuation for international teams. Cost-Effective Transactions: They reduce the transaction fees and delays often associated with traditional cross-border payments, ensuring employees get paid on time, every time, 24/7/365. Financial Inclusivity: Offering access to a unified, global financial system, stablecoins empower companies to hire and retain talent worldwide, irrespective of the local banking infrastructure. The transition from viewing stablecoin payments as a luxury to recognizing them as a necessity underlines the growing importance of Web3 technologies in supporting the dynamic needs of global teams. This evolution reflects a broader shift towards more decentralized, efficient, and inclusive financial operations in the global economy landscape that is no longer siloed to the crypto industry. #crypto #payroll #hr