Stablecoins
Stablecoins are digital currencies issued by private companies on public blockchains (e.g., Ethereum, Base, Solana) that are pegged to fiat currencies and backed by audited reserves. For every dollar of stablecoin issued, the issuer holds an equivalent amount of either fiat currency directly or other highly liquid, fiat-denominated assets (primarily government bonds). As of mid-2025, approximately 99% of stablecoins are pegged to the U.S. dollar. Because stablecoins are fully backed by existing assets, they do not expand the monetary base of the underlying currency. The two largest stablecoin issuers are Tether (USDT) and Circle (USDC). (source
The primary benefit claimed for stablecoins is faster and cheaper international transactions. Once you top up your account with a local stablecoin provider—who converts your currency into U.S. dollars and then into USDC or USDT—you can instantly transfer money to other stablecoin holders using their wallet IDs. Numerous user-friendly interfaces now exist, and more continue to emerge: paying through smartphone apps like Sling Money or even WhatsApp chats via FelixPago are just a few ways local providers help people access the stablecoin ecosystem. Fees for international transfers are significantly lower than those charged by Visa or Mastercard and slightly lower than those offered by other alternatives such as Wise. Both Visa and Mastercard recognize the disruptive potential of this technology and are working to adapt quickly, with Visa even launching a virtual stablecoin payment card in partnership with Bridge.
Additionally, stablecoins can offer advantages to people in countries with unstable economies, such as Venezuela or Argentina. In these situations, individuals may choose to hold their money in stablecoins to preserve its value relative to their local currency.
However, for many ordinary people in advanced economies, the benefits of stablecoins are relatively negligible. In the UK, for example, banking access is widespread, inflation and currency stability are strong, and the payment system is extremely fast. With just two basic identifiers—an account number and a sort code—you can transfer money to someone with virtually no barriers, and the funds arrive almost instantly. A similar system will soon be implemented across the entire eurozone thanks to the recent Instant Payments Regulation.
For enterprises, the advantages of holding stablecoins are also more ambiguous. Holding stablecoins as an asset may be less attractive than holding U.S. Treasuries directly, since in the former case you forgo the interest income that Treasuries provide. For other businesses, adopting stablecoins may depend on their international exposure or scale. For example, Amazon and Walmart have considered creating their own stablecoins to reduce reliance on Visa and Mastercard. For companies of this size, even a 1% reduction in transaction fees can translate into substantial revenue gains—and potentially aggregate savings for customers.
Growth in organic stablecoin adoption has gone hand in hand with increased regulatory scrutiny. The U.S. Congress recently passed legislation establishing a regulatory framework for stablecoins, known as the GENUIS Act ([source][https://www.weforum.org/stories/2025/07/stablecoin-regulation-genius-act/]). The main points are: (a) stablecoin issuers, such as Tether and Circle, are now fully regulated financial institutions, and (b) issuers must maintain 1:1 reserves for their stablecoins, consisting of specified assets including U.S. dollars and short-term (<3 months) Treasury bonds. Implementing such stringent regulations is a sensible step toward making stablecoins a more widely accepted financial instrument. Similar regulations were passed by the European Union a few months earlier under the MiCA framework (source).
Some analysts view the dominance of USD-backed stablecoins and the GENUIS Act as attempts to slow the process of de-dollarization: "… stablecoins have become a Trojan horse for U.S. debt, ensuring continued—if not higher—demand for U.S. Treasuries from a growing base of global users, even in regions, mentioned above, seeking to disengage from traditional U.S. financial systems." (source) In recent years, major holders of U.S. Treasuries—primarily the Chinese central bank—have reduced their portfolios, lowering demand for U.S. dollars and pushing up Treasury yields and U.S. government borrowing costs. Some commentators argue that stablecoins could help slow, if not halt, de-dollarization. However, this argument is less persuasive when considered alongside: (a) the still very low share of stablecoins in the U.S. dollar monetary base (around 1%), and (b) the fact that a large proportion of foreign central banks’ Treasury holdings are long-term bonds, whose demand is largely unaffected by stablecoin adoption.
The rapid expansion of stablecoin adoption has not only created ardent supporters but has also raised some concerns. There is a potential risk of increased volatility in the short-term Treasury market, with some warning that stablecoin “bank runs” could trigger catastrophic sell-offs. European regulators are particularly concerned about the dominance of USD-backed stablecoins. As a countermeasure, there has been a push to introduce a eurozone-native digital currency, similar to a stablecoin, but issued and governed by the European Central Bank (ECB). Belonging to the class of Central Bank Digital Currencies (CBDCs), this digital euro would aim to provide similar benefits as stablecoins while being officially issued by the ECB. However, for regular EU citizens, the advantages of this approach are less clear, given the already stable and efficient intra-European payment system. European leaders may therefore view this project more as a geopolitical initiative than a purely financial one.
The stablecoin economy involves multiple actors across different layers. At the base, companies provide the blockchain infrastructure on which stablecoin contracts are issued and redeemed. The duopoly of Tether and Circle issues their respective stablecoins on these blockchain networks. On the side, trading entities, such as Jump Trading, help maintain the peg between stablecoins and their underlying fiat currency, effectively acting as X-asset arbitrage traders. The infrastructure provided by these companies enables other businesses to offer global access to the stablecoin ecosystem. This brings us to the “application” layer, which includes a plethora of companies such as Binance, Coinbase, Sling Money, Felix Pago, and Espresso Cash. One particularly interesting business operating at the intersection of the internet and stablecoins is Bridge, recently acquired by Stripe (see e.g. here). Bridge does for the stablecoin economy what Stripe does for the traditional one - provide an API access to simplify the full flow of integrating your digital business arm into the stablecoin ecosystem.
To better understand the flow for potential users, let’s examine how a stablecoin transfer interacts with the traditional economy end-to-end. First, you open an account with a stablecoin provider, such as Binance. You deposit £100 and request that the provider (your wallet operator) exchange it for USDC. The provider converts your pounds to dollars and then works with Circle to issue the stablecoins. Once issued, the stablecoins are added to your wallet by the provider. If you have the wallet ID of your counterparty, you can easily send the stablecoins through your provider. When you want to withdraw your stablecoins, you request that your provider convert the USDC back into your local currency. The provider then asks Circle to redeem the stablecoins; Circle destroys the tokens and sends the equivalent amount in dollars back to the provider, who converts it back into pounds for you.
TLDR
As a consumer, you might prefer stablecoins if you value fast, cost-effective cross-border transfers or if you live in a high-inflation country. For businesses, the benefits are often more nuanced and depend on factors such as scale—for example, Amazon or Walmart exploring stablecoins to bypass the dominance of Mastercard and Visa—or on international relationships with suppliers, buyers, or contractors. Otherwise, using traditional debit or credit cards remains the preferred option for most consumers in advanced economies.