The market for stablecoin payments is gaining momentum, as more leading payment providers such as Visa and Mastercard integrate solutions into their systems or, in the case of Paypal, launch a coin. For business payments the potential of stablecoins is huge, promising to significantly speed up international trading and spark huge growth, across both developed and emerging markets. Now regulation needs to catch up and the race is on to see who can build infrastructure the fastest.

Most of us don’t think too much about how payments are processed. But for many businesses, payments can be a huge cause of frustration and friction. Any business that trades internationally and wants to make payments across borders must deal with delays of up to three or even five days. When this is happening at scale, it understandably causes significant headaches in terms of cash flow, order fulfilment, reporting, plus various ‘hidden’ charges mounting up throughout.  

The lions share of cross-border business payments are currently carried out via the SWIFT network, an archaic messaging system containing the payment instructions between financial institutions involved in a transaction. Clearing and settlement happen with the banks, and it takes time. Mistakes happen, sometimes payments get suspended, and there is minimal transparency about where the money is in the meantime.

Stablecoins offer an answer, as they are pegged to and backed by local currencies but act like cryptocurrencies, moving around on the blockchain. That means there are no limitations on where you can transfer funds to, and any transfer can happen almost instantly. For businesses making a high volume of high value payments every day, it’s a gamechanger.

Barriers to adoption

Currently, use of stablecoins is still niche. According to Statista, in late 2022, Central Banks believed that stablecoins were rarely used for payments beyond trading or De-Fi purposes. In 2023, Juniper Research estimated that the current global volume of transactions powered by stablecoins was $53 billion. That’s a drop in the ocean when you consider that over $150trn worth of cross border payments will be made this year, 97% of which are B2B.

For stablecoin payments to reach the mainstream, firstly the right infrastructure needs to be in place, and secondly regulations need to catch up, so that businesses know they can trust this method of processing their funds. In many countries, cryptocurrencies, including stablecoins, are still largely unregulated and unlicensed, with no protections if something goes wrong, although many leading economies are in the process of addressing this, including the UK.

A startup entering this space must build complex and expensive infrastructure enabling them to receive and pay out in a variety of fiat currencies, while linking up with stablecoin rails. This requires setting up licenses for both fiat and crypto in all relevant jurisdictions. They must ensure they have capacity for transaction monitoring, managing anti money laundering (AML) regulations, and know your customer (KYC), not to mention shouldering the risk as a counterparty to stable currencies. Nonetheless, for those who connect all the dots, the rewards could be significant. 

Future payments leaders

One of the leading players in overcoming these challenges is BVNK, which has built enterprise grade infrastructure for stablecoin payments, enabling clients to send, receive, store, and convert fiat and stablecoins at internet speed. BVNK now holds no fewer than eight licences and regulatory approvals globally across the realm of fiat payments and digital assets.

Another interesting example is NOAH, which leverages digital assets, especially stablecoins, to accelerate payment speed, lower fees, and avoid delays inherent in traditional systems. Supporting over 60 global currencies, its Checkout API enables online merchants to seamlessly accept stablecoins alongside card payments, with transactions finalised within seconds.

Regional specialists are also emerging around the world, in areas where cross-border payments are arguably the most cumbersome. For example, a startup called Koywe is catering to the LATAM market, a region with over 30 different currencies and a huge opportunity to streamline payments. Currently operating in five jurisdictions - Chile, Mexico, Peru, and Colombia – Koywe enables local bank transfers in just a few minutes.

Private vs. public systems

Business payments have been broken for a long time, and while governments around the world are working on their own alternatives in the form of Central Bank Digital Currencies (CBDCs) and instant payment systems, these are a long way from coming to fruition. In contrast, private stablecoin innovators are already offering a truly viable alternative and, once the technology gets accepted by regulators, the mainstream beckons and the sky is the limit.