Digital assets and crypto have become increasingly mainstream and have made many headlines, but not always for the right reasons. 

Aside from governance concerns, the biggest criticisms levelled at crypto from a B2B payments standpoint are volatility and the lack of an underlying asset. Bitcoin, the most prominent crypto coin, has fluctuated in value dramatically, rising again last year from $16,200 on January 1, 2023, to more than $44,000 in December.

However, one digital asset class is becoming increasingly popular – stablecoins.

Stablecoins peg their value to existing currencies such as the US dollar through holding assets such as cash or government bonds, supporting the value of the coin.

Due to this design, stablecoins are seen as a more viable payment option for goods and services in the real economy. Bitwise has bullishly predicted that stablecoins will collectively settle more money than global payment processor Visa in 2024. 

While there are still some concerns about the viability of stablecoins, treasurers who haven’t already should start having conversations with their providers to ensure they’re ready to increase stablecoin adoption and usage in the year ahead.

The rise in popularity

The development of cryptocurrencies, stablecoins, central bank digital currencies (CBDCs) and other forms of digital assets has progressed significantly in recent years.

The near-unanimous view is that these digital assets must become more standardised, secure, and robust before they can enter the mainstream with legislators and regulators working to do so across the world. 

However, large firms and institutions have taken notice and begun to make moves to ensure they remain at the forefront of any changes in making payments.

PayPal has grown its crypto presence from initially accepting payments via Bitcoin to launching its stablecoin late last year. More recently, cryptocurrency exchange Ripple Labs also announced it intends to launch a stablecoin this year. 

Before exploring whether they will become the new norm, it’s important to understand what they bring to the table and why this has huge firms investing in their development.

The benefits of stablecoins

Security, stability, recordkeeping and transparency are just some of the reasons why so many incumbents are exploring stablecoins and similar products that use blockchain ledgers. 

But the largest benefit is the swift settlement speeds that payments in stablecoins can offer. This is because tokenisation removes the involvement of the number of intermediaries which normally would be involved in the payment process.

Improved speed of execution ultimately means a better customer experience, and this is a huge reason why incumbents are keen to get on board the stablecoin wave. 

The potential of stablecoins to be used for cross-border payments is also a significant factor and why companies like PayPal have taken a liking.

In 2020, it cost $120 billion and on average took 2-3 days to move $23.5 trillion across borders. Research in 2023 found that 72% of SMEs still wait between 2-5 days for cross-border payments to appear on their supplier’s bank accounts. 

Recent findings from Bernstein analysts Gautam Chhugani and Mahika Sapra highlight that “Stablecoin value settled on the blockchain indicates strong adoption of digital dollar with the crypto trading ecosystem as well as a cross-border payments currency.” 

Stablecoin tokens can neatly fit into traditional banking practices and comply with current laws, helping to simplify and shorten complex and long bank transfers between businesses in two different countries. 

For consumers and businesses wanting to avail of stablecoins, most digital virtual wallets will have the capability to hold the assets as well as other digital assets like CBDCs once established. This could make payments for businesses much easier, but questions remain over whether this is enough to become the new normal and replace existing methods of payments.

Get ready for a stablecoin world

A JP Morgan paper from 2022 outlines that deposit tokens will eventually become “a widely used form of money within the digital asset ecosystem, just as commercial bank money in the form of bank deposits makes up over 90% of circulating money today.”

The ultimate success however will be determined by the buy-in amongst end-users from large corporations, SMEs and consumers. With European regulators making moves to mandate instant payments at no extra cost to customers, the need for stablecoins is being questioned by some. 

Stablecoins also still face strong scrutiny from financial regulators and central banks before they are permitted as a form of secure payment.  But the US Financial Stability Board's (FSB) recommendations, advocating for comprehensive regulation and oversight of global stablecoin arrangements last year have proven to be a pivotal moment in the growth of the market, which is now expected to hit $3 trillion by 2028.

The UK government have also indicated its intention to bring forward legislation to enhance regulation and recognise stablecoins’ role in the eco-system. While it's too early to say if stablecoins will eventually replace traditional forms of payments, treasurers need to start preparing. 

They should read up and stay abreast of the latest developments and start having conversations about their viability and digital wallets which allow them to hold and utilise them. Those who don’t, risk being left behind.