Author: Akila Quinio, Nikou Asgari, Financial Times; Translated by: Tong Deng, Jinse Finance
Some of the world's largest banks and fintech companies are rushing to launch their own stablecoins, aiming to capture the cross-border payments market that they expect to be redrawn by cryptocurrencies.
Last month, Bank of America said it was willing to issue its own cryptocurrency, joining the ranks of veteran payment providers such as Standard Chartered, PayPal, Revolut and Stripe, targeting the business dominated by the cryptocurrency groups Tether and Circle.
Their enthusiasm stems from the growing acceptance of stablecoins by global regulators, which are designed to maintain a $1 value per stablecoin and may become a more popular part of the financial system.
Six years ago, regulators were hostile to Meta's Libra stablecoin, while former US President Donald Trump's enthusiasm for cryptocurrencies has further driven this shift.
Simon Taylor, co-founder of fintech consultancy 11:FS, said: "This is the story of people selling shovels in the stablecoin gold rush." He likened it to FOMO, or the fear of missing out.
"Another factor driving this trend is actual transaction volume," he said. "Founders want a piece of the pie because they know they'll get stablecoin regulation, so it's all coming together."
While stablecoins are typically used to move funds between different cryptocurrencies, they are becoming increasingly popular in emerging markets as an alternative to local bank payments, particularly in commodities, agriculture and shipping.
They are a form of private digital cash, acting as de facto reserves for sovereign currencies (mostly the US dollar), allowing companies and consumers to access hard currency outside the banking system at low cost and in real time.
The total value of stablecoins issued globally is around $210 billion, with Tether in El Salvador issuing around $142 billion in USDT and Circle in the US issuing $57 billion in USDC.
Elon Musk's SpaceX uses them to repatriate funds from selling Starlink satellites in Argentina and Nigeria, while ScaleAI offers its vast overseas contractor workforce the option of being paid in digital tokens.
Visa data shows transaction volumes surged to $710 billion last month, up from $521 billion a year earlier, while the number of unique stablecoin addresses has grown 50% to 35 million over the same period.
With regulatory frameworks in place, large banks are growing more confident about entering the industry. US policymakers are debating bills in Congress to establish stablecoin standards, giving banks, companies and ordinary consumers more confidence in using the tokens.
"If they make stablecoins legal, we'll get into that business," Bank of America CEO Brian Moynihan said last month at the Economic Club of Washington on the Trump administration's plans.
The EU introduced regulations earlier this year requiring stablecoin operators within the EU to comply. The UK financial regulator plans to consult on the market this year.
Standard Chartered said last month it would lead a joint venture to launch a Hong Kong dollar-backed token under the city's upcoming new stablecoin laws.
To underscore the momentum, US group Stripe acquired stablecoin platform Ramp for $110 million last month, its largest acquisition to date.
"Stablecoins and more modern rails are really interesting for payments use cases, and that's where our business is," said co-founder and president John Collison. The $91.5 billion fintech company processed $1.4 trillion in payments last year.
PayPal already has a dollar-pegged stablecoin PYUSD and plans to roll out the payment option more widely by 2025, expecting it to be particularly accepted by US businesses paying overseas suppliers.
"Okay. I give up. Klarna and I will embrace crypto! And more... The last big fintech to embrace crypto. Someone has to be last. It's also a kind of milestone," Klarna's chief executive Sebastian Siemiatkowski wrote on the X social media platform last month.
Even so, new entrants still face an uphill battle. Visa data shows PayPal processed just $163 million in transactions this month, while Tether's volumes just topped $131 billion.
Visa said around 122 million stablecoin transactions were made globally last month. However, its own network averages 829 million transactions per day.
Martin Mignot, partner at Index Ventures and a Ramp backer, said stablecoins are "attractive" in markets "lacking good infrastructure or liquidity and with significant currency risk". But he added that the use case for stablecoins in Western markets "is not so obvious".
Analysts also warn that as users start to scrutinize the quality of the companies issuing stablecoins, the market is unlikely to be able to sustain dozens of stablecoins.
11:FS's Taylor pointed out that stablecoins are not cash, but just a substitute for cash, reflecting the credit risk of the issuing company and its ability to manage the operational risk of running the stablecoin.
"Fundamentally, the stablecoin brand tells you who the issuer is," he said. "So your credit risk is X or Y because the issuer is that organization. That's different from the dollar."
