Stablecoins are moving beyond their initial use in cryptocurrency exchanges, with a broader application in traditional financial activities, according to a report by Standard Chartered.
Stablecoins as a Bridge to Traditional Finance
The study reveals that stablecoins are increasingly utilized for functions similar to those in traditional finance. These include saving and transacting in U.S. dollars and enabling cross-border payments.
Standard Chartered emphasized this transition, stating:
“There is growing evidence of increasing stablecoin use for a variety of purposes akin to those provided in traditional finance.”
Demand for Faster Cross-Border Payments
A key factor driving the adoption of stablecoins is the demand for quicker and more accessible cross-border transactions. Traditional banking systems often face limitations, particularly in emerging markets with reduced access to correspondent banking networks. Stablecoins address these issues by enabling the swift transfer of digital dollar assets, offering reliability that traditional systems sometimes lack.
Diverse Use Cases and Regional Trends
The report identifies several primary uses for stablecoins: saving in U.S. dollar terms, transacting in USD, and facilitating cross-border USD-to-USD payments. A survey cited in the study shows regional trends, with 69% of respondents in countries like Brazil, Turkey, Nigeria, India, and Indonesia using stablecoins for currency substitution. Additionally, 39% reported using stablecoins to pay for goods and services, while another 39% leveraged them for cross-border transactions.
Emergence of Non-USD Stablecoins
Although U.S. dollar-pegged stablecoins dominate the market, holding 99.3% of the total market capitalization, there is growing interest in stablecoins tied to other national currencies. For instance, stablecoins linked to the Turkish lira signal a shift toward greater diversity in the stablecoin ecosystem.
Growth Potential and Regulatory Impact
With a current market capitalization of $163 billion, the stablecoin market remains relatively small compared to traditional financial markets but holds immense growth potential. Regulatory advancements could accelerate this expansion. The report notes:
“We expect this use case to continue to grow, particularly if U.S. stablecoin regulation is passed, as now looks likely under a Trump administration.”
A “Killer App” in Digital Assets
Standard Chartered highlights stablecoins as a “first killer app” in the digital asset space, providing alternatives for the unbanked and offering efficiencies in cross-border transactions unmatched by traditional systems.
The Future of Stablecoins
The report predicts a promising future for stablecoins, with increasing adoption in both developed and emerging markets. A combination of technological innovation and regulatory support could position stablecoins as a cornerstone of global financial infrastructure.
Broader Crypto Market Outlook
Standard Chartered remains optimistic about the cryptocurrency market, recently advising investors to purchase Bitcoin below $60,000. With Bitcoin’s rally toward $100,000, those who followed this guidance have seen significant returns. This bullish sentiment underscores the bank’s confidence in the potential of digital assets
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