In the evolving world of finance and commerce, few innovations have generated as much momentum as stablecoins, cryptocurrencies pegged to traditional assets like the U.S. dollar or gold. As businesses increasingly explore faster, cheaper, and more transparent payment mechanisms, stablecoins are emerging as a viable bridge between the traditional banking system and the digital economy.
This shift is not just a trend, it marks a structural change in how money is exchanged, stored, and accounted for in the payments industry.
Stablecoins
Stablecoins are digital tokens that maintain a fixed value by being backed by reserves or pegged to fiat currencies. Unlike volatile cryptocurrencies like Bitcoin or Ethereum, stablecoins are engineered to avoid dramatic price swings, making them a practical tool for payments, remittances, and cross-border transactions.
3 primary types of stablecoins
- Fiat-collateralized stablecoins (e.g., USDC, USDT): Backed by fiat reserves held in banks.
- Crypto-collateralized stablecoins (e.g., DAI): Backed by other cryptocurrencies, often over-collateralized.
- Algorithmic stablecoins: Use smart contracts to maintain price stability, without direct collateral.
Why Stablecoins are gaining ground in payments?
The global payments industry is riddled with inefficiencies from high transaction fees and delayed settlements to a lack of transparency in cross-border payments. Stablecoins offer compelling solutions to these challenges:
1. Faster Settlement Times
Traditional banking rails can take days to process international payments. Stablecoins operate 24/7 on blockchain networks, enabling near-instantaneous settlement regardless of geography.
2. Reduced Costs
By eliminating intermediaries such as correspondent banks and reducing currency conversion fees, stablecoins can significantly lower the cost of cross-border transactions.
3. Financial Inclusion
In emerging markets, stablecoins offer an accessible alternative to traditional banking systems, helping individuals and businesses participate in the global economy.
Use cases of Stablecoins across industries
1. E-commerce & Digital Marketplaces
Current State:
- Merchants face high chargeback rates and delays in cross-border payments.
- Currency conversion fees and processing fees reduce profits.
- Payment gateway intermediaries slow down transaction times.
Stablecoin-Based Advantage
- Merchants receive instant, final, and irreversible payments from customers across borders.
- Stablecoins reduce currency risk and eliminate costly intermediaries, offering lower transaction fees.
- Payments are traceable on the blockchain, improving transparency and customer trust.
Result: Faster settlements, reduced fraud, improved cash flow, and more control over transaction costs.
2. Payroll for Global Workforces
Current State
- Companies often face long delays in paying international contractors or remote employees.
- High foreign exchange fees and hidden banking charges reduce the value of wages.
- Traditional payment methods can be unreliable in certain regions, particularly in developing economies.
Stablecoin-Based Advantage
- Companies can pay employees in seconds, bypassing banks and currency conversion fees.
- Employees, especially in underbanked areas, receive full wages without the usual delays or loss due to conversion.
- No dependency on banking infrastructure, providing access to financial services for workers worldwide.
Result: Speed, savings, and greater financial inclusion for workers and contractors across the globe.
3. Remittances and P2P Transfers
Current State
- Remittance services like Western Union are slow and costly, charging up to 10% or more in fees for international transfers.
- The average remittance can take several days to clear, depending on the sender and receiver’s locations.
Stablecoin-Based Advantage
- Near-instantaneous, low-cost transfers: With stablecoins, users can send money within minutes, drastically reducing fees.
- Stablecoins remove intermediaries such as money transfer agents, banks, and exchange houses.
- Transparency on the blockchain ensures that both sender and receiver can track and verify transactions in real-time.
Result: Greater financial access for migrant workers and their families, and significant savings in transfer costs.
4. Corporate Treasury & Cash Management
Current State
- Corporate cash is often tied up in slow, inefficient bank transfers, especially in multi-currency operations.
- Currency volatility poses risks for international reserves and treasury operations.
- Idle capital in traditional bank accounts earns minimal returns.
Stablecoin-Based Advantage
- Companies can store reserves in stablecoins, hedging against currency fluctuations and gaining interest via decentralized finance (DeFi).
- Global transactions become instant, with no intermediary banks involved.
- Liquidity management is simplified, and capital can be moved quickly across borders to where it’s most needed.
Result: Improved treasury efficiency, faster global operations, and access to new revenue streams via DeFi platforms.
5. B2B Settlements and Invoicing
Current State
- Cross-border B2B transactions are often complex, involving multiple banks, exchange rate risks, and significant paperwork.
- The settlement process can take days or even weeks, especially if there are disputes or manual intervention.
- High transaction fees due to intermediary banks.
Stablecoin-Based Advantage
- B2B payments can be automated using smart contracts, ensuring instant settlement when contract conditions are met.
- Payments are final, secure, and occur without the need for currency conversion or third-party verification.
- Smart contracts streamline invoicing and reconcile payments in real-time, minimizing disputes and delays.
Result: Faster invoicing, reduced reconciliation times, lower fees, and enhanced transaction security for businesses.
Recent Successes and Experiments in Stablecoin Adoption
JPM Coin
Objective: JPMorgan, one of the largest banks in the world, developed its own JPM Coin to facilitate real-time payments for institutional clients, making it possible for JPMorgan to transfer dollars between accounts within seconds.
Outcome: JPM Coin has been successfully used for transactions between institutional clients, showing the viability of stablecoins in traditional financial markets. The project has allowed faster settlements and cost reductions compared to traditional banking, particularly in cross-border transactions.
Stablecoins in DeFi
Objective: Decentralized Finance (DeFi) protocols are increasingly relying on stablecoins to enable lending, borrowing, and yield farming activities without relying on centralized institutions.
Outcome: USDC and DAI have become the backbone of the DeFi ecosystem, with stablecoins being used for automated lending and liquidity provision. MakerDAO’s DAI has achieved great success as a decentralized stablecoin, with over $8 billion in assets currently held in its system. These decentralized applications (dApps) have lowered entry barriers for individuals looking to participate in financial services, especially in unbanked regions.
El Salvador’s Bitcoin & Stablecoin Experiment
Objective: El Salvador became the first country to adopt Bitcoin as legal tender and proposed using USD-backed stablecoins to increase financial accessibility for its citizens.
Outcome: El Salvador issued a stablecoin tied to the U.S. dollar, making it easier for its citizens to receive remittances, pay bills, and conduct everyday transactions. This experiment shows the potential of stablecoins in national economies, especially for financial inclusion in underserved populations.
Cross-Border Payments by Ripple (XRP)
Objective: Ripple’s XRP aims to solve the problem of cross-border payments by using blockchain technology and stablecoins, offering near-instant payments for businesses globally.
Outcome: Ripple has successfully conducted partnerships with financial institutions, enabling cost-effective and instant cross-border payments. By integrating stablecoins into its protocol, Ripple has enhanced the speed, cost-efficiency, and security of international transactions for businesses, especially in regions with limited banking services.
Brazil’s Stablecoin Adoption for Remittances
Objective: In Brazil, a stablecoin-backed remittance project using USDC was launched to allow Brazilian workers to send money to their families back home without relying on traditional remittance services.
Outcome: The project has significantly reduced the cost of sending remittances—with fees lowered from 10% to less than 2%. These kinds of stablecoin-backed solutions are creating a new era for lower-cost, faster international remittance systems, directly benefiting millions in developing countries.
Regulatory Outlook
Governments and regulatory bodies are increasingly recognizing stablecoins as a legitimate digital asset class. While global regulations are still evolving, frameworks are being developed to ensure consumer protection, AML/KYC compliance, and systemic stability.
Organizations planning to adopt stablecoin-based systems must stay updated on compliance requirements in various jurisdictions, a complex task that requires both technical and regulatory expertise.
How Milestone Technologies can help?
As the adoption of stablecoins accelerates, businesses require a reliable partner to navigate the convergence of finance and technology. That’s where Milestone Technologies comes in.
With deep expertise in financial systems integration, compliance advisory, digital transformation, and blockchain technologies, Milestone, a top payment processing service company in the USA, helps companies unlock the full potential of stablecoin-based payment ecosystems. Our specialists work closely with enterprises to:
- Design and implement secure, scalable digital payment infrastructures.
- Integrate blockchain-based settlement systems with existing financial platforms.
- Ensure regulatory compliance and risk mitigation.
- Provide end-to-end support from strategy to execution.
Whether you’re a fintech disruptor, a multinational corporation, or a growing e-commerce business, Milestone is equipped to support your journey into the future of digital payments.
