The rapid growth of the digital currency market has highlighted the colossal potential of stablecoins. Leading alternative asset manager, Brevan Howard Digital, recently issued a report envisaging the future of stablecoins scaling to several trillions in supply and transactional value in the imminent years. With the increasing global access to the U.S currency via cryptocurrencies, this prediction seems rather plausible.
Specific attention is drawn to the role of stablecoins in financially assisting the global unbanked and underbanked population, as well as providing a haven from economies experiencing high inflation. With the world witnessing technological advancements galore, the inception of such novel global monetary movement trends could potentially fuel an unprecedented innovation wave.
Case in point is the recent launch of PayPal USD (PYUSD), a distinct stablecoin by payments behemoth, Paypal (PYPL). This move underlines the immense possibilities in the offing for stablecoins, while simultaneously posing a significant challenge to worldwide financial services.
In a startling comparison, the report cites that the value of stablecoins settled on-chain in 2022 trumped the volumes processed by Paypal ($1.4t) and almost touched that of Visa ($11.6t). What’s more? It represented 14% of the total processed by the Automated Clearing House (ACH) and over 1% settled by Fedwire, both prominent payment systems of the U.S. It is indeed remarkable for this nascent yet dynamic monetary rail to be in league with some of the most globally influential payment systems.
Interestingly, data reveals that over 25 million blockchain addresses hold more than $1 in stablecoins. If we compare this scenario with traditional finance, a U.S bank with a similar number of accounts would rank fifth in terms of the number of accounts exclusively. This affirms the possibility of stablecoins filling the void in providing international financial services to customers who are often overlooked by conventional financial institutions.
Adding further dimension to this narrative is the observed low correlation between the utilisation of stablecoins and crypto exchange volumes. This implies that a substantial volume of stablecoin transactions potentially serve non-speculative purposes.
What lends even more credence to the stablecoin model is the strength it showcased during the recent crypto market slump. The total market cap fell around 24% from its peak, as against a 57% dip for the collective crypto market cap, underscoring the stability and resilience of stablecoins.
In conclusion, the evolving landscape of digital currencies pegs stablecoins as a potential game-changer in global financial services. It is, however, of critical importance to take into account the associated risks and navigational challenges. A well-regulated market coupled with consumer awareness and responsible investing could indeed set the stage for this next big revolution in global finances.
Source: Coindesk
