Stablecoin's Trillion-Dollar Power Play Unfolds

You may not notice it right away, but soon enough this will happen to you. using stablecoins — Because the traditional global payment systems may soon undergo transformation or be supplanted, potentially due to the rise of stablecoins.

Why it matters: Increasingly, sectors ranging from conventional banking to financial technology firms are wagering that cryptocurrencies tied to real-world currency will become a trillion-dollar industry shortly — the main uncertainty lies in how many trillions And how quickly it arrives.

The big picture: Global payments have been constructed using the sluggish and outdated system of correspondent banking That traces back a few centuries, but prior to the emergence of stablecoins, there hadn't been enough motivation to genuinely modernize it.

Stablecoins apply competitive pressure to traditional payment processes, enabling settlements within minutes rather than days, operating around the clock and typically charging minimal fees, as the sole intermediary is the supporting blockchain technology.

Zoom in: The company behind the second-biggest stablecoin, USDC, is Circle. announced The Circle Payments Network from last week appears to be the clearest attempt yet to position itself at the heart of trillions of dollars circulating globally.

The network aims to establish itself as a cryptocurrency-friendly initiative designed to provide an alternative to SWIFT, the current backbone of interbank communications within the global payment systems. This digital platform facilitates correspondent banking for the modern era through electronic means.
Circle is basically suggesting a regulatory framework for stablecoin networks to provide a compliance advantage, allowing conventional financial institutions to transmit stablecoins more easily. regular old money And accelerate it more quickly, cost-effectively, and with enhanced capabilities.
The payments company Stripe took a comparable action when it acquired Bridge , facilitating one of the largest mergers in the cryptocurrency sector.

Between the lines: The introduction of Circle's new network coincides with their initial public offering. submitted on April 1 , where it is looking for a valuation of $4 or $5 billion , an impressive valuation relative to its present earnings.

However, Ananya Kumar from the Atlantic Council views Circle's objectives as relatively conservative. "The aim is primarily to achieve interoperability and minimize obstacles," she stated. She does not perceive an imminent threat to SWIFT.

Reality check: Global payments amount to approximately $1.8 quadrillion in value," states Kumar. "However, the volume is nowhere near what would be required for replacing SWIFT.

New laws, big banks

Collectively, stablecoins are already a rival for Visa a secure network linking financial institutions, retailers, individuals, and companies for payment transactions.

ING Direct and other Banks across Europe apparently aim to develop a stablecoin. Visa, originally established through cooperation among banks known as "coopetition," seems to be serving as their blueprint for this initiative.

Bank of America is the One that set VISA in motion Starting way back in 1958, thus its announcement this year that it will be ready to go When stablecoins receive approval might provide insight.

Up until now, the primary major bank we've received information from is BNY, which came before the U.S. House Financial Services Committee to push for allowing banks to offer them.

Big banks They have certainly shown interest in stablecoin technology for quite some time, but only recently did they stop avoiding the unavoidable regulatory challenges.

However, the regulatory environment has shifted, and conventional financial institutions are taking action.
Europe has essentially, clear guidelines have been established for stablecoins as well MiCA framework . A recent legislation has been enacted in the U.S. seems to be just months, not years, away.

King of the realm

Many players aren't planning To be part of a group, nonetheless. Everyone aims to become the next Visa, that is, to rule this new category.

Tether reigns supreme as the top stablecoin. for now The firm responsible for by far the most used stablecoin, USDT asserts that it has significantly broadened its use cases far beyond cryptocurrency trading and is particularly favored in emerging markets.

In the meantime, the firm is discussing the possibility of introducing the fight for stablecoin dominance into the U.S., potentially trying to cause disruption Square payment system by Block, Inc. , developing a fresh point-of-sale system featuring benefits for customers who utilize a newly created U.S.-compliant stablecoin.

Paypal has bet on Expanding the usefulness of its stablecoin, PYUSD, as it sees these tools unlocking myriad new business opportunities, beginning with corporate entities and international transactions.

It just announced a 3.7% return When held within its application, this stablecoin generates yields for the issuer from the interest earned on the underlying Treasury securities.
The idea behind this approach is that giving users a share of the yields will increase the likelihood of them keeping those funds within their digital wallets. This, in turn, makes it more probable that these users will use the money for transactions with merchants.

Paypal however, The initial major financial technology company to introduce a stablecoin is opting out of significant upheaval in the payment systems sector.

"New payment systems will coexist with traditional ones," says Jose Fernandez da Ponte, who leads the company’s digital asset initiatives, speaking to Romero.my.id.

Between the lines: Regardless of whether stablecoins upend the present payment systems or get incorporated into their core infrastructure, it seems unavoidable that they will shortly assume an important position.

💭 Our thought bubble In 2005, you could purchase a T-shirt with the message "I'm not interested in reading your blog."

However, by the close of that decade, nearly every piece of content people encountered online had been created with what essentially amounted to blogging software (and this site is no exception).

The bottom line: Similar to how we might abandon the term "blogging," we will likely also phase out the use of the word "stablecoin" over time.

However, the infrastructure created for this purpose will be ubiquitous, driving the future forward, and one person—a new monarch—will oversee it all.

Go deeper: Bitcoin provides a politically neutral means of conducting transactions.

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