The international payments system is complex and convoluted. And while we're working hard to get around the challenges for our merchants — building technology to help them thrive in the digital economy — we envision a better world for international buyers and sellers on the horizon. A world where international payments can be made quickly, at minimal cost and without the complexity and points of failure that exist today.
Solving for the complexity of international payments
Stablecoins — crypto tokens typically pegged to a fiat currency, like USD or EUR — are a large part of this shift, enabling financial transfers of fiat-pegged currency, at an unparalleled speed, making money available almost instantly, 24/7.
The benefits of this technology are clear on both sides of the transaction. The business selling online can access their funds instantly, allowing them to invest in their business, instead of waiting for bank transfers to clear. Meanwhile, their international buyers, from Boston to Berlin, can receive their products quicker and without waiting for payments to clear. In many ways, this was the promise of online marketplaces all along — stablecoins are one way we could see it soon become a reality.
As we watch the growth of technologies like NFTs and decentralized banking, it’s clear that fiat-pegged cryptocurrencies are a crucial part of this puzzle. We’re seeing the early signs of mass adoption by financial players making early moves.
Indeed, during 2021, the stablecoin sector grew by 388% from $29 billion at the start of the year to over $140 billion at the end of the year, according to a year-end report from Block Research. Meanwhile, Visa has announced that it will now settle payments with crypto partners in USDC, a stablecoin.
A transformation in progress
This widespread stablecoin transformation, however, is not quite here yet. What is crucial is where this growth is happening. Currently, stablecoins are used mainly to hold currency instead of spending it. It's also worth remembering that many stablecoins are still in their infancy.
However, the technology to shift these constraints is fast-emerging: Solana, for example, is a 'Layer 1 blockchain protocol' offering faster and cheaper transfers on the blockchain, enabling the kind of market-wide adoption that could really shift the needle on stablecoins for the general consumer. Other players are also pushing forward in this space, including Avalanche, Binance and Polygon.
We're also seeing some crucial signs of growth on the spending side more recently. For example, some consumers use stablecoin payments to buy high-value ticket items, such as watches and cars.
High-speed, low-cost payments
Looking at the possibilities for high-speed, low-cost payments, we can envision a world where this programmable currency becomes more widely used for small ticket items. Like in other areas of payment tech, these positive signals could lead to a ripple effect, spreading the benefits to a broader group of customers.
In particular, they could enable innovations in new formats such as micro-payments. Until now, it's typically been prohibitively expensive for each consumer to transfer a minimal amount of money to pay for a high-volume, low-priced item like a piece of content or media due to the fixed costs involved in processing a payment. However, with the ultra-low-cost of stablecoin transfers, this could be the ideal place to see their adoption.
As we watch the growth of stablecoins within the crypto world, it's easy to see the benefits they could have compared to the current international payment system. Now, the only question is: when and how will the world take advantage of them?