Part 1: How Stablecoins Are Changing the Future of Finance: Why They Matter

Crypto is known for its wild price swings and volatility. So it’s somewhat ironic that arguably the sector’s most interesting asset is the one designed to stay perfectly still. These are stablecoins: cryptocurrency tokens pegged 1-to-1 to an external reference, such as the U.S. dollar. In fact, close to 99% of all stablecoin market cap is tied to the U.S. dollar, while other currency pegs remain tiny but slowly growing.

The beauty of stablecoins is that they don’t experience the big ups and downs of cryptocurrencies like Bitcoin and Ethereum or altcoins like Solana and Cardano. Their price is intentionally held steady. This means stablecoins are handy for everyday payments and as a low-volatility store of value within the crypto ecosystem. They remain stable because they hold real-world reserves (such as cash and treasuries) or use smart contract algorithms that dynamically adjust supply to prevent price swings.

Stablecoins exist as fungible tokens on blockchains, managed by smart contract code instead of a central ledger, and are designed to maintain price stability. Each coin is interchangeable with minimal volatility relative to its peg. Stablecoins are tradeable and can be sent peer-to-peer like any currency, enabling direct transfers without intermediaries. They are convertible and redeemable, which means a holder can cash out 1 stablecoin for $1 or trade it seamlessly for other crypto assets.

The primary types of stablecoins

Different stablecoins use different methods to stay aligned with their peg. Here are the three primary types of stablecoins, in order of their market adoption and importance:

1. Fiat-collateralized: Each coin is redeemable for one real dollar (or euro, etc.) and is kept in a bank account or in shortterm Treasuries, providing straightforward, auditverified backing and easy redemption.

2. Crypto-collateralized: Users lock volatile crypto (e.g., ETH) into a smart contract at a higher value than that at which the stablecoin was minted, so even sharp price drops still leave enough collateral onchain.

3. Institutional/private stablecoins: These tokens represent claims on tangible assets like vaulted gold or tokenized bonds, meaning holders can swap the coin for the underlying asset or its cash value.

The problems stablecoins solve

Stablecoins address several critical inefficiencies in the traditional financial system. Firstly, they tackle the problem of expensive and slow cross-border money movement. Globally, cross-border remittances typically incur fees amounting to several percent of the transfer value. By comparison, stablecoin transactions typically cost between 0.1% and 3%, with the added benefit of near-instant settlement on public blockchain rails. As a result, companies handling large transactions can move funds at a fraction of the cost of traditional methods while simultaneously earning interest thanks to instant settlement. We believe the efficiency gains and compounding benefits of instant, low-fee settlement will make stablecoins a foundational pillar of institutional finance. 

Secondly, stablecoins provide access to “digital dollars” in emerging markets that suffer from local currency volatility and high inflation. Residents in these countries often want to hold U.S. dollars to protect their wealth. But accessing physical bills or opening dollar-denominated bank accounts can be a challenge. With stablecoins, users can overcome these barriers simply by converting local currency to stablecoins via peer-to-peer markets or crypto exchanges. We believe this accessibility will fundamentally reshape how people in emerging markets protect and grow their wealth, making digital dollars a new baseline for financial stability.

In the realm of internet-native commerce, stablecoins provide an always-on, programmable settlement layer. Public ledgers enable 24/7 settlement, automated payments and a level of traceability that cash can’t match. This will unlock a new wave of internet-native applications built directly on programmable money rails.

Finally, stablecoins have become base money for on-chain markets. They are the primary asset for crypto trading and the core “cash leg” for tokenized asset settlement, liquidity provision and DeFi collateral.

Stablecoins are solving problems that have long constrained the movement of money—friction, cost, and exclusion. What we’re seeing now is not a niche crypto trend, but the early stages of a global financial upgrade. As stablecoins become integrated into everyday systems, they will redefine how the world stores, moves, and builds with money.

What stablecoins are used for today

The primary use of stablecoins today is for trading, which accounts for over 80% of their activity. Essentially, stablecoins act as the “cash leg” for buying, selling, and arbitraging tokens on both centralized and decentralized exchanges.

The remaining activity is divided among several key functions. About 4% is for on/off ramping, which involves moving money between traditional bank accounts and crypto wallets using stablecoins as the bridge currency. Another 3% is dedicated to tokenized RWA settlement, using stablecoins to pay for or settle trades in tokenized real-world assets like Treasury bills, money-market funds, or other securities.

Payments make up the rest of the usage. This includes P2P payments, such as international remittances and family/friend transfers. It also includes B2C payments, where consumers pay merchants with stablecoins for goods and services, and B2B payments, where businesses use stablecoins for treasury operations, cross-border invoices, or foreign exchange settlements.

So yes, trading is today the primary use of stablecoins. But it’s that 20% remaining that’s most interesting. If stablecoins can shift even 10%-20% of volume toward real-world payments and traditional asset settlement, the total addressable market expands dramatically.

Why this is only the beginning for stablecoins

The scale of stablecoin adoption becomes clear when compared to activity by the traditional payment giants. Stablecoin transfer volumes are rising at a compelling rate. Adjusted for high-frequency trading and bot activity, year-to-date stablecoin transaction volume has reached an estimated $7.2 trillion—now exceeding half of Visa’s total 2024 payments volume of $13.2 trillion, underscoring the accelerating mainstream traction of stablecoins in global payments. Despite being barely a decade old, the rapid growth in stablecoin transactions should alert anyone paying attention to just how quickly the financial world is changing.

With approximately $289 billion in supply supporting close to $800 billion in monthly transactions, each stablecoin circulates more than three times per month on average. The drivers of this high turnover are crypto trading, arbitrage and market-making bots, and cross-border flows, which recycle the same coins many times daily.

Looking ahead, we believe stablecoins will become a $2+ trillion market by 2030. This means that stablecoins are poised to be a huge growth driver for U.S. Treasuries, the primary assets backing these digital dollars. This level of demand could, in turn, lower the government’s borrowing costs and contribute to managing the national debt. What’s more, it would introduce millions of new users across the globe to the dollar-based digital economy, which is not only good for the U.S. Treasury but also for businesses and consumers worldwide.

In part two of this series, we’ll explore the major catalysts driving broad interest in stablecoins and the opportunities that lie ahead.