Part 2: How Stablecoins Are Changing the Future of Finance: Why They Matter

In part one of this series, we explored the primary types of stablecoin and how they’re being used today. Here, in part two, we’ll dive into the key catalysts that are driving stablecoin adoption forward.

But first, a little history. The original stablecoins burst onto the crypto scene around 2014. Let’s call this the Genesis Era (2014–2017). During this period, BitShares introduced the first crypto-collateralized stablecoin with BITUSD, while Tether (USDT) pioneered the fiat-backed model and quickly became a key liquidity infrastructure for exchanges.

Next, the Experiment Era (2018–2022) saw the arrival of new players with innovative models. Regulated institutions like Paxos and Circle launched audited stablecoins. Major banks such as JPMorgan introduced settlement coins for internal use. Stablecoin goals expanded to include monetizing trust and improving corporate efficiency, as demonstrated by Binance’s BUSD. The era ended dramatically with the collapse of Terra, the third-largest cryptocurrency ecosystem, after Bitcoin and Ethereum. Terra’s demise, which wiped out $50 billion in valuation over three days in May 2022, highlighted the risk of algorithmic models.

The Mainstream Era (2023–2025), which we’re in now, has been defined by the entry of non-crypto-native institutions and growing regulatory clarity. Global payment giants like PayPal (PYUSD) and solutions providers like Ripple (RLUSD) launched stablecoins, while new ventures such as AllUnity are targeting European regulated markets. Meanwhile, wallet provider MetaMask, which lets users hold, transact, and earn stablecoins like any other token, has embedded stablecoins directly into its products with mmUSD. The Mainstream Era has also seen the rise of new innovations like Ethena Labs’s synthetic dollar (USDe), the first digitally native synthetic dollar not tethered to the traditional banking system.

So what’s next? We’re now entering the Expansion Era for stablecoins, with a number of factors driving growth. Major U.S. banks like Bank of America and Citigroup are exploring USD-backed stablecoins of their own, while others, including JPMorgan Chase, Bank of America, Wells Fargo, and Citigroup, have announced plans to examine a joint stablecoin. Remittance giants like Western Union and retail giants like Amazon and Walmart are also investigating consumer use. It likely won’t be long before leading firms such as these move from deliberation to active development of regulated stablecoins.

Going forward, three primary catalysts will drive broad interest in stablecoins. Let’s take a closer look at each of them.

Catalyst 1: Regulatory clarity

Three pieces of legislation—the Genius Act, the Stable Act, and the Clarity Act—together show how lawmakers are attempting to tame the chaos of crypto and make it more palatable for businesses and consumers.

The Genius Act focuses on disclosures, advertising standards, and fraud prevention, seeking to protect retail investors from hype-driven scams. The act could go a long way toward building the trust necessary to bring cautious mainstream investors into the fold.

The Stable Act, as the name suggests, promises greater stability by tightening rules around stablecoin issuers. For instance, it requires banking charters and access to FDIC insurance. The main goal of the act is to help protect consumers from losing funds if an issuer fails, thus strengthening confidence in the market.

The Clarity Act, for its part, aims to draw clearer lines between securities, commodities, and payment tokens and reduce the regulatory haze that has forced startups to navigate endless gray areas. Such clarity could unlock growth, as entrepreneurs and investors gain the confidence to innovate without fear that they’ll be punished for their actions somewhere down the road.

Catalyst 2: Greater utility and functionality

Stablecoins are set to reframe the way money works in everyday commerce. Imagine being able to send dollars across the U.S.—or the world—as easily and cheaply as sending a text message. There are millions of foreign workers in the U.S. supporting families abroad, and the cost savings for them alone could amount to billions in aggregate. For people living in emerging markets, stablecoins will be a safe haven. Indeed, dollar-linked stablecoins will become the go-to store of value for savers battling inflation and volatile currencies.

On the merchant side, e-commerce platforms are likely to embrace stablecoins as a back-end settlement layer, bypassing card networks and their hefty fees. This means not only higher margins for businesses but also more inclusive global marketplaces, where even small merchants can sell to international buyers without having to deal with costly intermediaries.

In financial markets, stablecoins could be the default cash rail powering 24/7, bank-free crypto trading. In decentralized finance (DeFi), they could underpin on-chain lending and yield markets, drawing ever more capital into DeFi. But the real inflection point will come when regulated stablecoins integrate with traditional finance. Imagine corporate treasuries moving dollars instantly across borders or banks settling transactions on-chain in seconds rather than days.

Finally, in moments of market turmoil, stablecoins may act as a rapid flight-to-safety asset, serving as a private-sector “central bank” shock absorber for the crypto economy and stabilizing the system when confidence wavers.

Taken together, these use cases highlight the potential for stablecoins to become a meaningful part of the evolving financial landscape.

Catalyst 3: New applications and innovations

History shows us how platforms can unleash unexpected innovation. Steve Jobs initially resisted third-party apps on the iPhone, preferring closed web apps for control and security. Only after his team convinced him to open the App Store did we see an explosion of apps that Apple itself could never have imagined.

Stablecoins represent a similar inflection point. Today, they’re primarily viewed as a safer digital dollar. But as programmable money, they open the door to entirely new categories of financial applications. It won’t just be the issuers who drive this wave of innovation, but the builders who will create money-native apps the same way developers once created apps for the iPhone.

The possibilities are wide open. Wallet-native marketing could reshape how brands engage with customers, turning everyday payment flows into targeted rewards and loyalty programs. Credit underwriting might evolve as well, combining traditional data with real-time wallet activity so risk, limits, and offers can adjust dynamically and more fairly. With user consent, marketers could move from proxy signals to actual, verifiable spending patterns—without resorting to guesswork.

At the network level, stablecoins could sit at the center of new branded economies, powering instant refunds, creator payouts, and loyalty incentives that stay native to each platform. For businesses, they could unlock programmable spend-management and treasury tools that automate approvals, routing, and cash positioning across entities. And in gaming and virtual worlds, instant settlement could pair with built-in safeguards—like limits, rules, and compliance checks—to make digital economies faster, safer, and more transparent.

Opportunities ahead

For early-stage investors, clearer U.S. rules are de-risking stablecoins and opening up investable categories—from issuers and on/off-ramps to wallets, payment processors, and compliance tools. At Cota Capital, we’re most focused on the application layer—software that uses stablecoins to power B2B payments, treasury, payroll, remittances, and consumer finance, and over time, entirely new categories and use cases. Much like the app store unlocked an open platform on top of the smartphone, stablecoins are creating a programmable money layer, and with milestones like Circle’s IPO and growing interest from major banks, we think this application wave is only just beginning.