Stablecoins have undergone a remarkable transformation, turning from a niche cryptocurrency utility into a fundamental component of mainstream financial infrastructure. What began as a blockchain solution for cryptocurrency traders has evolved into a powerful mechanism for accelerating payments, reducing transaction costs, and expanding access to financial systems globally. With over $250 billion in stablecoins, such as USDC and USDT, currently in circulation and an estimated transaction volume of $30 trillion handled last year alone, stablecoins are no longer on the periphery—they have become foundational.

What Are Stablecoins, Really?

At their core, stablecoins are digital tokens designed to maintain a stable value. Typically pegged one-to-one to a fiat currency, such as the US dollar or euro, these digital assets serve as internet-native equivalents to physical cash. When someone purchases a stablecoin, the issuer commits to holding an equivalent amount in reserve, which can include fiat currency, government bonds, or commodities like gold.

Unlike volatile cryptocurrencies such as Bitcoin or Ethereum, stablecoins can function as reliable stores of value, mediums of exchange, and units of account. They leverage the efficiency and programmability of blockchain technology while avoiding the price fluctuations that plague many digital assets. However, beyond their technical framework, the true strength of stablecoins lies in their practical use: frictionless, programmable money that can traverse borders at remarkable speed.

Who Uses Stablecoins—and Why?

The user base for stablecoins spans a diverse range, from crypto-native traders to underbanked citizens in economically volatile regions to large corporations. However, accurately tracking who is using stablecoins and for what purpose remains challenging due to fragmentation across multiple blockchain networks and the pseudonymous nature of addresses.

Nevertheless, macro trends highlight significant uses. Companies like Uber are investigating stablecoin-based payments to avoid currency conversion fees in international markets. Meanwhile, Stripe and Visa have integrated stablecoins into their systems, allowing merchants to accept crypto payments that settle instantaneously in fiat currency. This practical application is pushing stablecoins beyond mere speculative use.

The rationale is straightforward: traditional banking systems—burdened with intermediaries, hidden fees, and multi-day settlement times—are becoming less competitive in a world where stablecoins can transfer value in seconds for just a fraction of a cent.

Disrupting the Financial Value Chain

Stablecoins represent more than just an advancement in digital money; they challenge entire layers of the legacy financial infrastructure. As fintech analysts have noted, stablecoins enable businesses to bypass entrenched gatekeepers, such as card networks and correspondent banks. This facilitates instant ledger-to-ledger settlement across blockchain networks, rather than reliance on SWIFT or Visa. By doing so, firms can create fully self-contained financial ecosystems with lower costs, faster services, and increased transparency. The implications are vast. Analysts suggest that the company that successfully integrates stablecoins into a seamless financial super-app could become the world’s first trillion-dollar fintech player.

How Stablecoins Are Backed

Not all stablecoins are created equal; they can be classified into four main categories:

Fiat-based: These are backed by cash or cash equivalents held in reserves. Circle’s USDC and Tether’s USDT dominate this category. The Bank for International Settlements (BIS) reported that stablecoin issuers purchased $40 billion in US Treasury bills last year, comparable to the holdings of significant money market funds.

Crypto-collateralized: These are backed by other cryptocurrencies, often “overcollateralized” to manage volatility. For example, MakerDAO’s DAI utilizes Ethereum as collateral, governed by smart contracts that automatically liquidate assets to maintain stability. If a borrower takes out $100 worth of its stablecoin DAI (i.e. 100 DAI), this very borrow will have to let MakerDAO lock up at least $150 worth of Ethereum (hence term overcollateralized).

Commodity-collateralized: These are backed by tangible assets such as gold. Pax Gold and CACHE allow holders to redeem their tokens for fractional amounts of physical gold, providing a digital pathway to traditionally inflation-resistant assets.

Algorithmic: These aim to maintain a stable peg without any reserves, relying on smart contracts to manage supply. While theoretically appealing, they have proven to be highly risky; the collapse of TerraUSD, which lost $18 billion in 2022, serves as a cautionary tale.

Good And Bad

Stablecoins offer concrete benefits compared to traditional fiat transfers:

Speed and efficiency: Cross-border transactions using stablecoins take seconds instead of days. Settlements that once required days to complete via SWIFT or Western Union can now occur in near-real-time, improving liquidity and cash conversion cycles for global businesses.

Significant cost savings: Sending USDC over the Solana blockchain costs less than £0.01—considerably lower than the £25–£50 fees typically associated with international bank wires. This democratizes access to global finance for both small and medium-sized enterprises and individual users.

Dollar-access: In regions with unstable currencies or high inflation, stablecoins provide a reliable and accessible alternative for managing value.

Despite their potential, stablecoins come with significant risks:

Regulatory ambiguity: Until recently, stablecoins sat in a legal no-man’s-land—part payment service, part security, part bank deposit. This exposed users to uncertain consumer protections and unclear accountability.

Transparency gaps: Many issuers have resisted complete audits, fueling doubts about whether they truly hold enough assets to back all tokens in circulation.

Illicit use: It has been reported that stablecoins accounted for 63% of the $51 billion in criminal crypto activity in 2024. Their speed and anonymity, while appealing, also attract bad actors.

Systemic risk: US Treasury officials have warned that stablecoins could drain up to $6.6 trillion from commercial bank deposits, potentially disrupting monetary policy and forcing banks to raise rates or seek costly wholesale funding.

These contrasting benefits and risks highlight the complex trade-offs in adopting stablecoin technology for mainstream financial use. The technology’s dual nature—enabling both legitimate financial innovation and illicit activities—exemplifies the broader challenge facing policymakers and businesses as they navigate the integration of digital assets into traditional finance. Successfully harnessing stablecoins’ transformative potential while mitigating their inherent risks will require careful regulatory frameworks, enhanced transparency standards, and robust risk management protocols that balance innovation with financial stability.

The Stable Future

With the projection of stablecoin circulation ballooning from $250 billion today to $2 trillion by 2028, the financial sector is bracing for transformation. Stablecoins are not just a new form of digital cash—they are poised to become core money rails of the internet. In this reshaped landscape, the question is not whether stablecoins will redefine finance, but who will own the rails, write the rules, and deliver the value.

References

1. 2025 Crypto Crime Report: Introduction, Chainanalysis, (2025)
2. Artemis: Stablecoin payments from the ground up, Castle Island Ventures, (2025).
3. Exploring the risks and failures of algorithmic stablecoins in the crypto market, BlockApps, (2025).
4. How stablecoins are entering the financial mainstream, Financial Times (FT), (2025).
5. Stripe accelerates the utility of AI and stablecoins with major launches, Stripe, (2025).
6. Stablecoin issuer Circle soars in NYSE debut after pricing IPO above expected range, CNBC, (2025).
7. Stablecoin market could grow to $2T by end-2028: Standard Chartered, CoinDesk, (2025).
8. Stablecoin payments, Helius, (2025).
9. Stablecoins and safe asset prices, Bank for International Settlements (BIS), (2025).
10. Uber considers using stablecoins for cross-border money transfers, PYMNTS, (2025).
11. Visa pursues stablecoins for cross-border payments, Payments Dive, (2025).