Stablecoins Are Seeing Adoption as a Cross-Border Settlement Mechanism: Bernstein

According to a recent research report from Bernstein, the market for stablecoins is expanding rapidly. These digital currencies are increasingly being utilized by financial institutions and tech companies for cross-border transactions, specifically payments, fintech, and consumer platforms.

Bernstein points out that the total value of stablecoins amounts to $150 billion at present. Among them, tether (USDT) and USD Coin (USDC) hold significant market shares, accounting for 75% and 22% respectively. Stablecoins are a category of cryptocurrencies that are typically linked to the value of a specific currency or asset, most commonly the U.S. dollar. However, some stablecoins are pegged to other currencies or assets like gold.

According to analysts Gautam Chhugani and Mahika Sapra, the value of stablecoins being settled on the blockchain is a clear sign of robust adoption of digital dollars in the crypto marketplace and for cross-border transactions. They added that the estimated annual transfer value in Q1 2024 reaches an impressive $6.8 trillion, which is equivalent to the high of approximately $7 trillion seen in 2022.

Signs indicate that payments companies like PayPal (PYPL) and Visa (V), as well as consumer fintech platforms such as Grab (GRAB) in Singapore and Mercado Libre (MELI) in Latin America, have begun adopting stablecoins.

Solana is leading the field in blockchain payments, but has scalability issues, the report said. “The big change this cycle has been the dominant market share of Solana (43% highest share) in value of stablecoins transferred versus prior cycle market leader Ethereum,”

Solana is currently testing partnerships with Visa and Shopify. However, it remains uncertain if this blockchain can make significant inroads into mainstream consumer and business-to-business payments. Achieving such penetration would necessitate a substantial increase in Solana’s capacity, which presently stands at around 700 transactions per second (TPS), far below the thousands of TPS required by established payment networks. General-purpose blockchains have yet to surpass this barrier. [