As the use of stablecoins expands globally, they’ll become part of a hybrid payment model that mixes old rails with cryptocurrencies, investment professionals from a venture capital group said during a payment discussion last week.
Stablecoins will find their place in payments depending on where they make the most sense for a transaction, a panel of financial industry professionals from QED Investors said. QED, a VC firm that invests in a variety of fintechs globally, hosted the panel discussion Thursday on how stablecoins will complement existing payments.
The arrival of stablecoins is akin to how email hasn’t replaced traditional postal services for some use cases, said Gbenga Ajayi, a QED partner and head of the firm’s Africa and the Middle East business.
“It’s going to be a combination of stablecoin doing what it does best, and we’re going to have existing payment systems and existing fiat rails doing what they do best,” he said. “It’s not a question of crypto or stablecoin versus banks. It’s a combination of both.”
The bigger – and far knottier – question will be how stablecoins and the older legacy payments systems interact, said Bill Cilluffo, a partner with QED, which is based in Alexandria, Virginia.
“The future will be about figuring out what are the best payment systems for the right uses and, more importantly, how do these payment systems work together?” Cilluffo said.
Stablecoins are tied to the value of fiat currency such as the dollar or euro, with their value considered less volatile than other cryptocurrencies such as Bitcoin and Dogecoin. Stablecoin use is surging following regulatory clarity by the U.S. government last year via enactment of the Genius Act.
Despite the recent increased use, stablecoins still make up a tiny portion of overall payments volume and are principally used in certain areas, such as crypto trading and remittances, according to JPMorgan Chase, the largest U.S. bank.
About $269 billion in stablecoins circulated last year, with that figure expected to increase to $434 billion by 2028, according to estimates Wednesday from S&P Global Market Intelligence. The digital asset is being fueled by institutional infrastructure investment, rather than consumer use, with only 12% of U.S. consumers familiar with stablecoins, the S&P research unit said.
“The most meaningful adoption is happening behind the scenes — improving settlement speed, capital efficiency, and liquidity movement — rather than at the consumer checkout layer,” Jordan McKee, director of fintech research at S&P Global Market Intelligence, said in an emailed statement.
Consumers for traditional payments rails highly value cost, speed and security, the panelists noted. However, stablecoins introduce two more critical metrics to the equation when evaluating how to pay: Privacy and recourse, or the ability to recover a payment, said Adams Conrad, a QED principal.
“We really see folks looking to prioritize across all five of these,” Conrad said.
Relative to traditional rails, stablecoins clearly win on the speed of settlements, Ajayi said, noting that a company in Mexico or Nigeria supplying goods to a Chinese or Korean customer might wait three days for a traditional wire payment to settle.
“There’s 30 days in a month, and that’s 10% of your working month going towards just waiting for banks to ping themselves on a messaging network,” he said. “You’re not operating anywhere near the throughput capacity that you can operate with stablecoin.”
The digital coin also prevails on price, with fewer costs sitting in the middle for completing a transaction. In terms of safety, however, legacy rails offer clear advantages for reversibility over their crypto peers, Ajayi said.
“If the transaction goes wrong, you need that undo button,” he said.
