The race among major financial institutions and fintech firms to establish their own stablecoins is accelerating, as the global payments industry anticipates a shift driven by digital currencies.
Banks and fintechs race to enter stablecoin market
This rapid expansion reflects a growing regulatory acceptance of stablecoins, contrasting sharply with the scepticism that initially greeted Meta’s Libra project six years ago.
Prominent players such as Bank of America, Standard Chartered, PayPal, Revolut and Stripe are entering the market, aiming to challenge established leaders like Tether and Circle.
Currently, USDT and USDC dominate the stablecoin sector, representing a combined market capitalisation of approximately $210 billion.
Bank of America recently indicated its openness to issuing a digital coin, reinforcing the perception that stablecoins are on the verge of mainstream financial adoption.
A Massive Market Potential
Stablecoin transfer volumes surpassed Visa and Mastercard combined in 2024, reaching $27.6 trillion.
However, it should be noted that a recent study conducted by the CEX.io revealed that the overall stablecoin transfer value totalled $27.6 trillion in 2024.
According to this calculation, the combined transfer volume increased by only 7.68% when compared to the separate volumes of spreadings carried out by Visa and Mastercard.
This milestone highlights the growing adoption of digital assets in the global economy and signals a shift from the traditional financial system, despite a slowdown in the third quarter.
Regulatory Clarity a Crucial Driver
Regulatory clarity is a crucial driver behind this trend.
In the US, lawmakers are debating legislation to formalise stablecoin oversight, offering a framework that could encourage banks and corporations to integrate digital currencies into their operations.
The European Union has already enacted compliance requirements for stablecoin issuers, while the UK’s Financial Conduct Authority is preparing its own set of guidelines.
These developments have emboldened financial institutions, reducing the uncertainty that previously hindered stablecoin adoption.
Unlike traditional cryptocurrencies, stablecoins are designed to maintain a stable value, typically pegged to the US dollar, making them a reliable alternative for cross-border transactions.
Emerging markets are leading the charge in adoption, using stablecoins as an efficient, low-cost method for payments.
Industries such as commodities trading, agriculture and logistics are increasingly leveraging digital tokens for international transactions.
Notably, companies like SpaceX and ScaleAI use stablecoins to facilitate payroll and repatriate earnings in countries with volatile local currencies.
Visa data underscores the growing role of stablecoins in global payments, with transaction volumes hitting $710 billion last month, up from $521 billion a year earlier.
The number of unique stablecoin wallet addresses has surged by 50%, reaching 35 million.
However, new entrants still face formidable competition from market incumbents. PayPal’s PYUSD coin, for instance, processed only $163 million in transactions last month, a fraction of Tether’s $131 billion volume.
Competition Hots Up
To compete effectively, major banks are focusing on transparency and regulatory compliance, differentiating their stablecoins from existing alternatives.
Standard Chartered recently announced plans to launch a Hong Kong dollar-backed stablecoin under the region’s evolving regulatory framework.
Meanwhile, Stripe made headlines with its $1.1 billion acquisition of Bridge, a move that signals its commitment to integrating stablecoin solutions into its global payment network.
“Modern blockchains and stablecoins offer a compelling alternative for payments, which aligns with our core business model,” said John Collison, Stripe’s co-founder and president, underscoring the strategic importance of stablecoins.
Stripe’s vast payment network, which processed $1.4 trillion last year, could serve as a significant catalyst for stablecoin adoption.
Even fintech firms that previously resisted cryptocurrencies are beginning to embrace digital assets.
Klarna CEO Sebastian Siemiatkowski recently announced on social media: “OK. I give up. Klarna and I will embrace crypto! More to come… Someone had to be last.”
His statement highlights the inevitability of stablecoin adoption across financial services.
Despite the momentum, analysts caution that the market may not be able to sustain an influx of new coins.
Investors and users are increasingly scrutinising issuers based on their creditworthiness and operational risk.
Simon Taylor, co-founder of fintech consultancy 11:FS, notes: “Stablecoins are not equivalent to cash. They represent the credit risk of their issuer and the operational challenges of maintaining a stable value.”
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