Do you recall the days when making international calls or sending texts abroad came with a hefty price tag? Nowadays, such expenditures are a thing of the past thanks to advanced messaging applications like WhatsApp, which have made overseas communications free.
Similarly, the emergence of stablecoins is poised to revolutionize the remittance landscape by removing traditional barriers within the payments sector.
“Just as WhatsApp transformed expensive international calls, blockchain technology and stablecoins are set to redefine global money transfers,” according to a recent blog entry from a leading venture capital firm.
The existing structure of global payments is intricate, entailing numerous entities including points of sale, payment processors, acquiring banks, issuing banks, correspondent banks, foreign exchange services, and credit card networks.
Read more: What Is a Stablecoin?
Each participant in this network levies fees and introduces delays, which complicates international transactions. For example, remittance fees can soar to 10%, reminiscent of the high costs of cross-border communication prior to the advent of instant messaging solutions.
This is where blockchain technology and stablecoins come into play—digital currencies that are pegged to stable assets such as the U.S. dollar.
“Stablecoins present a fresh approach. Rather than piecing together cumbersome, expensive, and outdated systems, stablecoins operate smoothly atop global blockchain networks,” the blog post states.
“Currently, stablecoins are dramatically reducing remittance costs: Sending $200 from the U.S. to Colombia using traditional services incurs costs of approximately $12.13, whereas transferring the same amount through stablecoins costs just a cent.”
Moreover, the advantages of stablecoins extend beyond remittances and could significantly enhance B2B transactions. The firm cites business transfers from Mexico to Vietnam, which typically take three to seven days and incur fees ranging from $14 to $150 per $1,000. Each transaction is funneled through multiple intermediaries, each taking a cut.
Implementing stablecoins could make such transactions nearly instantaneous and virtually cost-free.
Some corporations are already leveraging stablecoins; for instance, SpaceX utilizes them to manage their corporate funds, protecting themselves against foreign exchange volatility.
Given this shift, it’s no wonder that stablecoins’ total market cap has surpassed $200 billion and that their annual transaction value is projected to reach $15.6 trillion in 2024—equating to about 119% and 200% of the values of major payment processors like Visa and Mastercard.
However, the rise of stablecoins does face hurdles.
Regulatory scrutiny has complicated the transition from traditional finance to stablecoins, making it “incredibly challenging,” as noted by the firm. Fortunately, the landscape is evolving as lawmakers in the U.S. are establishing regulations to acknowledge and oversee stablecoins. “Upcoming legislation that clarifies these regulations could lay the groundwork for even broader adoption and integration into the global financial framework,” the post suggests.
With the rapidly evolving financial environment and cryptocurrencies gaining more acceptance, stablecoins are likely to emerge as a pivotal force in reshaping the future of currency.
“Just as WhatsApp disrupted costly international phone calls, blockchain payments and stablecoins are transforming global money transfers,” the firm emphasized.
Read more: U.S. House Committee Advances Stablecoin Bill, While Concerns Arise Over Trump Conflicts