DENVER--(BUSINESS WIRE)--Should technology channel companies pay attention to stablecoins?
Yes, particularly with the recent GENIUS (Guiding and Establishing National Innovation for U.S. Stablecoins) Act signed into law by US President Donald J. Trump.
"Stablecoins can modernise financial transactions, but regulatory vagueness prevents wider business adoption. The GENIUS act significantly reduces that friction," says Ben Jonsson, Business Research Analyst at the WeFi Technology Group.
The stablecoin market is small yet growing fast. McKinsey reports that stablecoin circulation has doubled since the start of 2024, facilitating $30 billion of transactions daily. Even though this amount represents less than 1% of global money flows, the consulting firm advises that "[payment industry] incumbents and disruptors alike must make urgent preparations."
Fast money
Stablecoins are a type of cryptocurrency: digital stores of value using peer-validated ledgers on blockchain networks to manage transactions and ownership. Colloquially, 'cryptocurrencies' refers to more speculative assets, such as Bitcoin and Ethereum. Stablecoins are also cryptocurrencies but are pegged to stable financial instruments such as a national currency (typically the US dollar).
This combination of fiscal stability and digital ease is useful for cross-border payments. A sender can convert local currency into stablecoins and transfer capital rapidly over a blockchain, settling within minutes while removing most intermediaries and reducing fees.
"Stablecoins allow you to get all the benefits of blockchain technology without the volatility, or at least the same volatility as a fiat currency," says Jonsson.
An era of stability
But uptake has been slow. Regulatory uncertainty limits wider investment in the knowledge and technology that stablecoins require. They operate in a grey area with limited oversight, leading to fears of liquidity shortfalls, bank-run dynamics, and enforcement actions from regulators.
The GENIUS Act establishes the United States as a reliable regulator and supporter of stablecoins. It provides a clear legal framework for issuing US dollar–pegged stablecoins, including requirements for full reserve backing and strong consumer protections that help reduce risks.
The act's framework makes stablecoin issuance more secure and transparent. It defines safeguards such as high-quality liquid asset backing, regular reserve disclosures, AML/KYC rules, attestations, operational risk and custody standards, and other financial safeguards.
"Although not the first stablecoin regulation globally, the GENIUS Act is very significant and a likely blueprint for most other similar regulations, perhaps comparable to how the EU's GDPR influenced data privacy regulations," says Jonsson.
What stablecoins mean for technology channels
Regulatory clarity from the world's largest technology market is a welcome development for technology companies that transact globally. This is especially relevant with emerging markets with strict capital controls or high inflation. Stablecoins can make cross-border transactions less complicated and risky.
"For example, you can send over a larger amount and then pay multiple parties by splitting it into their digital wallets. Recipients can convert those stablecoins to local currency or hold the stablecoins in a digital wallet as a dollar-denominated asset. This makes cross-border transfers faster, cheaper, and more accessible than conventional international banking," says Jonsson.
This impact is evident in cross-border transaction values. Stablecoins represented less than 1% of 2024's $194.8 trillion cross-border transactions. Yet, the savings from reducing intermediaries and the significance of flows to and from emerging markets give stablecoins a potential total addressable market value of $16.5 trillion, according to financial data analysts FXCintelligence
Preparing for payment opportunities
Stablecoins are not new. However, the establishment of the GENIUS Act marks a new chapter for them and will increase momentum behind other digital-based transactions and instruments, such as central bank digital currencies (CBDCs), bank-issued tokenised deposits, smart contracts, and asset tokenisation.
Admittedly, stablecoins are not the only opportunity. Payment providers have been working on streamlining cross-border and emerging market transactions through automation, artificial intelligence, and platform integrations with clients' finance processes.
However, companies like Mastercard, PayPal, Payoneer, and WeFi are exploring the potential of stablecoins. PayPal launched its PYUSD stablecoin in 2023 to explore B2B use cases.
Channel vendors, financiers, and their downstream peers can prepare by taking stock of their transaction volumes and relevant geographic markets, what regulatory requirements apply to them, and the technical capabilities and integration needs of their existing business systems. They should also understand their risks, such as tax liabilities around crypto assets or what happens if a stablecoin issuer fails.
But they gain nothing by ignoring the potential of stablecoins. The GENIUS Act signals a window to understand and implement stablecoin technologies, Jonsson advises.
"This is a good time for people to become more familiar with stablecoins and establish relationships with companies like WeFi. It's a revolution that's been waiting in the wings. GENIUS will move it to centre stage."
Contacts
For media queries please contact Victoria Lindsay: victoria@innocomm.co.za