Stablecoins Are Bridging the Gap Between Crypto and FinTech

The stablecoin market is collectively worth north of $170 billion. That's a large number. And with the news Monday (Oct. 21) that FinTech giant Stripe

Fintech giant Stripe’s recent acquisition of stablecoin platform Bridge for $1.1 billion is highlighting the growing interest of the payments sector in these digital assets. Stablecoins are cryptocurrencies pegged to a reserve asset, typically a fiat currency, to maintain a stable value. Their potential to bridge the gap between traditional FinTech and cryptocurrencies is making them an essential topic for payment professionals.

Stablecoins offer the efficiency and transparency of blockchain technology with the familiarity and stability of fiat currencies, which is critical for integrating blockchain-based assets into mainstream financial systems. They present an optimal solution for optimizing cross-border payments and providing alternative payment options, especially for complex commercial transactions or regions with less stable fiat currencies.

This interest is evident in recent developments. Payments infrastructure provider BVNK has joined forces with Circle, the issuer of the USDC stablecoin, to accelerate the utility of USDC for BVNK customers. Major payment providers like PayPal, Visa and Coinbase are also expanding their services.

PayPal recently completed its first business payment with its stablecoin, PYUSD, to EY. At the same time, Visa has launched a new platform for banks to issue fiat-backed tokens, including stablecoins and tokenized deposits. Additionally, Coinbase is expanding the methods for businesses to pay via its Coinbase Prime brokerage platform.

Other payment providers and FinTech companies are integrating stablecoins into their platforms, enabling users to make payments or settle accounts using these assets. For instance, Stripe began allowing its merchants in the U.S. to accept USDC through their online checkout pages on Oct. 9. Within the first 24 hours, customers from over 70 countries reportedly made purchases using this payment method.

Stripe had initially enabled crypto payments but paused them in 2018 before announcing their return this past April.

Several stablecoins are available in the market, each with its strengths and use cases. Knowing which stablecoin is best suited to which purpose is crucial to getting the most of its usage.

For example, Tether (USDT) is the largest stablecoin by market cap, but its primary use is as a trading pair on exchanges for liquidity and stability. Its regulatory status may also cause businesses to hesitate in fully embracing it across their operations, especially as the European Union’s Markets in Crypto-Assets Regulation (MiCA) introduces tougher oversight of crypto companies.

Binance USD (BUSD), the third-largest stablecoin, is similar in makeup and use to USDT, serving a key purpose within the broader Binance crypto ecosystem for remittances and cross-border transfers that bypass traditional banking.

USD Coin (USDC) is the stablecoin that is finding the widest embrace among institutions for payments, remittances and reserve assets, though banks like J.P. Morgan have also created their own native tokens.

In 2019, J.P. Morgan became the first major U.S. bank to introduce its own digital token for real-world use. The bank said the blockchain-based cryptocurrency was created to enable “the instantaneous transfer of payments between institutional accounts.”

Stablecoins also vary in their regulatory adherence, and businesses must assess the risk and compliance requirements for each.