Stablecoin has commanded the attention of the media, boardrooms and policymakers in Washington. Seldom, outside of a crisis, do the technical details of our financial system garner so much popular attention. Despite the hype, opinions vary on the breadth and speed of its potential adoption and what the implications could be for various financial market participants.
In assessing the most likely path forward for stablecoin adoption, we focus on the potential use cases and users, their economic incentives and their observed behaviors. Specifically, we examine where it is—and is not—faster, cheaper, more convenient or more secure relative to existing forms of payment. We then look at where tangible potential benefits to adopting stablecoin may be, and we consider their magnitude and if they would justify the effort to adopt a new payment method.
Furthermore, the impact of stablecoin adoption on banks and non-bank financial institutions (NBFIs) will depend not only on the level of adoption but also who’s adopting. For example, if adoption turns out to be predominantly by multi-national corporates, the impact on national banks would be far greater than on regionals. If, on the other hand, adoption were to be concentrated in the paycheck-to-paycheck consumer segment, the impact would be greatest on NBFIs such as Chime and CashApp and their BaaS bank partners.
We’ll unpack this in more detail, but our perspective is that stablecoin adoption will likely happen more gradually than indicated by the amount of attention it’s currently receiving in the public dialogue.
Background: What Is It and Why Use It?
Stablecoin is a tokenized digital asset powered by blockchain ledgering technology. For the purposes of this discussion, we’ll focus on those stablecoins pegged to the US Dollar and backed 1:1 by USD reserves or short-duration US Treasuries. The dollar peg is one of the key differentiators between stablecoin and other crypto currencies such as Bitcoin. Stablecoins can function as both a store of value and a means of exchange. In other words, they’re digital money.
Large issuers of stablecoin today include Tether and Circle. Other, larger financial and non-financial institutions such as Amazon, Walmart, Mastercard, JP Morgan, Bank of America and Citi are exploring developing their own stablecoin or partnering with integrated service providers such as FiServ to deploy a solution for their clients.
In Washington, the GENIUS Act has been passed into law establishing a regulatory framework for stablecoin issuers, which could promote further adoption for end users who deem regulation to be an indication of safety and stability.
What are the Benefits?
Stablecoin transactions are nearly instantaneous and can be executed any time of day. While they’re not free, stablecoin’s transaction charges, referred to as “gas fees,” are modest relative to many traditional payments rails. (Important aside: Costs to issuers are offset primarily by interest on the collateral, so the economic model supporting low gas fees might come under stress in a lower-rate environment.) They also offer added convenience and functionality in certain instances when deployed within an existing blockchain application such as a smart contract. This “programmable money” feature can theoretically automate finance functions within a blockchain ecosystem. And if managed within an enterprise-grade technology platform, they can be quite secure. For cross-border and/or cross-currency transactions, stablecoins are almost always more cost-effective and convenient than traditional payment rails.
What’s not to love? Well, first off, many of these benefits exist today within the confines of established payments rails. Credit cards offer nearly instantaneous payments, as do person-to-person transactions within networks such as Venmo and Zelle. The cost of these transactions varies by payment type and customer segment, but many existing rails offer compelling value. The affluent segment, for instance, benefits from generous credit card rewards while large businesses are able to negotiate steep volume-based discounts. While the security of stablecoin transactions will likely be as good as it is on traditional rails within enterprise-grade networks, it will still be susceptible to confidence and social-engineering frauds. So stablecoins may be a good means of exchange, but in many cases they’re not actually better relative to existing alternatives.
Stablecoin also presents some potential drawbacks as a means of exchange—chiefly, that interoperability is limited, meaning users might theoretically have to manage positions in many “currencies.”
Who will be More or Less Likely to Adopt?
The most obvious use cases would be for businesses and individuals that make and receive a large volume of international payments. There’s also been speculation that citizens of countries with volatile fiat currencies might prefer to store wealth in USD-backed stablecoin. But because the GENIUS act requires issuers to implement BSA / AML programs, this use case may prove more limited. Beyond that, corporates operating smart contracts or integrating with other blockchain applications may adopt stablecoins for certain transactions, especially agentic or automated finance functions.
In contrast, we expect that most small and mid-sized business will be slower to adopt. This is partly based on observed behavior—paper checks are still vastly more prevalent in B2B transactions than instant payments. And because many B2B transactions run on 15- to 30-day payments cycles in many cases, accelerating the last mile of the cash-conversion cycle wouldn’t materially impact working capital needs.
Finally, most individuals have a limited need to adopt. The existing payments rails are already fast, convenient and secure. And for many transactions, the costs are low, refunded to the consumer through rewards or non-transparent.
The Outlook
We’re wary of crystal balls, and rationality doesn’t always carry the day. But in piecing together the true benefits of stablecoin adoption and our observations of behaviors—particularly among small and mid-sized businesses—we would anticipate a gradual adoption of stablecoin with a near-term plateau to be at the lower end of current estimates. We would expect the impact to be particularly modest for regional banks that tend to serve an outsized share of small and mid-sized businesses. Corporates who typically bank with SIFIs today may adopt in higher volumes, but in the context of their overall business operations, the impact will likely be modest.
Items that we would watch for to drive faster adoption would be platform issuers creating appealing rewards structures for consumers, especially in the mass-consumer and paycheck-to-paycheck segments, which are less well served by rewards programs today. Additional accelerated adoption could come from platforms that drive both very simple integration and an attractive overall value proposition across a network of small businesses.
Stablecoin is a wonderful technical innovation with transformative potential. But our near-term outlook on its adoption remains grounded by the practicalities of where it does and does not provide benefits relative to existing payments rails today.
In today’s dynamic regulatory, technological and market environment, we will update our perspective as conditions and adoption change. In the meantime, feel free reach out to any of us or your trusted Curinos contact with any questions.
