Stablecoin Transactions: Adoption of Payment Stablecoins for Payment Purposes Is No Longer A Subject of Speculation, Study Concludes

Gordon Liao from Circle Internet Financial and Thomas Hadeed noted in a study titled, Beyond Speculation: Payment Stablecoins for Real-time Gross Settlements, that  empirical evidence shows “a notable shift in the usage of stablecoins, a form of digital currency transacted over distributed ledgers, in recent years.”

As noted in the abstract of the study, “Initially, stablecoins started out as on-chain cash balances for crypto exchanges and traders, but they have evolved over the past few years to resemble a form of general-purpose money tokenized on public blockchains.”

The paper also mentioned that payment stablecoins, “a type of stablecoin fully backed by high quality and liquid assets, are used proportionally less in crypto trading than fiat dollars are used in the trading of traditional assets.”

The study pointed out that the adoption of digital token money “such as payment stablecoins for general use in real-time gross settlement (RTGS) could potentially mitigate risks associated with concentration and liquidity in the current payment systems.”

As noted in the study, the greater integration of payment stablecoins “with fiat payment rails, through appropriate regulation and limited access to central bank accounts, can preserve the singleness of money and mitigate against financial stability concerns.”

As stated in the paper:

Financial innovations have often had their roots in payments. The ATM machine is one such example of financial innovation that straddles between banking and payments, serving two critical functions. First, it simplified the conversion between ’fountain pen money’ (created by commercial banks) and ’printing press money’ (printed by central banks). Second, it complemented and extended the reach of the core bank-centric payment rails, e.g. Fedwire, to everyday consumers, solving the last mile problem to enable transaction and commerce using a widespread medium of exchange.”

The paper also mentioned:

“This research conducts a comparative examination, demonstrating that payment stablecoins are proportionally less employed for trading and leveraged speculation activities than the fiat counterparts. Overall, the use of stablecoins in cryptocurrency trading has experienced a consistent annual decline over the past five years, a trend that appears to be independent of the variability in cryptocurrency market activities.”

The authors concluded:

“Given the ample empirical evidence, the adoption of payment stablecoins for actual payment purposes should no longer be a subject of speculation. Greater integration of payment stablecoins with existing payment infrastructure could augment the capabilities of RTGS systems, making them more programmable, transparent, and widely accessible.”

You may review the complete study here.

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