Nick Maynard, VP of Fintech Market Research at Juniper Research, notes that cryptocurrency and payments platform Ripple has announced that it is launching its own US Dollar-backed stablecoin later this year.
This move, which is subject to customary regulatory approvals, “represents the latest in a long line of positive developments for the stablecoin market in recent months.”
These developments included the following:
The Juniper Research update also mentioned that PayPal has launched the PYUSD stablecoin, which has recently been integrated with its Xoom cross-border payments app within the US.
This follows PYUSD’s launch in 2023.
Societe Generale Forge launched EURCV (EUR CoinVertible) on Bitstamp, “making it the first institutional Euro-denominated stablecoin to be listed on the platform.”
Sony Bank in Japan announced that it “was testing its own Yen-backed stablecoin for gaming payments and intellectual property payments.”
According to the Juniper Research analysis, these are “just several recent developments, but along with the Ripple announcement, these show that stablecoins are on a significantly upwards trajectory, moving into an increasingly mainstream market position.”
The Juniper Research team asks, so the question is, why is this happening?
Stablecoins provide an alternative “to traditional payment rails, which face difficulties for a number of reasons. Where traditional payment rails, such as ACH (Automated Clearing House), have not been designed for digital or web3 use cases, they can lack the easy ability to be integrated within digital processes.”
As such, stablecoins can create a more efficient process “that is better suited to this environment.”
However, the larger opportunity for stablecoins is “for cross-border payments. Despite it having represented a major challenge for various reasons, such as high cost, a lack of transparency and slow transaction & settlement processes, cross-border payments have stubbornly remained an issue for many in the payments industry.”
While there have been efforts “to overcome cross-border hurdles, such as the interlinking of instant payments schemes, these have yet to solve the issues, and the challenges in the market remain.”
Stablecoins are fundamentally “well suited to solving cross-border challenges. By offering a digital currency that can be easily accessed, this can allow for a significant reduction in the number of parties required for each cross-border transaction.”
Speeds can be improved “by both this reduction of intermediaries and the use of a digitally native platform. Costs can be reduced by increasing efficiency significantly. The use of a fiat currency-backed stablecoin means that viability is not a challenge in the same way as it is with mainstream cryptocurrencies, such as Bitcoin.”
Indeed, stablecoins are already “making waves in cross-border use cases.”
Outside of PayPal’s offering of stablecoins within Xoom, Visa has has “announced that it supports the use of the Solana blockchain to send or receive settlements cross-border in USDC, a US Dollar-pegged stablecoin.”
Juniper expect many further moves “by payments companies and existing cross-border players to adopt stablecoins; creating a highly competitive landscape.”
Juniper Research also looks into how well positioned Ripple might be in this highly competitive market.
Given that Juniper Research anticipate this market to become highly competitive, it is important “to understand how viable Ripple’s entry in this space is.”
There are already many relatively well-established stablecoins in the market, “making it a tough landscape to enter. It also faces competition on the payments side, with PayPal for example offering stablecoin capabilities.”
However, we believe that Ripple has “a good balance of capabilities for its entry into this market. Ripple has already developed its cross-border payments offering, with its XRP solution being adopted by several cross-border players, such as Nium, Modulr, Sentbe and Tranglo.”
The addition of a stablecoin “enhances existing capabilities, providing a good way to access the market. Its work on CBDCs (Central Bank Digital Currencies) has also bolstered its experience in compliance, which will be critical to scaling its stablecoin offering.”
While these factors stand Ripple in good stead, Juniper Research do believe “that this market will become more intensely competitive, as other players see the potential in stablecoins for payments, particularly in a cross-border environment.”
They anticipate that “over the next five years, we will see significant investment by existing payments players in stablecoins, as they seek to protect their role in cross-border payments. We also believe that alternative approaches, such as instant payments across borders will see significant investment. However, we believe stablecoins face a bright future.”
