The rise of stablecoins and their increasing role in cross-border payments

In recent years, the role of blockchain-based infrastructure in cross-border payments has undergone significant changes. Although it was initially exciting, blockchain-based stablecoin payment solutions have brought both opportunities and challenges in reality.

According to an article published by Forbes magazine, author Daniel Weber (contributor) stated that the increasing prominence of stablecoins in this field is the result of these dynamics, as businesses and consumers are seeking more stable and efficient ways to transfer value across borders.

The role of Ripple and the shift in understanding of blockchain infrastructure

Ripple was once hailed as a pioneer in the cross-border payment field, but its influence has fluctuated due to legal issues, particularly the lawsuit from the U.S. Securities and Exchange Commission (SEC). Before facing legal challenges, Ripple was widely seen as a strong alternative to traditional payment systems like SWIFT, providing instant settlement through its blockchain-based RippleNet service. Ripple's XRP token acted as a bridge currency in these transactions, providing liquidity and simplifying cross-currency payment processes.

However, due to banks and other financial institutions (especially those in Western countries) keeping their distance from Ripple amid the legal disputes involving the company, Ripple's involvement in the cross-border payment sector has declined. Nevertheless, Ripple continues to move forward, focusing on the markets where its Blockchain solutions can thrive.

The rise of stablecoins in the field of cross-border payments.

As Ripple is marginalized, the broader cross-border payment industry is beginning to rely more on such digital assets as a reliable solution. Unlike traditional cryptocurrencies that are highly volatile, stablecoins are pegged to fiat currencies (usually the US dollar), providing a more stable store of value. This stability is crucial in the payment industry, as asset price fluctuations can create unnecessary risks in cross-border transfers.

They can effectively reduce volatility, making them particularly attractive for the cross-border payment industry. Companies like MoneyGram, which previously used Ripple's Blockchain, later turned to Circle's USDC and Stellar's blockchain protocol. Facebook also explored stablecoin-based payment methods through its Libra project (which later evolved into the USDP-based Novi), highlighting the growing interest in stablecoin-supported remittance solutions.

Despite experiencing some setbacks, such as the collapse of TerraUSD, which highlighted the risks of algorithm-supported stablecoins, the demand for them continues to grow. This indicates that although the stablecoin industry has faced challenges, as long as these assets are well-regulated and audited, they still have strong growth potential in the field of cross-border payments.

Switch to US dollar-backed stablecoin

After the collapse of TerraUSD in 2022, the market gradually lost confidence in algorithmic stablecoins, and the focus shifted towards dollar-backed stablecoins. This transition coincided with the payment industry’s call for increased regulation and greater asset audit transparency. Companies like Paxos and Circle have become key players, offering solutions that hold full reserves within the United States—this is crucial for traditional financial institutions looking to use stablecoins for payments.

The continuous success of PayPal's stablecoin PYUSD (issued by Paxos) further highlights the increasing acceptance of stablecoins by large enterprises. In addition, Circle, with its USDC stablecoin, has established important partnerships with companies such as Visa, Bank of New York Mellon, and BlackRock, indicating that stablecoins are increasingly being integrated into traditional financial infrastructure.

Why stablecoins are still crucial for cross-border payments

The most compelling reason why stablecoins continue to integrate into the cross-border payment space is their ability to enable instant settlement. Traditional financial systems often take days to complete cross-border payment settlements, while blockchain-based solutions can provide near-instant settlements. This feature is particularly important for businesses as it can reduce the liquidity required in the remittance market, enhance operational efficiency, and facilitate easier scaling.

Moreover, the instant settlement capability alleviates the compliance burden for certain markets, as traditional solutions often require extensive verification and paperwork. These advantages are crucial for companies seeking to modernize their payment infrastructure, making stablecoin-supported systems increasingly attractive.

The Future of Cross-Border Payments

Although stablecoins have been adopted by several companies in the cross-border payment sector, this technology is not a one-size-fits-all solution. Different market demands vary, and not all payment channels can achieve optimal service through stablecoin technology. This means that while stablecoins are a valuable tool, they are only part of a broader solution set that shapes the future of cross-border payments.

In fact, the growth of stablecoins in this field will depend on their competitiveness with non-blockchain alternatives. In regions where payment systems are well-developed and efficient, traditional payment methods may still be superior to blockchain solutions. However, in emerging markets with underdeveloped traditional infrastructure, systems based on stablecoins have the potential to dominate.

As Ripple re-enters the enterprise payment space with its own stablecoin (RLUSD) and payment solutions, it remains to be seen how much of the global cross-border payment infrastructure will ultimately be supported by stablecoin technology. Stablecoins are unlikely to become the sole solution, but their increasing integration into the global financial system may significantly enhance their market share in the cross-border payment sector.

Conclusion: The role of stablecoins in cross-border payments is becoming increasingly important.

The importance of stablecoins in the field of cross-border payments is becoming increasingly prominent. Ripple's XRP was once a key player in the transformation of cross-border payments, while stablecoins such as USDC and USDP are now leading the industry with their compliance, stability, and instant settlement capabilities. As the industry gradually adopts blockchain-based solutions, stablecoins are expected to become an indispensable part of the global financial infrastructure, especially in regions where traditional systems are lacking.

Ripple enters the stablecoin market with the launch of RLUSD, indicating its commitment to maintaining a leading position in the evolving payment landscape. However, for stablecoins to achieve widespread adoption, they must continuously prove their efficiency, reliability, and compliance in an increasingly competitive market.