Cryptocurrency is becoming a viable alternative to traditional finance. While some people are running to crypto because they want to part ways with a system that no longer fits their beliefs of what a financial structure should be, there are others who find crypto an alternative to be included in the global economy in a way that traditional finance simply doesn't allow them to.
This is the case for people in many developing countries where many local banks still struggle with international payments.
Stablecoins to the rescue
When SpaceX started to expand the reach of its Starlink product, it faced one major issue, especially in developing countries: accepting payments.
In many countries across Africa, Latin America and Asia, traditional banking infrastructure is slow and unreliable, forcing SpaceX to look for alternatives.
The winning solution was stablecoins. The company partnered with Bridge, stablecoin payments platform, to accept payments in various currencies and instantly convert them into stablecoins for its global treasury.
Stablecoins on the rise
The stablecoins market is now evaluated at roughly $205 billion it's expected to grow.
The driver behind this surge is real-world utility. While cryptocurrency, in general, is still seen by many as a highly speculative market with very few real use cases, stablecoins are becoming a core part of the financial structure.
Stablecoins are not only making cross-border payments easier for people in developing countries but also significantly cheaper. For example, according to a16zcrypto, sending $200 from the U.S. to Colombia via stablecoins costs less than $0.01, compared to $12.13 using traditional methods.
Investor interest
With the steep rise in user adoption, it's not a surprise that businesses and investors started to pay attention to the stablecoins market as well.
Many startups building payment platforms powered by stablecoins are raising millions of dollars from VC and other traditional business.
KAST, a neobank that lets users hold and spend stablecoins raised $10 million in their seed round, Yellow Card raised $33 million, Cedar Money raised $9.9 million and Caliza raised $8.5 million, just to name a few.
Criticism and regulation
Despite all the upside of integrating stablecoins there are concerns regarding their adoption.
Critics are concerned that stablecoins could disrupt monetary policy as economies start relying too much on the U.S. dollar instead of building independent financial systems.
Another concern is that centralized stablecoins depend on private companies such as Circle and Tether to maintain their value, and the 2022 collapse of TerraUSD is seen as an example of how vulnerable stablecoins can be.
Regulation will also play a major role in stablecoin adoption.
Most governments are too slow to keep up with innovation, and regulations tend to lag when compared to the evolution of the economic landscape.
Moreover, because most legislators do not fully understand cryptocurrency and stablecoins, there is a risk governments around the world will opt for a more conservative approach and implement strict regulation policies on stablecoins and crypto assets, which could hinder adoption.
Final thoughts
Stablecoins solve real-world problems and have the potential to integrate a large number of people who are currently neglected by traditional finance.
Investor interest is rising and a lot of capital is flowing into projects that are building infrastructure to expand the integration of stablecoins into the economy.
With user adoption on the rise and increasing interest from investors, regulation could be the last piece of the puzzle. If legislators around the world see the potential benefits of stablecoins, they could become an integral part of the global financial system.