Sarah Lamont is an investor at F-Prime Capital, a global venture capital firm investing in healthcare and technology, with a heritage that spans four decades. She was previously a senior consultant at Oliver Wyman.

The original vision for crypto was ambitious: lower fees, faster transactions, inflation protection, and other features were supposed to create the ultimate low-cost payment network. Thanks to the inherent volatility of the currencies that emerged, cryptocurrencies struggled for many years to gain traction beyond their status as an alternative asset class.

In the last decade, however, we have seen stablecoins emerge, and recent developments suggest they may be the application that fulfills crypto’s original promise of a cheap, efficient, permanently accessible global payment network. Over the last six years, we’ve seen them rise to rival other payment networks. 

A stablecoin is a cryptocurrency pegged to the value of a more stable fiat currency—the US dollar is the most obvious and common choice—to facilitate payments that would be expensive and time-consuming by other methods. Fiat-backed stablecoin payment volume reportedly reached $4T in 2023, with some estimates running as high as $9.9T—enough to rival payment volume on traditional players like PayPal ($1.5T), Mastercard ($9T) and Visa ($12.3T). This shows that stablecoins are enabling transactions that would otherwise be slow and expensive, perhaps unlocking a killer use case for crypto.

The broader financial ecosystem is catching on to the value proposition of stablecoins, too. PayPal launched their own stablecoin, called PYUSD last year, and Stripe recently announced it would once again let customers accept crypto payments,namely via USDC stablecoins. 

The cross-border use case

Most international B2B payments are facilitated by the SWIFT (Society for Worldwide Interbank Financial Telecommunication) network, a messaging system that sends fund delivery instructions between two banks, which then moves funds using Nostro and Vostro accounts. These payments can be incredibly slow—sometimes taking up to five days—and expensive, as incoming and outgoing transfer fees, FX fees, and tracing fees add up, not to mention the added expenses when intermediary banks are involved. SWIFT payments are also opaque, as senders and receivers lack real-time visibility into the status of a payment. 

The current state of play has all the hallmarks of an industry ready for disruption. And in situations where one or more of the parties to an international transaction is working in a volatile currency, stablecoins have further advantages. High inflation rates, local currency volatility and lower access to financial services are driving high adoption of stablecoins in emerging markets, where stablecoins can provide a “stable” store of value. For example, most of Tether’s user base is located in emerging markets. Users in Brazil, Argentina, Turkey and Vietnam are adopting USDT as a “digital dollar,” rather than for trading purposes. 

One way we might measure the relative efficiency of different cross-border payment methods is to track the cost of sending a $200 remittance. According to the World Bank, the average cost of sending $200 hovers around 12% or $24. For a similar transaction conducted via stablecoin, the cost varies depending on off-ramp fees, exchange fees and network transaction fees. According to Uniswap, the cost of that same $200 transfer ranges between $9.10 at the high end, and as little as $0.37 on the low end. 

The future

While stablecoins have shown promise as a payment method, success depends on the willingness of consumers and businesses to transact in a relatively new and unknown type of currency. To facilitate user adoption, the existing complexity of the crypto ecosystem might need to be abstracted away from users. Meanwhile, as stablecoins function as the “translation” mechanism between foreign currencies, the underlying stablecoin swaps—say, between USDC and the Mexican peso—require sufficient liquidity. 

Aside from adoption hurdles, companies building in this space will still need to navigate and mitigate a broad array of regulatory, foreign exchange and concentration risks, both from partner banks and stablecoins themselves. Those that can overcome these challenges will be well-placed to transform how international payments take place, with massive implications for the rest of the world.