Stablecoins Gain Systemic Importance, According to Bernstein Report

Cryptocurrencies known as “stablecoins,” which are backed by reliable assets like the US dollar, are becoming more and more significant in the world economy. Stablecoins are now the 18th-largest investors of US Treasury bonds, according to a new research by Bernstein, demonstrating their expanding prominence in the financial sector.

Stablecoin supply has increased to a record high of $170 billion following a decline in 2023. A noteworthy development in the research was the tripling of monthly volumes of on-chain payments to $1.4 trillion by July 2024. Gautam Chhugani, a lead analyst at Bernstein, noted, “Stablecoins provide USD savings access to international users, propagating digital dollars beyond the U.S.”

Integration with Fintech and Cross-Border Payments

Fintech companies like PayPal, MercadoLibre, and Grab are increasingly incorporating stablecoins into their payment systems, making digital dollars more accessible worldwide. Their growing use in cross-border transactions also stands out, with Bernstein stating, “USD stablecoins on crypto rails are now the cheapest cross-border payments rails.” Transferring $1,000 on layer 2 blockchains costs as little as one cent.

Layer-1 blockchains serve as the core infrastructure, while layer 2 solutions enhance transaction speed and scalability. This layered approach makes stablecoins an attractive option for low-cost, efficient cross-border payments.

Stablecoins are becoming popular among international users, particularly in emerging markets where they serve as a hedge against local currency instability. Bernstein’s research indicates that younger generations are embracing these digital assets, with 20% of individuals aged 18-24 holding up to half of their portfolios in stablecoins.

As stablecoins continue to integrate into mainstream finance, their influence on global transactions and digital savings is expected to expand, providing new opportunities and challenges for the financial system.