Five years after its inception, SpaceX’s Starlink has become a crucial source of revenue, now operating in over 100 countries. However, as Starlink expanded its reach, it encountered a significant obstacle: processing payments in developing regions, where the reliability of traditional banking systems is often compromised. Numerous banks in Africa, Latin America, and Asia struggle with international transactions, prompting SpaceX to seek alternative solutions.
In response to these issues, SpaceX turned to stablecoins, an increasingly popular means of making cross-border payments, particularly among emerging economies. The company partnered with Bridge, a platform focused on stablecoin payments, allowing it to process transactions in multiple currencies and seamlessly convert them into stablecoins for its global treasury management.
This strategic choice established Bridge as a formidable alternative to correspondent banks in areas where conventional financial systems are inadequate. Shortly after, Stripe recognized this potential and acquired Bridge for over $1 billion, further solidifying its status and enhancing its valuation as a significant player addressing inefficiencies in the global financial landscape.
The surge in the use of stablecoins, which now constitutes a $205 billion market, is largely driven by practical applications rather than mere speculation, especially in emerging sectors where the most compelling use cases emerge. In these regions, cross-border transactions are often slow and costly, involving numerous intermediaries. For instance, a textile company in Brazil importing goods from Nigeria might deal with multiple banks and currency exchanges, each adding additional fees and delays. Stablecoins circumvent these barriers, facilitating faster and cheaper transactions.
Surging Adoption and Investor Interest
The increasing demand for stablecoin solutions has manifested in impressive transaction volume growth among startups that facilitate cross-border transactions for African and emerging market businesses.
Yellow Card, which enables users to convert between fiat and cryptocurrencies, saw its annual transaction volume soar to $3 billion in 2024, up from $1.5 billion the previous year. Conduit, a platform facilitating stablecoin payments for import-export operations in Africa and Latin America, reported an annualized TPV surge from $5 billion to $10 billion. Based in Lagos, Juicyway has managed to process a total payment volume of $1.3 billion to date.
Investor enthusiasm has also been on the rise, with leading venture capital firms backing fintech companies that leverage stablecoins to target these markets.
Peak XV and HongShan, which recently spun off from Sequoia, jointly led a $10 million seed investment in KAST, a neobank that allows users to hold and spend stablecoins. Sequoia remains a key investor in Bridge. Additionally, Yellow Card secured $33 million in funding, predominantly from Blockchain Capital. QED Investors spearheaded a $9.9 million investment in Cedar Money, a stealthy fintech using stablecoins for cross-border transactions. Meanwhile, Initialized led an $8.5 million investment round for Caliza, a company introducing real-time transactions to Latin America utilizing USDC.
Tether has also made significant investments in African stablecoin infrastructure and liquidity providers, as confirmed by TechCrunch. At the same time, Conduit, which raised a $6 million seed round last year, is closing in on another round with notable backers.
The trajectory is unmistakable: Stablecoins are transitioning from being seen as an experimental cryptocurrency to forming a central component of the financial infrastructure in emerging markets, enabling global money transfers. As their adoption accelerates, the pivotal question becomes not whether stablecoins will revolutionize payments, but at what pace they will either complement or replace outdated financial frameworks.
Data illustrates this shift, with a16z reporting that sending $200 from the U.S. to Colombia via stablecoins costs under $0.01, whereas traditional methods charge $12.13. Payment platforms are evolving, reducing their fees compared to conventional intermediaries. Stripe, for instance, now charges a 1.5% fee for stablecoin transactions, a 30% decrease from its regular card fees.
Businesses and individuals alike are increasingly utilizing stablecoins as a safeguard against inflation, with USDT and USDC emerging as key assets.
Expanding Applications Beyond Cross-Border Payments and Remittances
While cross-border payments and remittances have led the charge in early adoption, stablecoins are now gaining traction in areas like consumer finance, payroll, and even retail transactions.
This past January, Brazilian unicorn Nubank launched a feature offering USDC holders a 4% annual return, following a tenfold growth in customer-held USDC last year. Currently, 30% of Nubank’s clientele holds USDC in their portfolios. Nubank is joining the ranks of fintech giants like Venmo, Apple Pay, PayPal, Cash App, and Revolut, which have already integrated stablecoin transactions within their apps.
In addition to enhancing consumer savings, stablecoins are transforming global payroll mechanisms. As remote work continues to rise, startups like Rise are enabling companies to pay contractors in stablecoins. The platform facilitates payments in fiat while contractors can receive the payment in stablecoins such as USDC or USDT, thus mitigating currency volatility. Last November, Rise secured $6.3 million in Series A funding to support the expansion of its stablecoin payroll services.
“The market is evolving in line with our development, and sooner or later, significant players will enter the field. They will provide stablecoin offerings through partnerships, acquisitions, or by creating a crypto payment framework,” stated Rise CEO Hugo Finkelstein in an interview with TechCrunch.
Although the retail adoption of stablecoins has progressed slowly, startups like Cashnote.io are exploring innovative solutions. Developed by the Korean fintech firm Korea Credit Data in conjunction with the web3 VC firm Hashed, this platform allows merchants to accept credit and digital asset payments through a point-of-sale system. Merchants can handle payments via stablecoins, enjoying the freedom from credit card limits and enabling consumers to utilize digital assets for daily purchases.
Both companies are currently testing Cashnote in the Abu Dhabi Global Market (ADGM) and plan to launch with merchants in the region in the coming months, partnering with the UAE-based digital asset infrastructure provider Fuze for settlement. Fuze completed a $14 million seed round in 2023.
Despite the potential benefits of stablecoins for optimizing global payments, concerns linger. Critics caution that stablecoins may interfere with monetary policy. As they gain traction within the global financial system, apprehensions arise regarding their potential resemblance to past issues related to dollarization, where economies become overly dependent on the U.S. dollar rather than fostering independent financial frameworks.
Moreover, their efficiency comes with drawbacks. Unlike government-backed currencies, stablecoins’ value is contingent upon private entities like Circle and Tether to manage them properly. These entities maintain the value of stablecoins through cash reserves, short-term securities, and other financial instruments. The collapse of TerraUSD in 2022 underscored the vulnerabilities that stablecoins face.
Regulatory Changes: Key to Adoption
Attention from governments and regulatory bodies around the globe is growing, and their actions will play a crucial role in shaping the future of stablecoin adoption. Certain regions, such as the Abu Dhabi Global Market (ADGM), have established themselves as hospitable environments for crypto innovation, allowing fintech companies to test stablecoin payment systems. Hashed’s CEO Simon Kim asserts that Cashnote.io’s operation was viable due to the region’s well-structured and supportive regulatory framework.
“Abu Dhabi uniquely fosters innovation by providing substantial support to new entrants from abroad,” Kim remarked to TechCrunch. “The region features various sandboxes and governmental support systems for testing innovative and new crypto infrastructure.”
The UAE gained attention last year when a court ruling recognized crypto salary payments, reinforcing its position as a worldwide hub for digital asset advancements .
In Africa, the dynamic is quite different. Often, technological innovation accelerates faster than regulatory measures, leading policymakers to react post-factum once fintech establishes its value, similar to previous experiences with mobile money, as suggested by Zekarias Amsalu, co-founder of a leading fintech event in Africa. Amsalu argues that regulators ought to embrace stablecoins, as they can significantly lower costs for cross-border transactions and remittances — potentially by as much as 75%.
“If formalizing Franco-Valuta [a policy enabling the importation of goods without utilizing bank foreign exchange] is acceptable under crisis conditions, why not consider stabilizing regulated stablecoins backed by licensed exchanges with complete transparency?” Amsalu suggested.
Ultimately, the direction that regulations take may hinge on developments within the U.S., where new laws could have far-reaching implications for stablecoin usage: A stringent regulatory approach — while not probable — might slow adoption and impose stricter controls on issuers. Conversely, a supportive stance towards stablecoin initiatives could inspire more nations to outline clear licensing regulations for digital assets. “These are powerful signals for investors,” Finkelstein concluded.
Compiled by Techarena.au.
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