The rise of stablecoins in the cryptocurrency world
Stablecoins have rapidly become one of the most transformative innovations in the crypto ecosystem. What was a small USD 5 billion market in early 2020 has surged to more than USD 159 billion by early 2024, making stablecoins one of the most influential forces in digital finance. And while they may seem new to many, stablecoins have actually existed for over a decade — the first one, BitUSD, launched back in 2014.
Although stablecoins gained renewed attention following the passage of the U.S. GENIUS Act, their impact goes far beyond regulation. These digital, yield-bearing assets aren’t just adding another tool to the crypto toolkit — they’re reshaping how money moves, how value is stored, and how financial services might work in the future.
But is this progress just hype, or are stablecoins truly laying the groundwork for a more accessible financial ecosystem?
What exactly are stablecoins?
Stablecoins are cryptocurrencies designed to maintain a steady value by pegging their price to a stable asset — most commonly the U.S. dollar. They can be:
- Backed by reserves, such as treasury bills or cash
- Over-collateralized with other crypto assets
- Stabilized by algorithms designed to maintain price equilibrium
Some of the most widely used stablecoins include DAI, USDC, and USDT (Tether). They’re essential tools in crypto trading, remittances, and the broader DeFi (decentralized finance) ecosystem, offering the reliability of fiat currencies with the speed and programmability of blockchain.
Stablecoins were created to capture the advantages of digital money — instant processing, global accessibility, and decentralization — while avoiding the extreme price swings that make assets like Bitcoin impractical for everyday transactions.
However, one key distinction remains: unlike central bank digital currencies (CBDCs), stablecoins are not legal tender and are not issued by governments, which means they face varying levels of regulatory scrutiny.
Why stablecoins matter more than ever
Tokenized cash is transforming global payments by making them cheaper, faster, and borderless. Because stablecoins function as digital versions of traditional cash and operate on blockchain rails, they’ve become a serious alternative to traditional payment systems.
Their benefits are substantial:
- 24/7 global transferability
- Lower transaction fees
- Faster settlement times
- Greater transparency
- Broader financial inclusion
This is why stablecoin adoption is exploding. Millions of people around the world — especially in countries suffering from high inflation — now rely on dollar-pegged stablecoins as a financial lifeline.
But despite their popularity, stablecoins are still primarily used as intermediaries in the crypto ecosystem. They depend on off-ramps, liquidity providers, and exchanges to convert into traditional money. As a result, they currently account for less than 1% of global daily payment volume.
Yet the trend is unmistakable: stablecoin transaction volume has been growing consistently for five years. If this growth continues, stablecoin payment volume could surpass legacy financial networks in under a decade — possibly sooner.
Their ability to offer instant settlement, operate around the clock, and reduce counterparty risk makes stablecoins a compelling solution for real-world financial inefficiencies.
Risks and challenges
Stablecoins aren’t without concerns.
Even with new regulatory frameworks like the GENIUS Act emerging, many stablecoins currently operate outside official legal requirements. Some have temporarily lost their dollar peg due to concerns about underlying reserves.
Security is another issue. As with all digital assets, users face hacking risks, phishing attacks, and other forms of cybercrime.
A deeper concern is legal protection. Stablecoin holders typically do not have a legal claim to the issuer’s underlying reserve assets. In a bankruptcy scenario, holders might be treated as unsecured creditors — meaning they could have no guaranteed access to the funds backing their stablecoins.
With no established government precedent, trust in stablecoins ultimately depends heavily on the integrity and transparency of private issuers.
Final thoughts
Stablecoins saw explosive growth in 2024, with transaction volumes tripling to USD 5 trillion in organic transfers and USD 30 trillion overall. But for stablecoins to reach their full potential, the global financial system would need to adopt a new paradigm — one where most transactions can be settled directly in local currency equivalents on blockchain rails.
If that shift happens, stablecoins could dramatically reshape payment systems, business models, and global demand for reserves — fundamentally altering how money works in the digital age.
