Alexi Lane

Founder and CEO of Everex

As Stablecoins Rise in Popularity, How Can It Benefit Traditional Payments?

The rising popularity of stablecoins has often been highlighted as an indication of the growing adoption of blockchain technology. With projects such as Facebook’s Project Libra and JPMorgan’s JPMCoin, it is clear that even large corporations from beyond the blockchain space are seeking to partake in this growing trend.
For the most part, crypto adopters treat stablecoins as another form of cryptocurrency that is often collateralized by the value of an underlying asset such as a major fiat currency or commodities like gold. Other types of stablecoins are controlled using a combination of algorithms and smart contracts that manage cryptocurrency supply in order to maintain price equilibrium.
At this point in time, stablecoins are primarily used to hedge the price volatility of cryptocurrencies. But let’s ask ourselves one question: would stablecoins, which offer near-instant settlement times with virtually no transaction costs, be a better alternative to traditional payments? In an industry where individuals and SMEs are inconvenienced by cross-border payments that take days and even weeks...

You bet, they would.  
The fastest domestic payment method in the United States, the world’s largest economy, takes 24 hours with ACH (Automated Clearing House), while SEPA (Single Euro Payments Area) in Europe can take anywhere between a few hours to over a day to settle. Of course, there are always faster payment options with service providers like Paypal or Stripe, but they come with additional costs which oftentimes do little to raise the profit margins of SMEs. By my observation, Asian payment providers are currently more superior and offer instant settlements for domestic transactions on both an individual and corporate level. 
For the most part, this is thanks to a leapfrog development from having primarily cash-based economies to those that are more technologically advanced. For example, Thailand’s BahtNet and China’s interbank payment clearing system offer free and instantaneous settlements for domestic payments. However, for both worlds, the problem of slow and expensive cross-border money transfers still remains. I am convinced that stablecoins are the ultimate solution not only for the problems mentioned but also for commerce payments currently dominated by card-based payment processors.

In every part of the world, communities engage in both local and cross-border trading as well as in tourism. Many countries also host thousands of migrant workers who send billions of dollars to their loved ones every year*. Serving the payment needs of these stakeholders is one of the main use-cases for stablecoins which can play a significant role in local economic development.

Here is a list of stablecoins which I believe could be suitable for the abovementioned: 

1. THBEX, a stablecoin developed by money and crypto payment service provider Everex that is backed by the Thai Baht and recently approved by the Bank of Thailand. THBEX was designed to simplify and accelerate cross-border remittances between Thailand and Myanmar. The token can also be used for payment settlements among ASEAN countries trading with Thailand, such as Laos, Myanmar, Vietnam, and Singapore.
2. USDT (Tether). Love it or hate it, Tether has been dominating the stablecoin space since 2015 and has so far has been its undisputed leader. With its recent switch from the OMNI protocol to the more advanced ERC20 (Ethereum), we will undoubtedly see greater adoption of this coin, especially in Asia where Tether is the ultimate U.S Dollar-pegged currency. 
3. U.S-regulated USD coins (USDC, TUSD, PAX). Although not targeted for Asia, these coins can certainly be a good fit for Central and South American markets if their issuers adopt friendlier payment gateways with fiat support.

Functional stablecoins made for the Eurozone are still lacking given that existing ones such as EURS or xEUR are not currently ready to fulfil the role of a reliable payment settlement financial instrument. I see this as an open opportunity for a challenger or “neo” bank from Europe to explore this payment mechanism and possible become a leader in cross-border payments.
To share your opinion and learn more about our stablecoin settlement process, feel free to reach out to me on Twitter

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Comments

August 19th, 2019

fiat backed stablecoins do not make much sense. They cannot live to the promise cryptos were actually built for. They are dependent of fiats. I believe, algorithmic and commodity-backed stablecoins will survive in the long run.

August 20th, 2019

Fiat stablecoins don’t have to live to the promise of crypto nor they have anything to do with it. It’s the blockchain technology that allows digital money to move faster, cheaper, and solve actual non-cryptocurrency use cases such as cross-border money transfers for migrant workers or online payments for e-commerce merchants. The average cost of cross-border remittance is 7% and the poorest people pay the most of it. Fiat stablecoins can solve this and many other problems. Let’s leave crypto to the 1% of people who gets it.

August 20th, 2019

Indeed, they reduce the cost of cross border payments. I do not deny that. But what do you suggest when the dollar falls? I’m sure you’ve heard or read of the next financial crisis. What happens then?

August 20th, 2019

Not all cross-border and especially domestic payments are made with USD. There are direct transfer pairs between SAR, AED, PHP, CNY, IDR, INR, EUR, etc. Banks have to conduct their transfers thru USD on a backend, but actually with fiat stablecoin tech it’s possible to offer direct pair transfers. That’s one of the advantages of the tech. However, speaking of the dollar, I’d point out that there are tons of other much weaker currencies that USD. If green buck collapses, then technology along with fiat stablecoins will be the least of anyone’s concern :slight_smile:

August 20th, 2019

Stablecoins are highly valuable for the crypto industry from the “adoption of cryptos” POV.

And in a time when fiat to crypto transactions are banned under several legislation, stablecoins are the best alternative to keep the money in standby when not trading.

As far as the future is concerned, they would play an important role in banking and finance. They literally would mean a world to those who pay anywhere between 5% to 15% in transaction fees to banks for sending money to their family in their home land.

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