Advantages of Stablecoins over Fiat: from Transactions to Savings
Stablecoins are increasingly recognized for overcoming the inefficiencies of traditional financial systems. In previous discussions, we explored stablecoins' steady growth and promising potential in the global financial landscape. This article delves into the comparative advantages stablecoins hold over traditional fiat currencies, particularly in the areas of transaction efficiency, cost reduction, and asset management, offering a compelling and efficient financial option for users.
Cost Efficiency and Improved Liquidity
Stablecoins not only speed up transactions but also significantly reduce costs. According to GSMA, transferring $200 via stablecoins can cost just a few cents in transaction fees, compared to an average of $12 globally for traditional cash transfers — and in some cases, fees can be as high as $30 depending on the jurisdiction. This cost-saving aspect and reduced settlement times allow businesses and freelancers to optimize cash flow and mitigate currency risks in international transactions. Furthermore, by bypassing intermediaries, stablecoins help businesses improve liquidity, reducing the need for short-term borrowing and enhancing operational efficiency.
Stablecoins are transforming cross-border payments by addressing inefficiencies present in traditional systems. According to research by BVNK and the Centre for Economics and Business Research (Cebr), stablecoins can reduce settlement times by up to 3 to 6 days on specific cross-border routes, significantly improving business liquidity. Traditional cross-border payments often trap capital for extended periods, leading to higher costs and delays. In contrast, stablecoins offer near-instant settlements on these routes, freeing up capital for immediate use.
Asset Preservation
Stablecoins are increasingly used in emerging markets to manage daily finances, from savings to currency exchange and remittances. According to a report by Castle Island Ventures, many users in countries such as Brazil, Nigeria, Turkey, Indonesia, and India are turning to stablecoins to safeguard their wealth from local currency devaluation. Around 69% of respondents have converted their local currency to stablecoins, and many use stablecoins to purchase goods and services and send money internationally.
Beyond financial transactions, stablecoins provide a level of autonomy and flexibility that traditional banking systems often lack, along with the potential for earning yields and reduced risks of government interference. This makes stablecoins appealing to those seeking stability and flexibility in economies with fluctuating currencies. As such, stablecoins serve as a valuable bridge between traditional fiat and digital currencies, offering a reliable store of value in regions with less stable financial systems.
Growing Adoption in Freelance Payments
The adoption extends beyond businesses, reaching freelancers in regions where currency volatility and payment delays are common. At the Solana Breakpoint event, Visa’s Head of Crypto mentioned that in 2024, many non-crypto businesses have started using stablecoins to solve payout challenges for overseas freelancers. Many freelancers, especially in countries like Nigeria and Argentina, prefer to receive payments in dollar-denominated stablecoins for their efficiency, stability, and protection against local currency fluctuations.
Stablecoins, especially those based on the U.S. dollar, help freelancers avoid the complexities and fees associated with currency conversions and international transfers, allowing faster, more reliable payments and efficient conversion into local currencies when needed. The potential of stablecoins was also highlighted, as they could become a backend payment rail, linking both cross-border and domestic payment systems. This growing adoption demonstrates stablecoins’ expanding role in both global and local financial ecosystems.
Stablecoins’ Role in Future Finance
As the financial system continues to evolve, stablecoins are becoming an integral part of the global economy. Financial institutions, such as the Financial Stability Board (FSB), are actively working on international frameworks to regulate stablecoins, ensuring they mitigate potential risks while facilitating cross-border transactions.
While U.S. dollar stablecoins are expected to maintain their dominant position, demand for non-dollar stablecoins is also projected to grow as businesses and users seek alternatives for more diversified global transactions. This reflects the ongoing maturity of the cryptocurrency ecosystem and its deeper integration with traditional financial systems.
For businesses and individuals looking to explore the benefits of stablecoins, we offer fully reserve-backed and NYDFS-regulated USD and JPY stablecoins. With strict regulatory standards and robust security measures, our stablecoins provide a reliable option for various financial applications. Learn more on our website: https://stablecoin.z.com/
About GMO-Z.com Trust Company
GMO Trust connects traditional finance and blockchain technology for everyone. We issue GYEN, the world’s first regulated Japanese Yen stablecoin, and ZUSD, our trusted U.S. Dollar stablecoin. Visit our website to learn more.
Disclaimer
This content is not financial advice and it is not a recommendation to buy or sell any financial instruments, FX trading, cryptocurrency or engage in any trading or other activities. You must not rely on this content for any
financial decisions. Acquiring, trading, and otherwise transacting with financial instruments or cryptocurrency involves significant risks.
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