{"id":526903,"date":"2026-04-06T09:00:00","date_gmt":"2026-04-06T13:00:00","guid":{"rendered":"https:\/\/www.paymentsjournal.com\/?p=526903"},"modified":"2026-04-06T09:48:01","modified_gmt":"2026-04-06T13:48:01","slug":"how-stablecoins-emerged-as-a-key-element-of-cross-border-payments","status":"publish","type":"post","link":"https:\/\/www.paymentsjournal.com\/how-stablecoins-emerged-as-a-key-element-of-cross-border-payments\/","title":{"rendered":"How Stablecoins Emerged as a Key Element of Cross-Border Payments"},"content":{"rendered":"\n

Since their advent in the early 2000s, cryptocurrency supporters have sought viable real-world use cases. While the volatility of digital assets made them as attractive as investments, it hindered their adoption in mainstream financial activity.<\/p>\n\n\n\n

The development of stablecoins over a decade ago changed that. By maintaining a relatively consistent value and transcending currency exchange rates, stablecoins opened the door for digital assets to move beyond peer-to-peer (P2P) trades and gain tractions with businesses and financial institutions.<\/p>\n\n\n\n

Business-to-business (B2B) payments now surpass P2P transactions as the leading use case, accounting for roughly two-thirds of the market, according to blockchain firm Artemis. The primary driver: cross-border payments.<\/p>\n\n\n\n

Why Cross-Border Payments Needed an Overhaul<\/h2>\n\n\n\n

Just as cryptocurrency required a mainstream use case to enter the payments ecosystem, cross-border payments demanded a fundamental rethink in today\u2019s global economy. For years, these transactions relied on the correspondent banking system, in which banks facilitated currency exchanges and settled transactions on each other\u2019s behalf.<\/p>\n\n\n\n

Handle such transactions independently is challenging due to multiple currencies, jurisdictional issues, and constantly evolving anti-money laundering regulations. Traditional processing involves multiple intermediaries\u2014correspondent banks, clearinghouses, and more\u2014all of whom charge fees. Combined with foreign exchange costs, this makes it difficult for businesses to achieve transparency in their payment expenses.<\/p>\n\n\n\n

Despite global trade growth, the number of correspondent banks has declined by roughly 25%<\/a> over the last decade. Additionally, geographic and regulatory barriers, like Know Your Customer requirements, have excluded many people from the traditional financial system.<\/p>\n\n\n\n

Given all these issues, it is no surprise that correspondent banking faced significant challenges even before stablecoins entered the scene. Data from the Bank for International Settlements (BIS) shows active correspondent banking relationships declined by around 30% between 2011 and 2022.<\/p>\n\n\n\n

Early Development and Usage of Stablecoins<\/h2>\n\n\n\n

When the first stablecoin launched in 2014, its goal was not to solve cross-border issues. BitUSD, introduced <\/strong>on July 21, 2014, via the decentralized exchange Bitshares, aimed to facilitate trades within cryptocurrency markets.<\/p>\n\n\n\n

However, the coins\u2019 stable value proved useful for transactions between partners using different currencies. Stablecoins also leverage key benefits of cryptocurrencies, such as programmability and blockchain traceability, making them ideal for cross-currency settlements.<\/p>\n\n\n\n

\u201cThey pivoted really quickly, because once you have a wallet in place and you send it to another wallet, they realized, \u2018There’s something else here,\u2019\u201d said Joel Hugentobler<\/a>, Cryptocurrency Analyst at Javelin Strategy & Research. \u201cIt quickly became kind of the offshore digital euro dollar.\u201d<\/p>\n\n\n\n

Stablecoins gained momentum before the pandemic, as businesses accumulated excess capital and crypto adoption expanded. Post-pandemic inflation further drove demand, particularly in countries with hyperinflation like Venezuela and some African nations. Stablecoins provided a reliable alternative to unstable local currencies.<\/p>\n\n\n\n

Crypto Exchanges Lead, Legacy Firms Follow<\/h2>\n\n\n\n

In 2014, Tether introduced the first cryptocurrency pegged to the U.S. dollar. Originally called Realcoin, it was quickly rebranded as Tether (USDT). Tether remains the market leader with roughly $184 billion in circulation, followed by Circle with around $79 billion. Today, Tether processes approximately $10 trillion in transactions annually.<\/p>\n\n\n\n

The scale of these operations has prompted financial organizations to enter the stablecoin market. Visa, Fiserv, and SoFi are among the major players offering stablecoin programs.<\/p>\n\n\n\n