Stablecoins' m-cap surges to a record $251 billion

The total
market capitalization
of
stablecoins
surged to a record high on Wednesday, data showed, as the US Senate passed a bill to regulate the sector, a major step towards legitimising a once-niche but now fast-growing corner of the crypto market. According to CoinDesk data, the market capitalisation of stablecoins hit an all-time high of $251.7 billion, up 22% so far this year.
Stablecoins are a type of cryptocurrency designed to maintain a constant value, usually via a 1:1 peg with the US dollar. They are commonly used by crypto traders to move funds between tokens. Their use has soared in recent years, and analysts expect the market to grow further once the US legislation has passed.
Proponents say stablecoins could be used to send payments instantly, while others worry they will lead to closer ties between the crypto world and traditional financial markets.
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If the US bill is signed into law, stablecoins would be required to be backed by liquid assets such as US dollars and short-term Treasury bills, and for issuers to publicly disclose the composition of their reserves on a monthly basis.

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Now, stablecoins are taking the leap from their original use as crypto-market poker chips to common mediums of exchange, offering merchants and consumers cheaper and more efficient payment the hurdles getting in the way of the hype: An uneven regulatory environment between major markets like the US and the European Union that threatens to create compliance risks, as well as gaps in know-your-customer standards that raise concerns about fraud and illicit activity. What's more, the potential proliferation of competing stablecoins from issuers large and small could create complexity that stymies their adoption.'As with any new form of value, widespread adoption necessitates regulatory clarity, consistent legal frameworks across jurisdictions and – importantly – interoperability with existing infrastructure and assets,' said Tom Zscach, chief innovation officer at Swift, the global bank-messaging cooperative. 'Without this last point, new assets just risk creating additional fragmentation in an already complex financial ecosystem.'The eye-popping success of stablecoin issuer Circle Internet Group Inc.'s initial public offering — its shares are trading at about five times their offering price less than two weeks later — speaks to the optimism surrounding the potential growth to be found in this once-obscure corner of the crypto market. Meanwhile, financial giants including PayPal Inc., Banco Santander SA and Deutsche Bank AG are among those who have recently explored or already entered the space, while others like Visa Inc. and Stripe Inc. have adapted their existing infrastructure to be stablecoin-friendly. Even President Donald Trump has launched a stablecoin via his family's venture, World Liberty Financial merchants and other businesses, the advantages of using the tokens could be significant: lower transaction costs, faster payments and 24/7 availability. Banks and fintechs are not the only ones taking notice. Inc. and Walmart Inc. are among large multinational companies which have recently discussed issuing their own stablecoins in the US, the Wall Street Journal reported last week, citing unidentified people familiar with the all could lead to an explosion of growth in the sector. The world's supply of stablecoins could swell to as high as $3.7 trillion by 2030 if growing integration of digital assets into traditional finance and favourable macroeconomic conditions continue, Citigroup Inc. analysts said in an April report. But there's a caveat to that prediction. Should risks like delayed regulations, fraud, and security concerns go unmitigated, Citi estimated the figure could be closer to $500 billion, which nonetheless is still about double what it is the sector has already rapidly grown in popularity, stablecoins are still largely used for transactions related to the cryptocurrency market rather than business payments. The total volume of all stablecoin transactions was nearly $4 trillion in February, according to data compiled by Allium Labs and Visa. Yet only $6 billion in stablecoin transactions categorised as payments were recorded that month, an analysis of data collated by Artemis, Castle Island Ventures and Dragonfly Capital use case for payments has started to gain traction, even before US legislation officially goes into the books. Shadeform AI, a San Francisco-based startup running a marketplace for providers of artificial intelligence technology, started accepting stablecoins as a payment method in February, facilitated by its existing payments processing partner, then, Shadeform has seen transaction cost savings of up to 70% when a customer chooses to pay using Circle's stablecoin USDC , Chief Technology Officer Ronald Ding said in an interview. 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As a result, customers paying in USDC don't have to wait for the check to clear before Shadeform can give them access to the computing power they've bought, and Shadeform isn't exposed to potential chargebacks, Ding said.'Being able to save the difference, in certain cases, can save us a lot more on the actual profit that we're making,' he are also finding stablecoins useful for streamlining payments to workers around the Writer, an AI content software business based in Malaysia, started using stablecoins after it lost a developer in Argentina because fees for traditional payment methods were too costly and taking too long to clear. Now about 30% of the company's external payments go through USDC, according to CEO Adam Yong, including those made to some of its own software providers.'What convinced me was seeing how much smoother our operations run when we're not waiting on bank transfers or dealing with currency conversion headaches,' Yong said over are also becoming a practical payment solution for companies with suppliers in areas with limited access to traditional banking services. Win Win Coffee, a Philadelphia-based merchant, has been testing out PayPal's PYUSD stablecoin and is considering using it to pay for coffee from a farmers' cooperative in Colombia.'A lot of people need cash, and a lot of these producers are unbanked. When they're living in areas where banks aren't very close by, stablecoin helps,' said Matt Nam, co-founder of Win Win. 'If we're doing things more securely and we're sending payments faster, that helps us to have some competitive advantage.'Still, stablecoins remain cumbersome for very large payments due to relatively low liquidity compared with the vast volumes handled by global banks each day. JPMorgan Chase & Co. alone processes around $10 trillion in daily transactions.'Where it gets clunky is in the hundreds of millions of dollars,' said Chris Harmse, co-founder of stablecoin payments company BVNK. 'If you are moving interbank-sized flows, it will get clunky.' This is likely to change as stablecoins gain further acceptance by existing payment processors, he jurisdictions like the European Union, Singapore and Hong Kong now have rules for stablecoins, but major players like the US and the UK aren't expected to have regulation fully implemented for months or even years to come. 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