Stablecoin Utility

In the early days of crypto, when it was primarily a niche group of cyberpunks, there were limited options for transacting between digital assets. To maintain a net-neutral position in Bitcoin, you had to take both a long and short position of equal size at the same pricing on exchanges. Fast forward a few years, and in 2014, Tether (USDT) emerged, addressing the extreme volatility of cryptocurrencies by offering a token pegged to a stable asset—the US dollar.

Tether introduced a cryptocurrency that maintained a 1:1 ratio with fiat currency, allowing traders and investors to move funds between exchanges without cashing out into traditional currencies. This also provided a stable store of value during periods of market volatility.

Emerging vs. Established Markets

A common question in crypto circles is: What will be the leading use case for blockchain? Gaming, SocialFi, AI, and multi-yield DeFi protocols often come up in discussions, but stablecoins have proven to have more widespread usability.

Emerging markets in regions like Africa, Asia, and Latin America are experiencing rapid adoption of stablecoins as blockchain-based payments gain traction. In countries like Nigeria, Turkey, Argentina, India, Vietnam, and Brazil, traditional payment networks like Visa and MasterCard have limited penetration, leaving consumers without easy access to global financial services. Historically, global merchants needed to navigate a complex array of local wallets and alternative payment methods, which made cross-border transactions cumbersome.

Stablecoins have transformed this landscape, providing consumers in these regions access to Digital Dollars without the need for traditional bank accounts. Long considered a hedge against local currency volatility, US Dollars are now available via blockchain technology. In many of these regions, stablecoins have seen adoption rates of 20-50%, becoming a reliable, decentralized payment option for saving and transacting.

In contrast, developed markets like North America and Europe have less motivation to adopt crypto payments, as efficient systems like Visa and MasterCard are already integrated into daily life. For many, crypto remains a speculative investment rather than a practical tool. Additionally, spending crypto in these regions is often considered an asset disposal, triggering capital gains tax, further discouraging its use for everyday transactions.

The Leading Use Case

Bitcoin was initially envisioned for cross-border payments with minimal friction, but it became too slow and technical for this purpose. With long block times and an outdated user experience, an alternative was needed. Stablecoins stepped in, erasing volatility while maintaining the peer-to-peer nature of transactions without restrictions, laying the groundwork for a cashless society.

While US citizens enjoy access to a $30 trillion treasury market, the rest of the world lacks permissionless access to a dollar-denominated means of preserving capital. Overcollateralized and algorithmic stablecoins have been explored to provide users with a way to earn yield while transacting with digital assets.

The demand for stablecoins is already substantial, with over $150 billion in assets under management, despite their "return-free" risk profile. A permissionless, value-accruing product could be the largest market opportunity crypto offers—surpassing both volatile stores of value and current stablecoin models.

The Size of the Market

Stablecoins are well on their way to becoming a primary candidate for global digital money. Emerging markets use them as a flight to safety, while established markets leverage them for DeFi applications. Tether alone manages over $119 billion in assets, growing through innovation and regulatory adaptation. Stablecoins, particularly in emerging markets, provide essential financial inclusion by offering Digital Dollars without the need for a bank account.

With $170 billion in total assets under management, stablecoins are expanding the reach of the US dollar while operating under relatively minimal regulatory oversight. Their growing popularity necessitates robust compliance models, such as address blacklisting for law enforcement, to secure broader acceptance. Like previous disruptive technologies, stablecoins have the opportunity to reshape global finance—changing the rules as they evolve. The US government’s hesitancy to regulate digital dollars may reflect the increasing utility of stablecoins, signaling a future where they transform the movement of money worldwide.