Offensive Security Engineer

Stablecoins couldn’t have chosen a better name. Compared to other, more volatile cryptocurrencies that have traditionally defined crypto markets, stablecoins have positioned themselves as a trusted, e.g. stable, and comparatively safe avenue for digital asset exploration. But while stablecoins offer a bridge between traditional finance and the burgeoning world of digital assets, the stability of this bridge is inextricably linked to the reserves that underpin it. Unlike previous market cycles where stablecoins were largely tied to crypto trading activity, there is now a focus on real-world utility, including cross-border payments and corporate treasury management. This makes understanding who safeguards these reserves, the composition of assets backing leading stablecoins, as well as the inherent operational and financial risks, crucial for stakeholders navigating this financial landscape.​

Payment stablecoins, blockchain and other digital innovations, including tokenization, will enable more efficient money movement across the globe, while ensuring primacy of the U.S. dollar in transactions and trade, executives and other industry experts told lawmakers Tuesday (March 11). During testimony and under questioning by representatives of the House Financial Services Committee, witnesses at the nearly four-hour hearing also contended that it is the private sector — and not a central bank-created CBDC — that will expand financial services and the benefits of digital dollar options to the world at large. Chairman Rep. French Hill, R-Ark., said during his opening remarks: “The evolution of payment stablecoins and their increasing adoption beyond the digital asset ecosystem reflect broader modernization efforts in the U.S. and global payments landscape,” noting that the offerings streamline cross-border payments

The world’s biggest banks and FinTechs are scrambling to roll out their own stablecoins.It’s a sort of “gold rush” driven by the anticipation that cryptocurrencies will transform the cross-border payments market, the Financial Times (FT) reported Monday (March 10).For example, the report said, Bank of America recently said it would consider issuing its own coin, joining the likes of PayPal, Stripe and Revolut. It’s a trend being driven by rising acceptance of stablecoins — digital assets pegged to fiat currencies — among regulators around the world, the FT added.“It’s about people selling shovels in the stablecoin gold rush,” said Simon Taylor, co-founder of FinTech consultancy 11: FS, who described the situation as financial institutions experiencing FOMO (“fear of missing out”).“The other thing that’s driven it is there’s real volume,” he said. “Founders want to get a piece of it because they know they’re going to get stablecoin regulation and so it’s all of those things coming together.”Stablecoins, the FT notes, have historically been used to transfer money between different cryptocurrencies, but are becoming a popular alternative to local banks for payments in emerging markets, especially in commodities, agriculture and shipping.As PYMNTS wrote last month, stablecoins provide users with the benefits of cryptocurrency — such as fast transactions and borderless transferability — but without the volatility.“However, until now, regulatory uncertainty has hindered their adoption, particularly among institutional use cases,” that report said. “Risks for security-critical sectors like financial services remain despite marketplace advances.”For example, data from Chainalysis shows that stablecoins are involved in 63% of illicit crypto transactions, supplanting bitcoin in recent years as the tool of choice for criminal activities, such as laundering stolen money and avoiding sanctions.In a separate report last week, PYMNTS examined the use of stablecoins by FinTech companies. For example, Stripe recently described stablecoins as “room temperature superconductors for financial services” in a letter to shareholders.Banks, meanwhile, are still mainly on the sidelines, PYMNTS wrote, because of a combination of regulatory issues, risk appetite and structural agility.“FinTechs, unburdened by the strictures of traditional banking charters, are leveraging their regulatory flexibility, customer demand and technological prowess to push forward,” that report said. “Meanwhile, banks, which must follow compliance requirements and conservative risk frameworks, are moving cautiously — if at all — into the crypto space.”