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Stablecoins taking center stage for payments

Over 75 percent of all blockchain crypto exchange transactions involve stablecoins (The Block), but stablecoins go beyond just crypto transactions, as they take center stage as a means of payment. This is especially prominent in countries with devalued fiat currencies, with unstable financial, economic and banking sectors.

This is a far cry from the BIS (Bank of International Settlements) assessment which sees the use of stablecoins as limited outside of crypto. In a BIS survey, they found that stablecoins were seldomly used for payments beyond the crypto ecosystem. It also noted that central banks observed that stablecoins were primarily used for crypto trading or within DeFi platforms, with minimal adoption for mainstream payment purposes.

Yet some countries including Lebanon in the Middle East, Nigeria in Africa, Argentina in Latin America and even Turkey have set the record straight and proved BIS and central banks wrong.

Lebanon

In Lebanon for example, a country warped by financial meltdown, devaluation of their currency, as well as an unlegislated capital control has witnessed a rise in the holding and usage of stablecoins.

Lebanese receive stablecoins as either remittances from their family members working abroad, or as payments for remote work services offered. In addition, across Beirut and in the villages some coffee shops, mobile/electronic shops and even small supermarkets are accepting stablecoins as a method of payment, especially USDT, a popular stablecoin in Lebanon.

Examples of shops and merchants also include Casino Du Liban’s Bet Arabia application and stores allow stablecoin payment, specifically USDT.

The Founder of Buy Bitcoin In Lebanon, Nader Dirany states, “Many businesses in Lebanon are paying their suppliers with USDT as it is easier, less costly, and is a solution to their inability to use the Lebanese banking system as well as a run around given the current devaluation of the Lebanese currency.”

Even Gold sellers in Lebanon are accepting USDT. One example is Lebanor which accepts USDT for gold.

Lebanese NGOs are no different. Rebirth Beirut, is receiving bitcoin and USDT donations to help fund their initiatives. These donations help fund projects such as installing cables from private generators to light up the streets.

Argentina

In a report by the European Central Bank, it acknowledges that in settings with high inflation, such as Lebanon and Argentina, individuals have begun storing value and transacting using stablecoins with some merchants accepting stablecoins as a form of payment.

Chainalysis, a blockchain analysis firm, noted that Argentina leads Latin America in raw transaction volume of cryptocurrencies, with more than $85bn in value received in the year to July 2023. Within that number, the sale of stablecoins amounts to roughly 31% of Argentina’s small retail-sized crypto transaction volume.

Pablo Larguia, CEO of SenseiNode, a Latin American blockchain infrastructure firm with headquarters in Buenos Aires says stablecoins are important for people to protect their savings. “Due to the economic collapse, a lot of people don’t want their money to go through the banking system; instead, they prefer to invest in stablecoins that are pegged to the US dollar.” ( source the Banker)

According to MasterCard data, more than a third of Latin Americans have embraced stablecoins for everyday purchases, far surpassing the global average of 11%. (Source Chainalysis)

Nigeria

In Nigeria, one witnesses the same utility for stablecoins, despite the fact that the Central Bank of Nigeria came out with its own CBDC. Most users in the country hedge it against inflation, while others use it for cross-border transactions, especially given that remittances in Nigeria are the most expensive in the world.

Turkey

Even the Turkish population is using stablecoins, especially with the continuous depreciation of Turkish Lira. The Turkish also use stablecoins for cross border payments for commerce and trade transactions. Recently the Turkish bank Garanti BBVA launched its crypto wallet and trading platform to trade and store BTC, ETH, and USD Coin (USDC) seamlessly via the bank’s mobile app. The bank is also set to introduce the Bonus Platinum Biometric Card and a “Request Payment” feature, further expanding its fintech capabilities.

The future of stablecoins in UAE, Australia and USA

But it is not only countries with hyperinflation, or unstable economies that are turning to stablecoins. Recently the Central Bank of the United Arab Emirates (CBUAE) decided to integrate stablecoins into the financial system. It will be dirham-backed stablecoins. This regulatory move aims to mitigate risks while harnessing the benefits of stablecoins within a secure and stable financial framework.

Retailers and consumers will be barred from transacting with unlicensed stablecoins, but will be allowed to transact with UAE backed stablecoins.

While in Australia, its Treasury department will soon include stablecoin rules in its crypto bill draft.

Even in the U.S. stablecoins are on the rise. This is clearly seen with PayPal receiving a New York trust charter for digital assets. The New York Trust charter means PayPal could handle its own stablecoin issuance and provide custody in-house.

Conclusion

In conclusion, the growth and utility of stablecoins is rising. This is perfectly noted by Paxos CEO Charles Cascarilla who stated, “Stablecoins will grow 10x in the coming years and serve as the fulcrum for opening the financial system through tokenization.”

While Jeremy Allaire, the CEO of USDC Circle stablecoin, recently expressed a strong optimistic views on the potential of stablecoins saying the assets will account for 10% of global economy in the next ten years

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