Stablecoin growth
Stablecoins have grown strongly over the past few years. Their market value is increasing, and huge amounts of money are transferred through them every day. Most of this market is pegged to the US dollar.
This is important because the stablecoin that backs the dollar must have coverage. Issuers of such stablecoins therefore hold large reserves in dollars and US government bonds. In other words, the more people use dollar stablecoins, the more demand for the dollar and US debt grows.
This is why stablecoins are not just a crypto trading tool. They become part of a wider financial infrastructure. If they start to be used more for payments, savings, and international transfers, their impact can be much greater than the crypto market itself.
It all works in favor of the dollar. U.S. officials are increasingly openly acknowledging this. The logic is simple: if stablecoins are spread globally, and almost all of them are pegged to the dollar, then the use of the dollar is also expanding. Stablecoins can thus further strengthen the dollar’s position as the world’s main reserve currency.
Source: cointelegraph
Stablecoins and developing countries
For developing countries, stablecoins can play a very practical role. Many of these countries have volatile currencies, high inflation, and a banking system that is not equally accessible to everyone.
People in such conditions are often looking for a way to get a dollar because they see it as a more stable form of money. This is nothing new. In many countries, the dollar has been used for years for savings, larger purchases or protection against the fall of the domestic currency.
The problem was the approach. In the past, people often needed physical dollars, a bank account, or expensive international transfers. Stablecoins make this process much simpler.
Today, one can only hold digital dollars through mobile phones and crypto wallets. They don’t have to wait in the bank, pay high conversion fees, or depend on local infrastructure that often doesn’t work well.
This is especially important for people who don’t have a bank account. A large part of the world’s population still lacks access to basic financial services, especially in parts of Africa and Asia. Stablecoins can allow them to save in a more stable currency, send money, and participate in the global financial system without a traditional bank.
That’s why stablecoins in developing countries are not just a crypto trading tool. For many people, they can be a simpler approach to the dollar and a way to protect the value of their money.
Source: cointelegraph
How do stablecoins open up access to money?
In sub-Saharan Africa, stablecoins already play an important role in payments, savings, and trade. The reason is simple. When the domestic currency is volatile, people are looking for something more reliable.
Today, stablecoins make up a large portion of crypto transactions in Africa. In some cases, people are even willing to pay more than the actual value of the stablecoin just to get their hands on digital dollars. This shows how strong the need for a stable form of money is.
Stablecoins are especially useful when sending money from abroad. For many developing countries, remittances are one of the main sources of income for households. People who work outside send money to the family, but traditional channels often have high fees.
This is where stablecoins can make a big difference. Instead of expensive bank transfers and slow intermediaries, money can be sent faster and cheaper. In one example from Kenya, stablecoins reduced fees for cross-border micropayments from almost 29% to just 2%. This means that workers keep most of their earnings.
Globally, the savings could be enormous if stablecoins replaced some of the classic international transfers. That money would not end up in fees, but directly with families who use it for everyday expenses, savings or small business.
Stablecoins can also help where banks are unwilling or unable to lend. If local banks see too much risk or too little profit, funding through stablecoins and DeFi protocols can at least partially fill the gap. This is important for small and medium-sized enterprises, especially in countries where access to capital is limited.
Source: cointelegraph
Stablecoins as a new source of capital
The wider use of stablecoins in developing countries may also have geopolitical significance. Many poorer countries have been dependent on large foreign creditors for years, among which China is a particularly important player.
Through the Belt and Road Initiative, China has financed numerous infrastructure projects in less developed countries. The problem is that these loans are often difficult to repay. When a government cannot repay its debt, it can lose control of important assets such as ports, power plants, or other strategic projects.
Such a model works best when countries have no other sources of financing. If you have no choice, you accept bad conditions.
Stablecoins and digital finance can pave a different path here. Developing countries would be able to raise capital more easily, reduce dependence on large creditors and avoid some unfavorable arrangements.
One of the more interesting examples is the tokenization of government debt. Instead of relying solely on large foreign investors, the state can issue bonds in smaller amounts on the blockchain. Thus, local citizens, expatriates and smaller global investors can also participate in the financing.
This could be especially important for countries with large diasporas. People living abroad would be able to invest in their country’s bonds more easily through a digital wallet, without complicated access to traditional capital markets.
Some countries are already exploring tokenized bonds and government bills that can be bought and traded through digital wallets. If this model develops, countries could more easily refinance expensive foreign loans or buy back some of their existing debt.
The point is simple. Every dollar that the state raises from the diaspora, local citizens, or global crypto investors is a dollar that it does not have to borrow on poor terms.
Source: cointelegraph
CBDCs
Central banks have also recognized the potential of digital money. That is why more and more countries are developing CBDCs, i.e. a digital currency issued and controlled by a central bank.
The idea sounds simple. The state issues digital money, payments become faster, and people who don’t have a bank account find it easier to access financial services. At least in theory.
In practice, the results are not particularly convincing so far.
A good example is Nigeria’s eNaira, one of the first CBDCs for the general public. Although the project had great support from the state, a large part of the users who opened the eNaira wallet stopped using it. At the same time, people in Nigeria continue to increasingly use stablecoins to protect themselves from the decline in the value of the naira.
This is where the main difference can be seen. CBDC often comes from above, through the decision of the state and the central bank. Stablecoins spread from below, as people choose them themselves when they really need them.
China has a similar problem. The digital yuan has been around for years, but its international use remains limited. Especially since stablecoins already have a great advantage and a much wider global use.
There is another problem. When central banks announce their own CBDC, activity around stablecoins may temporarily decline as the market waits to see what the government will do. This may suit regulators who don’t want competition, but it may not be good for users.
If the private sector already offers better, faster and more accessible solutions, the question is how much sense it makes to put the brakes on it just because the state wants its own version of digital money.
So far, CBDCs have not proven that they can significantly improve access to finance, reduce costs, or solve the problems of inflation and weak currencies. Stablecoins, on the other hand, already have real uses. People use them for savings, transfers, payments, and access to the dollar.
That’s why stablecoins can be beneficial for both the US and developing countries.
For the U.S., they are expanding the dollar’s influence in the digital age. If stablecoins are used globally, and most of them are accompanied by the dollar, then the dollar remains a key currency in the new financial infrastructure as well.
For developing countries, stablecoins can mean easier access to more stable money, cheaper transfers, new forms of investment, and less dependence on expensive creditors.
This doesn’t mean that stablecoins are perfect. There are risks around regulation, reserves, issuers and control over wallets. But in many states, they are already solving a specific problem that CBDCs have largely failed to solve so far.
If the US supports stablecoins and the open financial networks on which they are used, it can simultaneously help emerging markets grow and further strengthen its own economic position.
In the fight for users, capital, and global influence, stablecoins could play a much bigger role than meets the eye.