Stablecoins are quietly moving into the financial mainstream. “We’ve seen a dramatic explosion in the use of stablecoin,” Wall Street Journal editor Gerard Baker told participants in a session in Davos.
What’s driven that growth and where is it going? Dan Katz, First Deputy Managing Director at the IMF, started by putting those figures into perspective: “In the context of the global financial system, $300 billion” — that’s the total market capitalization of stablecoins, according to recent estimates — is still very, very tiny,” he told participants.
But that figure belies its potential, other panellists pointed out. Take the example of the African continent, where access to banking and high inflation rates remain a huge issue. “1.5 billion people globally do not have access to a bank account, 650 million people on the African continent,” said Vera Songwe, Chairperson and Founder, Liquidity and Sustainability Facility. “With a smartphone, you have access to stablecoin, so you can actually save in a currency that is not exposed to the fluctuations of inflation and making you poorer,” she explained. “That’s a big contribution of stablecoin.”
Indeed, as Jeremy Allaire, Co-Founder, Chair and CEO at Circle, a payments technology company, noted, if anything, we’re seeing use cases proliferate beyond what was initially envisaged: “We’re seeing use grow in cross-border trade settlement; we’re seeing use grow in trade finance; we’re seeing the biggest e-commerce platforms like Stripe and Shopify adding USDC payment acceptance in their own platforms.”
That’s something that Siu Yat, Co-Founder and Executive Chairman of Animoca Brands, a digital assets company, thinks explains stablecoin’s huge takeup — and why, he thinks, that trend will continue to grow. In the countries where his company operates, for example, they saw mass adoption during COVID, when people were forced out of the traditional labour market and had to find alternative sources of income. “In places like the Philippines and Indonesia, there was basically mass adoption in places where they needed to make a virtual income.”
Watch the session in full here.
