Stablecoins are now one of the fastest growing areas in the world of cryptocurrencies. They grew at an incredible rate of 49% last year and show no signs of slowing down anytime soon. The two stablecoin giants: Tie (CRYPT: USDT) and USDC (CRYPT: USDC) – now have a combined market capitalization of $250 billion.
But the top executives of Visa (NYSE: V) and MasterCard (NYSE: MA) don’t see it like that. In this year’s earnings calls, they dismissed the usefulness of stablecoins. In his view, there is simply no real consumer demand for them and their use is limited beyond cross-border payments. So should cryptocurrency investors be worried?
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Both Visa and Mastercard have started their own blockchain payment initiatives, so it’s not like they deny the technological changes happening in the financial system. But in developed markets, they say, there is simply “no product-market fit” for stablecoins.
It is true that there is some logic in that argument. Consumers already have many options for paying for things online and may not see the appeal of paying with stablecoins. Retail customers, if given the choice, would prefer to pay with digital dollars in their bank accounts. Why go to the trouble of owning dollar-backed stablecoins?
That could be so, but there are many reasons why banks and payment networks should pay more attention. Stablecoins running on blockchain technology offer 24/7 settlements and payments, finalizing in seconds instead of days.
Additionally, some stablecoins offer attractive yields to consumers. That’s what attracts the crypto crowd: they see stablecoins as a potentially higher-yielding option for checking and savings accounts. In fact, Chartered Standard predicts that by 2028, nearly $500 billion in bank deposits will flow into stablecoins. The highest returns possible in the blockchain and crypto world will be too good to pass up.
When it comes to stablecoins, investors have many options. There are now nine different stablecoins with market caps exceeding $1 billion. In addition to Tether, there is USDC, which is the stablecoin backed by Internet Circle Group (NYSE: CRCL). There is also a stablecoin of PayPal (NASDAQ: PYPL) and a stablecoin from Ripple, the company behind the XRP (CRYPT: XRP) symbolic.