Stablecoins are a type of cryptocurrency designed to hold a fixed value against a reference currency, most commonly one U.S. dollar.
Transferring stablecoins across countries is unlike transferring money through a bank: A sender converts their local currency into a stablecoin, sends it to the recipient’s blockchain address via a blockchain network, and the recipient then converts it to their own local currency. Recently, this is being recognized as an often more efficient and cost-effective method of moving money for international remittances.
In this article, we’ll cover the mechanics, benefits, and drawbacks of stablecoins in cross-border payments.
What Is a Stablecoin, and Why Does It Matter for Payments?
A stablecoin is a token that promises redemption at par against a reference currency, backed by reserves the issuer holds in cash and short-term government debt. Almost the entirety of the stablecoin market is based on US Dollars, with Tether's USDT and Circle's USDC forming a duopoly that accounts for over 85% of the market.
