The rise of stablecoins in cross-border payments is quietly transforming the traditional model of cross-border transactions,opening up new possibilities for global trade and financial exchanges.
I. Stablecoin: The "digital nouveau riche" that is anchored to reality
Stablecoins, as a special type of digital currency, aim to address the issue of excessive price fluctuations in cryptocurrencies by being pegged to a fiat currency (such as the US dollar or the euro) or other assets (such as gold). Their creation seeks to combine the convenience of digital currencies with the stability of traditional currencies, providing a more reliable option for cross-border payments.
II. The pain points of traditional cross-border payment have given rise to the demand for stablecoins.
The pain points of traditional cross-border payment have given rise to the demand for stablecoins. Traditional cross-border payment relies on inter-bank clearing networks, such as the SWIFT system, which has cumbersome processes and high costs. A cross-border remittance often needs to pass through multiple intermediary banks, and a certain percentage of handling fees is deducted from each bank. The funds usually arrive within 1 to 3 working days, or even longer. For example, a $10,000 cross-border remittance from the United States to Europe may have a handling fee of up to $50 - $100. The long waiting time also brings great inconvenience to the capital turnover of enterprises.
Stablecoins rely on blockchain technology, with transactions conducted point-to-point and without the need to go through numerous intermediary institutions. In theory, when using stablecoins for cross-border payments, the transaction fees can be reduced to 1/10 or even lower of the traditional method, and the funds can be credited almost in real time. This efficient and low-cost feature is precisely what makes stablecoins attractive to the cross-border payment market.
III. Blockchain technology safeguards stablecoins.
The operation of stablecoins is based on the decentralized ledger technology of blockchain. Taking USDT (Tether) as an example, it is one of the earliest and most well-known stablecoins. It claims that for every 1 USDT issued, 1 US dollar will be deposited in a bank as a reserve. Users can conduct USDT transfer transactions on the blockchain through smart contracts. All transaction records are transparent and cannot be altered. The distributed architecture of the blockchain ensures the security and reliability of transactions, without relying on a single central institution, thereby reducing the risk of transaction interruption caused by institutional failures or malicious attacks.