Stablecoins are now one of the fastest-growing areas of the crypto world. They grew at an incredible 49% clip last year, and show no signs of slowing down anytime soon. The two stablecoin behemoths — Tether (USDT +0.02%) and USDC (USDC +0.00%) — now have a combined market cap of $250 billion.
But top executives at Visa (V +0.81%) and Mastercard (MA 0.57%) don’t see it that way. In earnings calls this year, they dismissed the utility of stablecoins. As they see it, there simply is not any real demand for them from consumers, and their usage is limited beyond just cross-border payments. So should crypto investors be concerned?
Both Visa and Mastercard have initiated blockchain payment initiatives of their own, so it’s not like they are in denial about the technological changes happening in the financial system. But, in developed markets, they say, there is simply “no product-market fit” for stablecoins.
Admittedly, there’s some logic to that argument. Consumers already have plenty of options for paying for things online, and may not see the appeal of paying with stablecoins. Retail customers, if given a choice, would rather pay with digital dollars in their bank accounts. Why go to all the trouble of owning dollar-backed stablecoins?
That might be the case, but there are plenty of reasons banks and payment networks should pay closer attention. Stablecoins running on blockchain technology offer 24/7 settlement and payments that are finalized in seconds rather than days.
Moreover, some stablecoins pay out attractive yields to consumers. That’s what pulls in the crypto crowd — they see stablecoins as a potentially higher-yielding option to checking and savings accounts. In fact, Standard Chartered predicts that, by 2028, nearly $500 billion in bank deposits will flow into stablecoins The higher yields possible in the blockchain and crypto world will just be too good to pass up.
When it comes to stablecoins, investors have plenty of choices. There are now nine different stablecoins with market caps above $1 billion. In addition to Tether, there’s USDC, which is the stablecoin backed by Circle Internet Group (CRCL +13.56%). There’s also a stablecoin from PayPal (PYPL +1.30%) and a stablecoin from Ripple, the company behind the XRP (XRP +1.90%) token.
So I’m hardly concerned about the skeptical comments from Visa and Mastercard. There are some big-time fintech names, such as Circle Internet Group, behind stablecoins. Moreover, key officials within the Trump administration have been outspoken in their support of stablecoins.
As a result, stablecoins hardly seem like a passing fad. It’s time for investors to keep a close eye on what’s happening within this fast-growing area of the crypto market.
