Stablecoin: Mainstream stability, maybe?

Executive summary: Stablecoin’s time may be now. Processed transaction volumes now surpass those of Visa, yet they still represent less than 1% of global financial transactions by value. With advances in technology, supportive regulation, and growing acceptance from established players, the stablecoin market could expand more than fivefold by 2030, reaching up to $3 trillion in value. Stablecoins promise enhanced speed, cost, transparency, availability and inclusivity for users. Forget trading for crypto accounts – stablecoins will increasingly be used in retail transactions and cross-border payments, bypassing traditional intermediaries. Although there are no shortage of stablecoin advocates, stablecoins remain unproven and subject to the credit and liquidity risks of their issuers. The path forward will be uneven but the emergence of stablecoins represents a major shift both for incumbents and disruptors. It may still be too early to call the winners, but the established payment processors (Visa and Mastercard) look potentially vulnerable.

Remember memecoins or non-fungible tokens? Digital assets have come and gone, often in spectacular style. The crypto space has been marred with scandals and scams throughout its short history. Yet the value of bitcoin has continued to increase, enjoying a greater than 90-fold rise over the last decade, albeit with several bumps along the way. Despite – or maybe because of – this move, there remains a high degree of scepticism. The championing of crypto by the Trump administration only adds to both the euphoria and the confusion.

However, nothing arguably marks crypto's emerging maturity more than the rise of stablecoins. They have become the fastest and cheapest way to send a dollar – in less than one second for less than one cent – almost anywhere in the world. Think of a stablecoin as a type of cryptocurrency designed to maintain a stable value by being pegged to a reserve asset, such as a fiat currency like the US dollar or a commodity like gold.

Stablecoins can be likened to digital tokens that run on existing blockchains (or secure, decentralised digital ledgers). These blockchains automatically handle transactions and track ownership using built-in rules and algorithms. Popular stablecoins run on multiple blockchains, much like cash can be printed by different Central Banks and stored in separate vaults. When a customer sends money to the issuer, a digital token is created and the funds are held in reserve. To redeem, the token is destroyed (‘burned’), and the original currency is returned.

There are good reasons why the time for stablecoins may now be right. Their growing ubiquity demonstrates how new technologies can help address some of the current and pervasive inefficiencies in modern financial systems. What stablecoins offer is the promise of a cheap and broadly accessible means of domestic and cross-border payments. Stablecoin adoption will accelerate as network effects spread across financial institutions, merchants and consumers.

Technological progress and supportive policies have driven the growth of stablecoins. These have been accompanied by increasing transaction volumes and incumbent responses. By contrast, early attempts, such as BitUSD, faltered because they were under-collateralised and lacked sufficient liquidity. Tether and Circle both launched in the mid-2010s but average daily stablecoin volumes remained negligible until recently. Daily flows have increased 400,000-fold in the last decade (albeit from a low base) and more than doubled in the last year. In 2025, approximately $30tr of stablecoins were processed, according to Bloomberg. For context, Visa processed $16.7tr of volumes across its network in its most recent financial year (ending 30 September 2025).

Technological advancements in blockchain, e-wallets and on-chain analytics have enhanced the robustness of the stablecoin ecosystem. Performance (speed of transactions) has improved, reducing network congestion and improving reliability. On many crypto exchanges today, stablecoins are offered one-to-one in exchange for cash with a single click. Meanwhile, enterprise payment platforms such as SAP and PayPal now offer native stablecoins to their business customers.

At the same time, the policy environment has become increasingly supportive. The GENIUS Act (or Guiding and Establishing National Innovation for US Stablecoins) was signed into law in July last year. It legitimises stablecoins for mainstream use and clarifies issuer eligibility, regulatory oversight, definitions, and permitted collateral types. The Act also requires stablecoin to comply with strict marketing rules to protect consumers from deceptive practices. Other geographies have sought to follow suit. The European Union is in the process of developing its Markets in Crypto-Assets rulebook. The UK, Switzerland, Japan and Singapore are accelerating developments too. China has been more reluctant, preferring to prioritise its Central Bank Digital Currency project.

The industry is responding. Banks including JPMorgan and Citi already operate tokenised deposits (a traditional bank deposit represented as a digital token on a blockchain issued by a regulated bank). Customers of Goldman Sachs, JPMorgan and UBS can make stablecoin purchases via credit cards. The payment processors – Mastercard and Visa – have integrated support for stablecoin-routed payments. Visa announced in November a pilot that will allow businesses and platforms to send payouts directly to recipients’ stablecoin wallets. This was followed by a December announcement that it had launched stablecoin settlement on its network in the US for both issuer and acquirer partners.

SWIFT, the global messaging network that enables banks and financial institutions to securely exchange information about financial transactions, has begun its own blockchain to facilitate transactions between global banks. It plans a blockchain-based ledger for asset-based transactions. Meanwhile, a consortium of nine European banks has said it intends to jointly launch a euro-denominated stablecoin in the latter part of 2026. Other projects underway include Project Guardian and Project Helvetia, which involve the Monetary Authority of Singapore and the Swiss National Bank respectively.

Despite rapid growth and increasing adoption over the past year, stablecoins currently account for fewer than 1% of global financial transactions by value. Their total circulating supply was equivalent to at least $300 billion at the end of 2025, based on reports from multiple sources. However, look ahead and the stablecoin market could grow at least fivefold to $2tr by 2028, and reach $3tr by 2030, according to McKinsey.

Speed, cost, transparency, availability and inclusivity comprise the main reasons why stablecoin adoption should grow. Think of stablecoins as de facto digital Dollars that can move at internet speed, 24-7, every day of the year. They transcend traditional banking hours and global borders. Ownership is registered instantaneously on digital ledgers, allowing for near-instant settlement. This allows for increased transparency and control. Payments can be tracked in real-time. Future business innovation could see smart contracts, automated portfolio rebalancing, tokenised assets as payment vehicles.

Today, stablecoins are mostly used within crypto markets, where traders use them to move funds quickly between exchanges and to buy other digital assets without converting back to traditional currency. Crypto trading accounts for around 90% of stablecoin volumes, according to Alpine Macro. The remainder currently comprises remittances and settlements.

However, the number of potential use cases is significant. Consider that retail payments are currently dominated by credit and debit cards. Merchant costs are generally 1-2% of transaction value (bank acquirer and issuer fees add further costs). Using stablecoins would cut out firms such as Mastercard and Visa and address a major pain point for both consumers and retailers. Major businesses such as Amazon and Walmart are also reportedly considering their own coins. To consumers, these might work like a gift card, providing a balance to spend with the retailer, perhaps at lower prices.

Cross-border payments represent another area for stablecoin growth. Legacy systems rely on correspondent banking, which is slow and costly for small values. Middlemen can again be disintermediated. Interestingly Western Union, a major incumbent in the space, announced last October that it would seek to launch a dollar-backed stablecoin. This would let its 100m customers send money internationally detached from local currency fluctuations and risks. The US Dollar Payment Token (USDPT) is expected to launch in the first half of 2026.

Since stablecoins are wallet-based as opposed to account-based, access is opened to anyone with an internet connection. The unbanked and underbanked now have enhanced access to a global payment network. This could be a particularly important dynamic in emerging markets, where local fiat currency is volatile and/or where consumers do not have easy or affordable access to Dollars. Stablecoins enable non-US based internationals to hold a Dollar proxy without needing to use a multi-currency bank account. Equally, in countries experiencing high inflation, individuals and businesses might use Dollar stablecoins as a hedge against local currency depreciation.

A much broader, longer-term vision would embrace full tokenisation. In this world view, ownership rights to an asset (whether cash, stocks or even private equity stakes and debt) would be converted into a digital token on a blockchain. With instant settlement, this dynamic could unleash significant capital.

There are no shortage of advocates for this vision. Most have a vested interest. Larry Fink, the Chairman of Blackrock, believes that “one day… tokenised funds will become as familiar to investors as ETFs.” Meanwhile, Vlad Tenev, his counterpart at Robinhood Markets believes that the changed financial environment is “laying the groundwork for crypto to become the backbone of the global financial system.” Scott Bessent, the US Treasury Secretary has also been an ardent supporter. For many in the Trump administration, leadership in stablecoins can represent a mechanism for reinforcing Dollar hegemony.

However, the path forward will be uneven. The IMF warned in its 2025 financial stability report that the stablecoin market could pose a systemic threat to the global financial system. Since stablecoins are relatively new, they may face usability errors, systemic shocks, and periods of volatility. Stablecoins carry the credit and liquidity risks of their issuers. They may therefore face runs (like banks), creating possible contagion risks. At present, since most stablecoins are currently used to transact in crypto rather than outside it, implies that bear markets in riskier crypto assets could drive outflows in stablecoins.

More broadly, for any currency to become a general-purpose payment tool, it needs to be not only seamless and predictable but also have significant reach, distribution and global merchant acceptance. Add in to this the importance of multi-level security and fraud protection as well as compliance with local laws and regulations across multiple geographies. Consumer habits take time to change. Banks may also face operational challenges, needing new technologies and infrastructure. Intermediaries may be reluctant to cannibalise lucrative payment revenues unless competition forces it. For as long as stablecoins are employed mostly as an intermediary, they will require abundant liquidity and off-ramps (venues for exchanging digital assets) to traditional fiat currency.

Nonetheless, the growth in stablecoins represents a major shift both for incumbents and disruptors. Stablecoin payments are unlikely to lift total transaction volumes, but they promise efficiency, and those gains come at incumbents’ expense. The growing use of stablecoins will pressure transaction and payment service providers. Stablecoins may divert deposits away from banks, resulting in fee compression. Banks may simply become less relevant. Payment networks would suffer via disintermediation, since direct peer-to-peer payments bypass card networks.

Visa and Mastercard may be at particular risk owing to their elevated profit margins and valuations. Both businesses generate operating margins above 50% and have consistently traded at a clear premium to the broader market. Unsurprisingly, the businesses have a vested interest in stating that stablecoins represent a complement rather than a substitute to their existing solutions. Visa has described stablecoins as “an opportunity” and has already supports a tokenised asset platform on its network. Mastercard calls it “an attractive and growing offering.” Only time will tell. Stablecoins might also render parts of other fintechs’ infrastructure obsolete unless they adapt quickly. Businesses such as Adyen and Fiserv may be exposed.

At this stage it may be too early to identify the beneficiaries. Ease of use and acceptance will drive adoption. Payment scale and network effects will be key. The two current market leaders are Tether and Circle, which command ~80% of the stablecoin market. The former is privately owned. The latter listed in June 2025 on the New York Stock Exchange. Circle (owner of the USDC stablecoin) was valued at $20bn at the end of 2025, down from a peak market capitalisation of $50bn. Coinbase is the co-issuer of USDC and operates the Base blockchain for stablecoin settlement. It earns fees from stablecoin trading, custody and infrastructure and is capitalised at $68bn.

Other businesses that have begun to establish a presence in the space include Figure, PayPal and Robinhood. All are listed. Figure has launched YLDS, a stablecoin designed for institutional-grade use in lending and settlement. Its Provenance Blockchain supports stablecoin transactions and tokenised lending. The company has collaborations with BlackRock, Microsoft and NVIDA. Meanwhile, PayPal is the issuer of PYUSD, a dollar-backed stablecoin integrated into PayPal and Venmo. It has exposure through direct stablecoin issuance and payment infrastructure. Robinhood supports stablecoin trading and USDC payment solutions. It also has a retail crypto platform with growing stablecoin integration and has over 100 tokenised products currently available for its customers. Do not forget JPMorgan. As America’s largest bank, it is positioning itself to be a leader in compliant, bank-issued stablecoins. It is also the issuer of the JPM Coin for institutional payments.

Ultimately, the US Government stands to be the biggest beneficiary of stablecoin growth because most stablecoins are pegged to the US dollar, reinforcing its role as the dominant global reserve currency. As stablecoins expand into cross-border payments and digital commerce, they effectively export dollar usage into new markets, deepening dollarisation worldwide. This increased demand for dollar-backed assets also boosts liquidity for US Treasuries, since stablecoin issuers typically hold large reserves in short-term government securities. America’s financial influence will strengthen globally.

Alexander Gunz, Fund Manager

The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Heptagon Capital is an investor in Mastercard. The author of this piece has no personal direct investment in the business. Past performance does not predict future returns, the value of investments and income from them can fall as well as rise.