The payments industry often chases buzzwords before considering real, operational benefits. We saw it with BNPL when I challenged the hype vs the actual value. Stablecoins are quietly moving through the same arc. This article was first published in Paypers Global Ecommerce Report 2026
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Some context and definitions
First things first, what is a “stablecoin”? A stablecoin is a digital token pegged to fiat such as the US dollar or euro, designed to maintain a stable value over time. Unlike volatile cryptocurrencies, the peg is maintained through reserves, which may include cash, cash equivalents, or short-term government debt. The difference with “Central Bank Digital Currency” (CBDC) is that this one is issued directly by a central bank and backed by that institution – one example of this would be the “Digital Euro”. Finally, “fiat” refers to government-issued currency like USD or EUR that is legal tender.
Security and reliability depend on the quality and transparency of reserves, the governance model, and regulatory oversight. Fully backed, regularly audited coins such as USD Coin (USDC) and Pax Dollar (USDP) are generally considered among the most reliable, due to published attestation reports and reserve holdings in short-term US Treasuries, although the most used is USD Tether (USDT).
Most regulators treat stablecoins as financial assets rather than as money, becoming money only when converted into fiat – here is the paradox: money was created to simplify the trade of assets, yet today an asset, the stablecoin, is facilitating how money moves. In international commerce this classification means they can move across borders without being treated as currency until conversion. For merchants, selling goods or services for an asset creates unique accounting considerations. Value is recorded at the time of transaction, and changes before conversion may be taxable. Many convert to fiat immediately, but frameworks must evolve as adoption grows.
Economics and market entrants
The stablecoin ecosystem has gone from niche to massive. As of mid-2025, the total market capitalization of stablecoins stood at $252 billion, with Tether (USDT) holding around 68% market share (over $112 billion in circulation), and USDC following at roughly $64 billion – thanks in part to growing institutional trust, with 99% pegged to the U.S. dollar (CoinLaw). USDT alone processes $20–25 billion daily, much of it tied to cross-border transfers and remittance flows where stablecoins already offer faster and cheaper settlement than traditional methods.
How do stablecoin issuers profit from this activity? The core revenue driver is interest incomes from reserves. Tether’s Q4 2024 attestation reveals net profits of $13 billion, buttressed by over $113 billion in U.S. Treasury holdings and a reserve buffer above $7 billion. Earlier in 2024 it reported $5.2 billion for the first half alone. Issuers also earn from fees, API licensing, and white-label services.
Traditional finance is aligning with stablecoins. JPMorgan’s JPM Coin is live for institutional settlement, enabling 24/7 wholesale payments between clients (JPMorgan). PayPal launched PayPal USD (PYUSD) in 2023, a fully fiat-backed stablecoin redeemable 1:1 and available on Ethereum and Solana (PayPal Newsroom). Visa and Mastercard are also piloting USDC-based settlement programs on Ethereum and Solana, allowing merchants to receive USDC directly (Visa Press Release, Mastercard Newsroom).
But profits rely on high rates, while liquidity mismatches or sudden redemptions could strain issuers. For merchants and PSPs, the challenge is integrating off-ramps and securing regulatory cover.
Key use cases for stablecoins in payments
Stablecoins prove their worth where speed, cost and transparency matter most.
For settlement they bypass cutoff times and weekend delays, enabling a marketplace to pay a seller on Sunday and have funds available within minutes. In cross-border scenarios this removes correspondent banks, cutting time and fees while improving visibility. This strengthens liquidity and reduces the need for pre-funding.
In cross-border and volatile markets they allow merchants to lock in value at the moment of payment, avoiding currency swings and in some cases earning yield until conversion. This brings stability in revenues and flexibility in cash flow while lowering conversion costs compared to traditional FX channels.
For low-value, high-frequency transactions they make micropayments viable by removing the fee burden that undermines sub-dollar sales. With on-chain compliance each transaction is traceable in real time, giving regulators, merchants and consumers clearer visibility and faster reconciliation.
Emerging sectors highlight the edge: digital content platforms experimenting with sub-dollar tips, ride-hailing apps piloting instant driver payouts, and corporates testing treasury sweeps across subsidiaries. These cases show the shift from theory to practice.
Why it matters and what’s next?
According to McKinsey, tokenized cash can reduce operational risk, accelerate settlement, and improve liquidity when integrated into institutional systems. Legislative frameworks such as the GENIUS Act in the US and MiCAR in the EU are providing clearer rules on issuance, redemption and compliance, the kind of certainty needed for scale.
The cross-border market is where stablecoins could deliver the most immediate impact, replacing multi-day, high-cost transfers with near instant, low fee and fully auditable transactions on transparent ledgers. For merchants and payment providers they offer faster settlement, reduced FX exposure and new billing models without overhauling infrastructure. For issuers and financial institutions, they offer a scalable product with recurring yield from reserves, creating a new profit center in payments.
The next frontier is programmability. If stablecoins embed tax calculation, invoice matching, or ESG tagging at the transaction level, they move from being just cheaper rails to becoming value-added infrastructure. That is where merchants, banks and regulators will need to collaborate — not just to move money faster, but to move it smarter.
If adoption continues its current trajectory, stablecoins could become a default settlement method in global trade, a liquidity tool for corporates and a new compliance benchmark in regulated payments. I truly believe that those who integrate early, align with regulations and solve merchant challenges will shape the next generation of payment infrastructure.