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Stablecoins - not just for crypto traders anymore
Our focus today is on the transformative power of stablecoins, the unsung heroes of the digital economy, especially within emerging markets. Joining me in this deep dive is Linda Jeng, Founder and CEO of Digital Self Labs at the time of recording. Linda has since become Chief Legal & Policy Officer at Aave Labs.
Linda joins me in exploring the evolving landscape of stablecoins. Our discussion focuses on our key takeaways from Castle Island Ventures' latest stablecoin report, 'Stablecoins: the Emerging Market Story'.
To kick things off, Linda shares her background in financial regulation, blockchain, and AI, and offers critical insights into how stablecoins are reshaping financial systems in emerging markets. Through a detailed analysis of the Castle Island Ventures report written with Brevan Howard Digital, our conversation reveals the growing use of stablecoins for cross-border payments, currency conversion, and as a stable store of value, reflecting their importance beyond crypto trading.
We also touch on regulatory perspectives, why non-dollar stablecoin volumes are so meager, and the potential impact of Central Bank Digital Currencies (CBDCs) on the stablecoin market.
Linda Jeng is a trailblazing leader in the digital economy through ‘shaping a self-empowered future through blockchain and AI technologies’. Digital Self Labs is a regulatory and policy advisory firm combining blockchain expertise with policy and regulatory strategy.
With over 15 years of government experience, Linda has held key roles at institutions like the U.S. Federal Reserve, US Treasury Department, the SEC and the Bank for International Settlements. Linda is also a Visiting Scholar at Georgetown Law, a Senior Lecturing Fellow at Duke Law School, and a Bank for International Settlements Research Fellow. Her deep expertise in financial systems and her advocacy for data transparency and decentralized technology make her a pivotal figure in shaping the future of finance.
Reference Links
👉Follow Linda Jeng on X(Twitter) and LinkedIn
👉Stablecoins: The Emerging Market Story (Castle Island Ventures & Brevan Howard Digital, 12-Sep-24)
👉The Finternet: The financial system for the future (Bank for International Settlements, 19-Apr-24)
👉International Association of Deposit Insurers
👉Overview of the Bancor Proposal from Bretton Woods (Wikipedia)
👉Stablecoin companies now 16th largest holder of U.S. treasuries globally (CryptoSlate, 18-Oct-23)
Final Takeaways
Here are some key takeaways from our deep dive into Castle Island Ventures’ ‘Stablecoins: The Emerging Markets Story’.
“Stablecoins as the Killer App of Crypto”
Stablecoins account for 50 percent of all value settled on public blockchains and continue to grow during crypto bear markets (data from the report)
Real Usage Volumes
Stablecoin volumes continued to grow during crypto bear markets as stablecoins crossed the chasm into the mainstream, with real usage volumes of $3.7trn in 2023 and projected to reach over $5trn in real usage volumes in 2024 (data from the report). The $3-5trn level is even more interesting when compared to something as common as the Faster Payments Scheme in the UK which does about $3trn in annual transaction volume.
Day-to-Day Use Cases
The feedback gathered with the survey pointed to a number of day-to-day use cases solving everyday problems for consumers and SMEs in emerging markets that are not problems for US consumers, which explains why the average US consumer or small business owner just does not get the point of stablecoins, if they’re even aware stablecoins exist.
Dominance of the U.S. Dollar
The U.S. dollar’s ubiquity in global commerce and as a stable store of value around the world is being mirrored in the digital realm through USD-pegged stablecoins.
While consumers and businesses outside the US would have a need for the U.S. dollar with or without stablecoins, they have far less of a need for liquidity in the other big currencies like euro, sterling and yen. This is one of the reasons why U.S. dollar stablecoins dominate the stablecoin landscape, as in many of the problems that U.S. Dollar stablecoins solve - things like fast and cheap cross-border remittance, more stable savings than your domestic currency, better currency conversion rates than your domestic currency - aren’t generally solved with non-dollar currencies today.
So even though non-dollar stablecoins are available, dollar stablecoin users (both individuals and businesses) and those who might become stablecoin users don’t really have an addressable problem that non-dollar stablecoins solve better than dollar stablecoins - yet.
Overall, the stablecoin story will continue to unfold as the long arc of the global monetary system bends towards digital.
Originally published on the MoneyNeverSleeps newsletter on 30 September 2024.
