Stablecoins Poised to Replace Traditional Forex, But Cross-Border Payments Face Hurdles

According to analysis from research firm Delphi Digital, stablecoins are gradually emerging as a solution for the high-cost cross-border payments in emerging markets, as they effectively reduce some inefficiencies of traditional foreign exchange (FX) infrastructure.

In emerging economies, stablecoins have become the most cost-effective option for transferring US dollars, especially when remitting to countries like Argentina or Nigeria, where the total fees for traditional FX channels can reach up to 8%.

Delphi notes, “Settlements are atomic, so there’s no longer a need for pre-funded liquidity to be idle in local currency.” The firm also stated that transaction volume thresholds and intermediary chains are no longer necessary for direct settlements with stablecoins.

Source: Delphi Digital

The “exit” for stablecoins remains a bottleneck for adoption.

According to the firm’s analysis, the “exit” for stablecoins, such as access to bank accounts or interbank transfers, remains a significant bottleneck, particularly when value needs to be transferred between on-chain and traditional environments.

Source: Delphi Digital

Most of the “friction” occurs outside of the blockchain. They point out that while the minting and burning of stablecoins can be completed in seconds, bank transfers to these systems experience significant delays due to batch processing schedules.

The firm added that stablecoins are unlikely to replace major FX channels in the short term, but in emerging markets, where “infrastructure costs far exceed currency risks, banks have largely abandoned competition,” the advantages of stablecoins will become more apparent.

Despite the decline in cryptocurrency prices, the supply of stablecoins continues to rise.

Delphi notes that emerging markets remain the most evident source of demand for stablecoins, especially when users require cheaper US dollar liquidity and cross-border transfers.

Total stablecoin supply, all-time chart. Source: DeFi NewsLlama