Stablecoin growth is hampered by nagging foreign exchange costs

[MUMBAI] Even as stablecoins enter a period of peak expectations, veterans in wider fintech circles see limitations to the tokens as an emerging payments tool. 

Stablecoin transaction volumes have already hit US$5 trillion across one billion payments so far in 2025, not far shy of the 2024 total of US$5.7 trillion, according to data from Visa and Allium. The combined value of these cryptocurrencies – designed to closely track the price of established currencies like the US dollar – has grown 47 per cent to US$255 billion since US President’s Donald Trump’s election win in November 2024. 

The promise of stablecoins is a faster, cheaper and more efficient future for payments, in particular those crisscrossing international borders. Based on the numbers, that potential is beginning to be realised, but doubts remain over whether the technology can resolve the same issues that have for decades plagued the business of foreign exchange (FX). 

Using stablecoins to exchange one fiat currency for another – euros to Hong Kong dollars, for instance – incurs many of the same costs as a normal conversion. 

“In crypto, there’s a belief that code and tech will solve everything. That’s naive when it comes to FX,” said Mike Robertson, chief executive of FX infrastructure firm AbbeyCross. “Each currency has its own dynamics. And most banks and payment providers make money on FX, not fees.”

FX costs typically cover bid-ask spreads, conversion fees, intermediary charges and slippage. They apply even in cross-border crypto transactions and can be especially acute during on and off-ramping, undermining the low-cost claims of stablecoin evangelists.

Much of the growth in stablecoin payment volumes can be attributed to two use cases: simplifying transactions spanning countries that aren’t well-connected by incumbent players and payouts in emerging markets.

BVNK, a startup specialising in stablecoin payments infrastructure, pays little mind to corridors involving the pound and the US dollar. Instead, it’s focusing on “exotic” corridors, such as Sri Lanka to Cambodia, according to Sagar Sarbhai, managing director for Asia-Pacific at BVNK. 

“That route would usually require multiple intermediaries. It’s expensive and slow. Stablecoins simplify it. They may not be cheap yet, but they’re faster and more capital-efficient,” he said. Today, BVNK handles about US$15 billion in annual volume. 

And it isn’t the only startup focused on helping corporates to deal in stablecoins. 

Conduit pivoted into stablecoin payments after a gruelling period for the crypto industry in 2022. The startup began using stablecoins to allow users to send money via local systems like Brazil’s Pix and receive it through Single Euro Payments Area, an equivalent system in Europe. Today, it’s processing US$10 billion annually, according to CEO Kirill Gertman. 

Singapore-based Thunes and Canada’s Aquanow are also trying to work with stablecoin issuers and corporates to streamline payments.

“The rise of stablecoins is a commercial opportunity,” said Floris de Kort, CEO of Thunes, which raised US$150 million in April. “The infrastructure might change, but people still need last-mile delivery in local currencies and wallets.”

All this may seem modest compared with the scale of established payments operators. Visa alone processed US$13.2 trillion in payments volume in 2024, according to its latest annual report. That’s more than double total stablecoin-denominated volumes in the same period. 

But the rapid growth of the market has put payments giants on high alert. They are exploring so-called “stablecoin sandwich” models: using stablecoins between two fiat currencies to bypass traditional banking networks – such as Swift – and settle transactions in minutes, with a focus on markets where dollar liquidity is scarce and legacy systems are slow. 

Visa in October 2024 unveiled a platform that would allow banks to mint, burn and transfer fiat-backed tokens, including tokenised deposits and stablecoins. 

The recent passage of the Genius Act in the US brings regulatory clarity in the world’s biggest stablecoin market, paving the way for banks and payment providers to enter the space with more confidence. That in turn has sparked a scramble among global regulators to forge ahead with comparable regimes for stablecoin issuers. 

“We’re just starting to see the hockey-stick growth,” said BVNK’s Sarbhai. “What took five years to build may explode in the next 12 months.” BLOOMBERG