Powering the Next Era of Cross-Border Payments: Stablecoins’ Role Alongside Traditional Currencies

Cross-border payments have become a critical issue for businesses operating globally. The traditional payment methods that served businesses well in a less interconnected, less globalised economy are now falling short in meeting the needs of businesses and customers alike. The world of commerce today is characterised by a drive to modernise global payments infrastructure as cross-border payments are being hindered by several challenges ranging from high fees, lengthy processing times, limited transparency and a web of varying requirements across countries. The result for business is slow settlement times, trapped liquidity, and a high volume of capital being funnelled towards transaction costs – additional burdens all of which slow down growth.

The urgency of solving this issue for business cannot be overstated as cross-border transactions are growing quickly. The value of cross-border payments is projected to grow, driven by borderless ecommerce, cross-border trade, digital wallet uptake and digitalisation of payments across industries, from nearly $150 trillion in 2017 to more than $250 trillion by 2027. This marks an increase of over $100 trillion within just a decade.  As the volume and frequency of cross-border payments will undoubtedly continue to surge in today’s interconnected economy, ensuring seamless, efficient transactions is no longer just a logistical challenge in treasury departments — it's a pivotal factor in maintaining the competitive edge for global businesses.

This has led to businesses turning to stablecoin blockchain-powered solutions for more efficient and cost-effective cross-border payments. While stablecoins are increasingly being used to construct robust payment systems streamlining cross-border transactions and enabling users to expand their access to faster and cheaper forms of payment, the optimal approach for businesses to achieve cross-border payment success is through the strategic combination of traditional currencies and stablecoins. Transactions leveraging blockchain technology and stablecoins, alongside traditional currencies, can be completed within minutes, making them highly attractive for cross-border payments and remittances.

‍The Challenge

The traditional financial system, which relies on a web of correspondent banks and payment processors, is slow, expensive with high fees due to multiple intermediaries involved in the process, and complex. This presents a major hurdle for companies trying to maintain cash flow and profitability when conducting international trade. The labyrinth of fees, delays, and unpredictability can erode margins and make global expansion seem like a risky prospect.

One of the most significant pain points is the high cost of international transfers. Fees from banks, payment processors, and currency conversion often eat into profits. In some cases, businesses report losing up to 10% of a transaction's value to intermediaries. In addition to impacting large businesses, these costs make it particularly difficult for small and medium-sized enterprises (SMEs) to operate on a global scale.

Traditional currencies, such as the US Dollar or Euro, have long served as the primary mediums of exchange in the global economy. However, for cross-border payments, the slow transaction speeds, where payments can take days to clear have caused friction. A major issue is that while domestic transfers can be settled instantly, international transactions can take several days or even weeks. These delays disrupt cash flow, making it harder for businesses to manage operations efficiently. In many cases, businesses are left waiting, with no visibility into where their money is or when it will arrive.

The pressure on cross-border payments to improve has grown, but traditional systems continue to struggle with inefficiencies, making innovation in areas like blockchain and stablecoins a more attractive alternative.

The Stablecoin Advantage

A 2024 report from Juniper Research highlighted the growing significance of digital currencies in cross-border payments, with stablecoins offering lower costs and faster transaction speeds than traditional banking methods. As stablecoin adoption grows, especially in developing regions where mobile money and alternative payment systems are already well-established, businesses are beginning to realise the benefits of blockchain technology for international money transfers​.

Stablecoins offer an innovative solution to these long-standing challenges. While the speculative trading of assets like Bitcoin or Ethereum has caused significant volatility, leading mainstream businesses to hesitate in adopting blockchain-based payment systems, stablecoins, especially those issued by trusted names like Circle, Tron, and PayPal, offer a trusted, stable solution by pegging their value to central bank-backed currencies such as the USD, the euro or sterling and coupling this security with their own reserves held in the currency. This approach eliminates the price fluctuations typically associated with cryptocurrencies.

One of the key benefits of using stablecoins is the significant reduction in transaction costs. By eliminating intermediaries and as stablecoin transactions occur directly on the blockchain, no go-betweens are involved, transactions can be significantly cheaper than traditional banking channels for cross-border payments, with some businesses reporting fee reductions of up to 80%. However, actual savings vary based on factors such as the specific stablecoin used, countries involved, and transaction amounts, whilst businesses must also navigate regulatory uncertainty and potential volatility. Companies are addressing these issues by adopting a holistic approach that harmonises traditional and cryptocurrency payment systems. Secondly, stablecoins also enable real-time settlement of cross-border payments - payments that previously took several days can now be reduced e.g. SWIFT's established messaging system enables near-instant settlement of cross-border payments, reducing what used to take several days to just minutes. This improvement in speed helps businesses maintain better control of their cash flow, making it easier to meet financial obligations and plan ahead.

Moreover, the transparency offered by blockchain technology, which underpins stablecoins, is another major advantage. Every transaction is recorded on an immutable ledger, providing businesses with real-time visibility into the status of their payments. This transparency not only builds trust between businesses and their international partners but also can be harnessed for compliance with regulations such as anti-money laundering (AML) rules. The inherent traceability of blockchain transactions provides a powerful foundation for regulatory compliance and risk management. To leverage this transparency effectively, forward-thinking companies are increasingly adopting specialised blockchain analysis tools, such as Chainalysis and similar platforms. Forward-thinking companies are rising to meet these challenges by adopting a holistic approach that integrates traditional and cryptocurrency payment systems and achieving notable security certifications such as SOC 2 Compliance and ISO 27001:2022 to safeguard assets and foster the confidence necessary for the continued growth and adoption of stablecoins in the broader financial ecosystem.

Merging Traditional and Blockchain Payment Rails

Pairing the two worlds together is the sweet spot businesses should be looking to land on, enabling them to benefit from the widespread acceptance and regulatory compliance of traditional payment methods as well as the speed, cost-effectiveness and security of blockchain payment rails.

There are several reasons why merging traditional and blockchain payment rails is the best way to maximise cross-border payments success.

Firstly, traditional payment schemes like SEPA Credit Transfer, SEPA Instant, Faster Payments, SWIFT, Fedwire etc. are widely accepted and trusted, making it easier for businesses to make cross-border payments to a large number of countries and organisations. Secondly, traditional payment schemes comply with local regulations and banking laws, providing businesses with added security and peace of mind.

Notwithstanding this, blockchain payment rails offer cost-effective cross-border payments and speed which are business-critical in today’s marketplace. A traditional payment via the SWIFT network generally takes 3 to 5 working days to reach the recipient’s bank. The time frame can vary depending on the destination, amount, occurrence of national holidays, and differing banking processes, but this is the typical duration for an international wire transfer. In contrast, transactions using blockchain technology and stablecoins, combined with traditional currencies, can be completed nearly instantly while still retaining the benefit of networks such as SWIFT. Choosing between traditional payments and stablecoins isn’t an either/or decision or zero-sum game; businesses can offer tailored solutions: customers pay in USDT, have funds converted to USD via a payments platform, and then seamlessly transfer them to any bank in USD, EUR, or GBP.

This combination also offers increased flexibility whereby businesses can choose the most appropriate payment method for each transaction, depending on factors such as speed, cost, security and compliance with regulations.

Looking to the Future

The traditional currency-only system for cross-border payments is no longer fit for purpose in today's global, digital-first economy. Stablecoins offer a solution to the inefficiencies that have long plagued international transactions; lower costs, faster settlement, and greater transparency. Although regulatory frameworks for digital assets are still being developed and refined globally, stablecoins currently offer a practical solution for payments across borders. As with any emerging technology, the future of cross-border payments is unfolding rapidly, and for many businesses, stablecoins are already offering a competitive edge. The question is not if, but when, to adopt this game-changing technology.