Stablecoin Monetization Demystified: Flow Business pt.2

It’s often said that stablecoins offer a cheaper, faster, and more accessible way to move value. But to truly grasp their disruptive potential, it’s critical to understand what stablecoins are designed to disrupt and equally importantly what they aren’t.

Take the headlines: in 2024, stablecoins reportedly settled $27.6 trillion, eclipsing Visa and Mastercard combined. But that figure is misleading. Up to 70% of that volume is inflated by bot activity. The organic number is closer to $8T, and by Visa’s own estimates, stablecoins processed $5.5T in genuine user-driven volume last year. The organic portion accounted for around 8T. By Visa’s own data, organic stablecoin volume did $5.5T in 2024. 

Of course, $5.5T is no small feat and it represents a major opportunity to capture revenue from the “flow” part of the stablecoin business.

But not all financial flows are created equal.

For example, JPMorgan’s  Kinexys Digital Payment system already enables qualified clients, such as banks and large corporates, to move money 24/7 on JPMorgan’s private blockchain rails. Just last week, the bank onboarded eight of MENA’s largest banks to the system. It’s a powerful product, specifically built for high-value, institutional-grade flows. The kind of flows that stablecoins don’t compete in today.

Let’s be clear: stablecoins do not challenge core financial market infrastructure like ACH or FedWire.

• ACH processed $86.2T in 2024, serving as the low-cost, batch-based workhorse for US domestic B2B and payroll transactions.

• FedWire, handling a staggering $1,133T, is the real-time settlement backbone for large-value payments between financial institutions.

Stablecoins don’t compete here, yet. Major hurdles standing in front of mainstream financial adoption for payments include:

• A US stablecoin market structure bill must pass through Congress to provide regulatory clarity

• Global accounting standards must classify stablecoins as cash equivalents to make them capital efficient for financial institutions

• Stablecoin issuer counterparty risk must be solved via a clearing system

  
  

So where are stablecoins winning? Where is the disruption real?

This week, we unpack the three verticals where stablecoins already offer a clear advantage and are beginning to reshape the payments landscape:

1. Crypto<>fiat cross-border settlement

2. Fiat<>fiat cross-border payments

3. Treasury management

   
   

Let’s dive in.

1. Crypto<>Fiat Cross-Border

As the digital asset ecosystem scales, the capital flows between exchanges, asset managers, and traditional banks are surging. While retail users use Coinbase and Kraken to act as their bridges into and out of the digital asset world, bigger players are sensitive to the fees or FX spread. 

Consider this: Coinbase charges 60bps for market orders on swaps. On a $1M volume, the taker would lose $6k in fees if he simply clicked on market buy/sell buttons on Coinbase.

If you are a business taking in $1M in monthly revenue in digital assets, that $6k cost may well be a material drag on margins.

Therein lies opportunities for a stablecoin startup that can offer more favourable pricing than exchanges to capture that flows in and out of the digital asset space. Of course this startup needs to have the fiat payment rails that can deliver the US dollars to the businesses bank account. 

Various challenges/opportunities further arise if the receiving bank accounts are based in geographies outside the US or Europe OR if the business requires the receiving currency to be in a non-major currency such as USD or EUR.

Every 20bps improvement in pricing translates to $2,000 saved per month.. While this may not seem a lot, to a business it could be an important source of efficiency gains or competitive advantage.

All of this sounds theoretical and far-fetched? Not at all. Look at the fast growing flows in and out of the digital asset space from the rapidly growing onchain asset management space. 

I am talking about tens of billions of tokenized US Treasuries, private credits, crypto projects allocating capital to offchain assets. All those subscriptions, redemptions and interest distributions are price-sensitive flows where 20bps savings are crucial competitive advantages that will impact on bottom-line returns. 

2. Fiat<>Fiat Cross-Border (Stablecoin Sandwich)

For most people in the US or Europe, cross-border payments feel distant: rarely relevant to daily life. After all, when was the last time you had to send $500 to the Philippines or South Sudan?

But for billions across EM Asia, Latin America, and the Global South, cross-border transfers are a monthly ritual tied to remittances, family support, and commerce.

Take the US<>Philippines corridor:

In 2024, US to Philippines remittance corridor totalled $14B, accounting for 8% of Philippine’s annual GDP. However, the sender faces either long wait or expensive fees depending on which payment rail he/she uses.

If he uses the international bank wire, a majority of the transfers, say from a US bank, he faces $35-$50 in bank fees. This would eat 3.5-5% of the total value of the transfer, not accounting for FX conversion fees or any receiving bank fees. A non-appealing option.

If he instead uses NeoBanks who cut their teeth in FX cross-border transfers, he would fare better with a lower fee. See Wise’s illustrative example below.

However, if he uses stablecoin, he would incur an even lower fee in sending money. It would cost less than 10c if it were processed on Ethereum and less than 1c if the transaction went through Solana or Arbitrum. This part of the transfer is commonly referred to as the stablecoin sandwich.

However, which stablecoins on blockchains do move faster than money settlement via correspondent banking, stablecoin sandwich often has the issue/opportunity of accessing FX liquidity to swap USD stablecoin for local PHP.

This part of the transfer can either be executed via a centralized exchange, as mentioned above, or via a stablecoin startup who has better FX pricing access than the market makers offer on exchanges. Whether the aggregate fees in all these steps are lower than that of Wise or Revolut is an open question and depends on specific corridors and stablecoin startup capabilities. 

Complicating the flow is the issue of third party payment as it relates to AML, KYC and CTF regulations. Of course banking as a service and various compliance models can solve this issue though they do require further regulatory work in acquiring additional licences or sign offs.

Despite these execution challenges, one thing is certain - the stablecoin route offers the potential for a more cost-effective cross-border payment option. The more niche the payment corridor, the more likely stablecoin route offers substantial savings.

3. Treasury Management

While there are complicated issues of accessing FX liquidity pools and dealing with legal requirements of third party payments, stablecoin does do one thing extremely well. And that is getting from one wallet to another in record speed 24/7.

This proves to be a killer use case for managing liquidity. Imagine a business operating across two jurisdictions, each with separate bank accounts. Moving USD between them requires pre-funded accounts and access to always-on USD rails, something only top-tier banks typically enjoy.

By contrast, stablecoin itself offers this capability natively. They offer near-instant settlement, no matter the time or geography. And that is why Visa has integrated USDC on Solana blockchain to offer instant settlement capability with merchant acquirers Worldpay and Nuvei all the way back in 2023. 

Why is Visa using stablecoin for settlement? Traditional settlement between merchant acquirers and payment networks happens end-of-day or in batches and takes T+2 days to clear after Visa reconciles, clears and instructs participating banks to move funds. This again requires pre-funded accounts.

When you move large sums, being able to receive money instantly via stablecoin vs in 2 days is a crucial advantage when it comes to liquidity management and cost. This use case gets very compelling when speed is crucial or volume is large. 

Digital asset exchanges process trillions in trading volume annually. All that movement of money requires treasury management optimization where liquidity needs to be earning a yield or fulfilling a payment needs. Speed of settlement becomes a crucial performance driver. After all, basis points savings on trillions of volumes would translate into hundreds of millions bottom-line profit.

Disclaimer: This content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.