Author: Aleks Gilbert, translated by: Shannooba, LianGuai
According to a report by Brevan Howard, stablecoins are becoming a payment channel competing with Visa.
This hedge fund giant is betting on the prosperity of stablecoins globally.
However, their explosive growth highlights their popularity in developing countries, where people use them to easily obtain coveted US dollars.
Last year, the settlement volume of stablecoins surpassed LianGuaiyLianGuail and is expected to exceed that of Visa.
This is according to a report by hedge fund giant Brevan Howard. The London-based firm found that cryptocurrencies pegged to the US dollar are gaining popularity outside of the United States and is betting that this prosperity will bring substantial returns.
The report states that by 2022, the settlement transaction value of stablecoins pegged to the US dollar will exceed $11 trillion. This is nearly 10 times the transaction volume processed by LianGuaiyLianGuail in 2022, slightly lower than the $11.6 trillion transaction volume processed by credit card payment company Visa.
The co-authors of the report wrote: The rapid growth in the use of stablecoins may surprise some US readers, as the value proposition of stablecoins has not resonated strongly. The adoption of stablecoins is essentially a global phenomenon, as one of the main value propositions of stablecoins is that they can provide basic, US dollar-based financial services to almost anyone with internet access.
Analysts found that nearly three-quarters of stablecoin transactions occur on the Tron and BNB blockchains, which are popular among users outside of North America and Western Europe due to their relatively low fees.
According to previous reports by DL News, for example, in Lebanon, the majority of transactions of the stablecoin Tether (USDT), pegged to the US dollar, are conducted on Tron, founded by Justin Sun.
“Sometimes we have clients who request us to send through the BNB chain,” Nasim Dirany, co-founder of the brokerage firm Buy Bitcoin Lebanon, told DL News. And then sometimes something happens, like they get confused with the address format or something else, and then they switch back to Tron.
Lebanon’s fondness for Tron and USDT is partly due to the country’s economic situation. In a country where the local currency fluctuates wildly like a low-market cap altcoin, stablecoins are useful precisely because they are stable. Many Lebanese distinguish between stablecoins and other cryptocurrencies. Using USDT is different from actually using cryptocurrencies—it is a form of payment.
Lebanon’s situation is not uncommon. For example, in Hong Kong, Tether is more popular than Bitcoin and Ethereum. Despite its efforts to shake off its shady reputation, it remains highly popular. A non-profit stablecoin rating agency gave Tether a “D” rating in July.
Bluechip Chief Economist Garet Jones said, “For Tether, the reason it eventually led to a downgrade to a very low level is the lack of audits – people cannot convincingly believe in its reserve plan,” according to DL News.
Although the trading volume of stablecoins is close to that of Visa, traditional financial giants still handle much more transaction volume. According to the company’s annual report, in 2022, Visa processed over 192 billion transactions. Brevan Howard states that stablecoins settle only 1.3 billion transactions. Given the global demand for the US dollar, the co-authors of the report believe that transaction numbers and volumes may continue to grow.
Global audiences will increasingly acquire US dollars through stablecoins.