With the increase in international transactions and the search for efficiency in global financial flows, many companies are considering alternatives to optimize the costs of cross-border payments. Stablecoins have emerged as a promising alternative to traditional foreign exchange (FX), offering faster, cheaper, and more accessible transactions.
The global crypto payment gateway market was valued at $1 billion in 2021 and is projected to reach $5.4 billion by 2031, growing at a CAGR of 18.7% from 2022 to 2031 (Allied Market Reserach). Additionally, it is estimated that 11% of total B2B cross-border payments will be conducted on blockchain networks by 2024 (BNK).
However, do stablecoins actually reduce costs in cross-border payments, or is this just a myth?
This article examines the differences between stablecoins and traditional FX, the costs involved, the challenges of each method, and effective strategies for companies looking to optimize their international payments.
What are stablecoins and traditional FX?
To understand whether stablecoins truly offer an economic advantage over traditional FX, it’s essential to first understand how these systems work.
1.Stablecoins
They are cryptocurrencies designed to maintain a stable value, usually pegged to fiat currencies (e.g., the US dollar, euro) or commodities (e.g., gold). Unlike other volatile cryptocurrencies such as Bitcoin, stablecoins are created to have a more predictable and stable price, making them an attractive option for cross-border transactions.
Key stablecoins used in cross-border payments include:
- USDT (Tether): The most widely used stablecoin globally, reaching an average daily transaction volume of $190 billion in 2023 (The Wall Street Journal);
- USDC (USD Coin): Issued by Circle, it is widely accepted on regulated financial platforms;
- DAI: A decentralized stablecoin backed by various digital assets, with a growing volume of use in decentralized finance (DeFi);
Traditional FX:
It refers to the conversion of fiat currencies through banks and regulated financial institutions. These operations are essential for international transactions, enabling businesses and individuals to convert money between different national currencies.
In this system, FX transactions are conducted based on interbank rates and exchange spreads, which vary according to economic, geopolitical, and market factors. This method often involves multiple fees (currency exchange, bank fees, settlement costs) and relies on financial intermediaries to complete transactions.
A comparative analysis:
To determine whether cost reduction with stablecoins in cross-border transactions is a myth or reality, it’s necessary to compare the key factors that impact transaction costs. The table below summarizes the costs, speed, and security of transactions with stablecoins and traditional FX:
It’s important to understand that both stablecoins and traditional FX have specific advantages and challenges. While stablecoins offer speed and direct access to global markets without relying on traditional banks, traditional FX provides regulatory stability and greater legal protection.
Cost reduction with stablecoins: myth or reality?
Cost reduction with stablecoins in cross-border payments is not a myth, but neither is it an absolute rule. The positive economic impact depends on the context and how stablecoins are used in international operations.
Scenarios where stablecoins reduce costs:
- International remittances: Replacing traditional systems like SWIFT with stablecoins can reduce money transfer costs, especially in emerging markets;
- Global B2B payments: Companies that make frequent payments to international suppliers can reduce operational costs by eliminating financial intermediaries;
- Instant settlement: Businesses that need fast international transactions avoid hidden costs from currency exchange delays by using stablecoins;
Scenarios where traditional FX may be more advantageous:
- High-value payments: Large transactions still find better protection and lower volatility in the traditional banking system;
- Regions with regulatory restrictions: Some countries impose limitations on the use of stablecoins, making traditional FX the only viable option;
Therefore, cost reduction is a reality for many operations, but not a one-size-fits-all solution for every business.
Strategies to reduce costs in international payments
For companies looking to optimize their costs in international operations, combining different strategies can lead to positive results and promote greater financial efficiency. One example is automating cross-border payment processes through the use of an API. This is one of the first steps to reducing costs and improving operational efficiency, enabling companies to achieve flexibility and financial predictability while operating in multiple markets.
Another important strategy is to have access to multiple sources of currency conversion, allowing companies to always choose the best available rate and reduce transaction costs. Additionally, monitoring exchange rates in real time and adjusting operations based on market conditions can generate significant savings over time. Finally, the choice between stablecoins and traditional FX should be based on a detailed assessment of the specific needs of each transaction, aiming to combine different payment solutions that balance speed, cost, and regulatory compliance.
All of this can be simplified with a strategic partner like FacilitaPay, which helps find the best payment solutions according to each company’s needs, promoting operational efficiency and regulatory compliance in cross-border transactions.
Conclusion: the best choice depends on your company’s strategy
The question of whether stablecoins reduce costs in cross-border payments doesn’t have a simple answer. What really matters is the strategic approach adopted by each company.
Stablecoins offer significant benefits in terms of speed, accessibility, and lower operational costs, especially in low-value transactions and emerging markets. On the other hand, traditional FX remains the best choice for operations that require greater regulatory protection and legal security.
Therefore, the key to maximizing efficiency and reducing costs in cross-border payments lies in combining different solutions intelligently and strategically.
If your company wants to explore the best approach to optimize international payments, talk to our experts and discover how to reduce costs and expand globally with efficiency.
