Coinbase Stablecoins are a part of the future of currency

Coinbase Stablecoins A Key Component of the Future of Currency

Source: Coinbase; Compiled by: Song Xue, Lian Guai

TL;DR:

• The number one complaint Americans have about using cash in the current financial system is that it costs too much to access and transfer funds. Stablecoins provide consumers with all the benefits of cash without the drawbacks, including being cheaper and faster to circulate. They are an important part of the currency’s future – and they are already helping to update the system. As the importance of stablecoins increases, so does the urgency to regulate them.

Americans are being charged. Their primary reason for opposing the use of cash in the current financial system is that it costs too much to access and transfer their funds. This is especially true for young people (aged 18-34), who experience the pain points of dealing with the current financial system – including fees – on a daily basis.

At Coinbase, we are working hard to help update the financial system and give 1 billion people access to cryptocurrencies because we believe cryptocurrencies and blockchain technology can increase economic freedom and opportunity. Stablecoins provide consumers with all the benefits of cash without the drawbacks – they are faster, more affordable, and easier to obtain than fiat currency, but equally stable and secure. They bridge the gap between traditional physical cash payments and the digital space by enabling currencies like the US dollar to exist digitally and flow freely on the blockchain. Stablecoins are an important part of the currency’s future, and they already exist.

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Cash is outdated

Physical cash no longer meets the needs and expectations of today’s digitally savvy consumers. Transferring fiat currency can take several days. Today’s consumers want to be able to make cross-border payments as quickly as the internet and to be able to do so without compromising security.

We want to preserve the great aspects of physical cash:

Physical cash has been popular for so long for a reason. It is private; it remains stable during economic volatility; and it supports instant person-to-person payments. These are the strong advantages we want to carry forward in the future payment system.

And we want to discard the drawbacks:

Especially for those privileged with the ability to transfer their own funds, traditional payment processes incur significant fees and interest. For cross-border transactions, the fees for fiat currency transfers can be as high as 3%-6%. According to data from the Consumer Financial Protection Bureau (CFPB), credit card companies charged consumers over $130 billion in fees and interest in 2022.

A study conducted by Coinbase found that not only are fees the biggest reason why Americans oppose using cash in the current financial system, but also Americans aged 18-34 are more likely to experience the daily pain points of dealing with the current financial system and its large institutions – especially fees and international transactions.

Stablecoins are an important part of the future of payments

Stablecoins offer all the benefits of cash to consumers, without the drawbacks:

• They are more affordable: The cost of sending stablecoins via blockchain is only a fraction of traditional payment methods, making them more attractive to both consumers and merchants.

• They are equally secure: Stablecoins backed by the US dollar are pegged 1:1, meaning their value remains stable and predictable.

• They are more efficient: Blockchain provides near-instant settlement for peer-to-peer stablecoin transactions. Almost instantly, recipients can receive funds no matter where they are.

• They are more accessible: Over half of the millennial and Gen Z adults (over 50 million people) are either sporadically or not at all involved in traditional financial systems. The acquisition of stablecoins is controlled by neutral software code, rather than qualified gatekeeping financial institutions.

Adoption of stablecoins in Nigeria, Brazil, and Argentina

In countries with unstable governments and currencies, stablecoins offer a neutral and decentralized way for citizens to protect their savings and engage in cross-border transactions. Emerging markets have dominated the overall adoption of cryptocurrencies (out of the top 20 countries with the highest cryptocurrency adoption rates, only two are “high-income” countries). For example, Nigeria and Brazil, the sixth and seventh most populous countries, play a crucial role in promoting global adoption of stablecoins and cryptocurrencies.

In Nigeria, the main driver for stablecoin ownership is to secure US dollar funds and enable more efficient international transactions. Nearly every Nigerian adult (99%) has a general knowledge of cryptocurrencies, over half of the population claims to understand stablecoins, and almost a third (28%) own stablecoins.

In Brazil, 51% of cryptocurrency owners have or have had stablecoins. Among current owners, 58% believe the best use case is saving without the risk of volatility, and half of them hope to earn interest from their deposits.

In another early adopter country, Argentina, protection against inflation and value fluctuation are the main drivers for stablecoin ownership. 12% of the population owns stablecoins, and 64% are aware of their existence.

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