Financial Stablecoins have been identified by authorities as the best way to make cross-border payments. However, a recent report by the Committee On Payment Market Infrastructures (CPMI) suggests that competition, regulations and network size are potential roadblocks to their wider adoption.
The report pointed out that Central Bank Digital Currencies (CBDC) could help the stablecoin market to grow. These include reserve currencies, as well as on- and off-ramp systems. Stablecoins are also issued in a specific pattern, which could affect their success as well as the general economic situation.
Moreover, the paper highlighted the many benefits of stablecoins for cross-border payments, such as lower costs, faster transaction speeds and improved settlement. Additionally, the number of chains involved in international payments will be reduced, leading to lower fees. Furthermore, transparency and accessibility are improved, as all blockchain transactions are traceable.
Despite the advantages of stablecoins, the report warned that the lack of regulations could limit its use by retail and institutional clients. Furthermore, a highly fragmented market could lead to siloed technologies and a lack of interoperability. To ensure stability, uniform regulations across multiple regions are necessary. The Markets in Crypto Assets (MiCA) is an example of a well-known regulation which can help create a safe and effective transborder transaction.
