EXCLUSIVE: Harnessing the Power of Stablecoins: The Future of Payments in High-Growth Emerging Markets

The payment landscape in emerging markets has undergone a rapid shift and global enterprises with a nexus in these geographies or a desire to expand into these markets must embrace stablecoins to thrive and stay competitive. Stablecoins are a proven crypto success story, with a capitalisation of around $160 billion and annual settlements exceeding $10 trillion — their rapid adoption speaks to their vital role in addressing treasury challenges in a globalised economy.

Within the global economy, it is in emerging market countries, where stablecoin adoption is most interesting. Consumers there already know the benefits and stablecoins are an integral part of daily transactions and financial life for many and now the international businesses that serve them must catch up.

The rise of stablecoins, cryptocurrencies designed to maintain a stable value relative to traditional currencies (such as the US dollar, euro, or even other assets and commodities such as gold), is transforming how transactions are conducted across borders and domestically in emerging markets. Stablecoins have become essential for facilitating faster, cheaper, and more secure payments in regions where traditional banking infrastructure may be limited or unreliable with access to traditional bank accounts not a given, or moreover, where local currencies may be volatile due to rapid inflation.

As emerging markets are becoming an increasingly powerful force in the global economy, driven by growing GDPs and expanding middle-class populations, their consumer bases are too big to be a payments blind spot. Therefore, treasury departments must include stablecoins as part of their payments strategy as customers in emerging markets increasingly favour stablecoins.

Understanding stablecoins rise to prominence in emerging markets

Access to financial services

A combination of governments’ desire to boost financial inclusion, and increased access to fintech has fueled rapid growth in electronic payments in emerging markets; this has brought a new breed of mobile-savvy digital native consumers into the market. In these regions, traditional banking systems are often unreliable, and stablecoins offer a low-cost, accessible alternative for transactions and remittances​. Emerging markets often have large unbanked populations, particularly in regions like Sub-Saharan Africa and Southeast Asia. Many individuals in these areas lack access to USD-denominated banking services. Stablecoins are bridging this gap, giving people access to essential financial services—empowering millions to store value and conduct transactions easily.

Cost efficiency is another significant benefit. Emerging markets frequently experience the highest fees for payments and foreign exchange. Stablecoins have reduced these costs dramatically while also speeding up cross-border payments. In high-traffic corridors, like Nigeria-US, Mexico-US, and Brazil-Europe, stablecoins are facilitating cheaper remittances and enabling more efficient international trade. In this way, stablecoins are facilitating greater participation in the global digital economy. 

Hedge against volatility mirroring historic appetite for holding USD

A significant push factor can be attributed to local currency instability. Particularly in countries like Brazil, India, Indonesia, Turkey, the Philippines and Nigeria, currency volatility and inflation have undermined confidence in local currencies. Countries like the Philippines, Nigeria, Turkey, and Argentina have experienced significant economic volatility.

In the Philippines, for instance, political uncertainty has contributed to peso fluctuations, driving citizens towards dollar-pegged stablecoins. Nigeria’s multiple currency devaluations and forex restrictions have also pushed businesses towards stablecoins as a store of value. In Turkey, the lira has experienced significant devaluation in recent years, driven by high inflation and political instability. The sharp decline of the lira against the US dollar in 2021 worsened inflation and the cost of imports, making stablecoins an increasingly attractive option for Turkish businesses looking for more stability and lower transaction costs. Similarly, the Argentine peso lost over 90% of its value against the USD in the past five years. This extreme volatility has made stablecoins an attractive option. Stablecoins provide a digital avenue to access USD-pegged assets, which have always been popular in emerging markets as a hedge against local currency instability but have typically been held as paper notes, which have less utility for making international payments. In this context, stablecoins are increasingly used as a hedge against local currency depreciation​, but given their popularity and liquidity, they are being used for much more than to hold value (and not as an investment as in the global north) but to transact and engage in the economy.

Why they are popular for payments

By the same virtue, stablecoins provide a more stable alternative for merchants in such environments, allowing them to avoid the challenges of fluctuating local currencies. Traditional cross-border payment systems in these regions are often plagued by inefficiencies, high costs, and lack of transparency. Stablecoins also simplify both receivables and payables for businesses. They streamline payments from counterparties in emerging markets and enable businesses to settle their obligations in stablecoins.

For businesses operating globally, stablecoins offer several key advantages. These digital assets can significantly reduce costs and charges, as stablecoin transactions often incur lower fees compared to traditional wire transfers. Moreover, they dramatically increase transaction speed, with most transfers completed in minutes rather than days. Unlike traditional banking systems, blockchain networks operate round the clock, providing 24/7 availability for transactions. The transparent nature of blockchain technology ensures an immutable record of all transactions, enhancing trust and accountability.

As businesses explore stablecoin payments, selecting the right stablecoin and blockchain infrastructure is crucial for maximising efficiency. Merchants that are embracing stablecoins are harnessing this trend. Rather than servicing the time-consuming and resource-intensive range of alternative payment methods and local wallets in each market, the stablecoin market today has one further factor making it an easy pathway for merchants to engage with emerging markets. This is the overwhelming dominance of Tether (USDT) which holds the position of the largest stablecoin issuer with a market capitalisation of $112 billion and over 75% among stablecoins, with over 50% of its issuance on the TRON blockchain.

In emerging markets, USDT is widely used, especially for cross-border transactions and as a safeguard against local currency volatility. It is commonly transacted on the TRON blockchain due to lower transaction fees and faster processing times compared to Ethereum. TRON’s low-cost infrastructure makes it appealing for users in regions with limited access to traditional financial systems. Evidence of this trend is reflected in high volumes of USDT on TRON in countries like Nigeria, Venezuela, and Turkey, where economic instability drives demand for stablecoins.

Recent data paints a compelling picture of stablecoin adoption in emerging markets. Riseworks, a financial services company specialising in payout processing for contractor services, reports that 25% of businesses worldwide already accept stablecoins as payment. However, by integrating a single payment rail that covers multiple emerging markets, businesses enjoy lower fees, eliminate chargebacks, and benefit from instant settlement. This not only improves cash flow but also reduces the complexity of operating across diverse financial ecosystems.

Integration of stablecoin payments can be achieved through payments platforms like Orbital, which provide APIs that streamline the process while maintaining security and compliance with regulatory frameworks​.

Is stablecoin adoption universal?

While stablecoins offer significant advantages, their adoption isn’t uniform across all markets. Developed economies, due to stable currencies and efficient banking systems, haven’t seen the same level of stablecoin uptake as emerging markets. For instance, USDT usage has seen massive adoption by consumers (20-50%) in many emerging markets. Stablecoin use in developed markets, particularly for USDT remains relatively low compared to emerging markets, largely due to the stability of local currencies and the reliability of banking systems. However, regulatory improvements, such as the MiCA regulation in the EU and increasing clarity in the U.S., signal potential for broader adoption in the long term.

These early positive steps in regulation from lawmakers in developed economies will no doubt be bolstered by the fact the leading players are taking their dominant market position very seriously and leveraging their scale to effect positive change and fight financial crime. Tron, Tether and TRM Labs have taken charge and joined forces earlier this year to fight financial crime. With the growing use of stablecoins, it’s essential for major industry stakeholders to advance their efforts in tackling illicit activities, money laundering, fraud, and maintaining a secure ecosystem.

This is exemplified by the recent collaboration, the fact it involves both Tron and Tether, the most prominent in the space, means crucial measures are being spurred at the highest level. While demand remains modest in developed regions, these regulatory advancements are laying the groundwork for future growth, especially as institutions become more comfortable with stablecoins like USDC and Paxos.

In conclusion, for businesses operating in these high-growth emerging markets, adopting stablecoins is no longer optional; it’s a strategic necessity to remain competitive and meet the evolving needs of consumers. The growing importance of emerging markets cannot be ignored. According to the IMF, the total economies in these emerging markets, from India to Vietnam, are projected to contribute 75% of global growth in 2024. As such, even businesses primarily operating in developed markets need to consider stablecoin strategies to effectively engage with these high-growth regions.

This approach not only caters to current preferences but anticipates future financial behaviours in these rapidly evolving economies – but by embracing this technological fusion of stablecoin utility and USDT and TRON’s popularity, businesses can catalyse their economic participation in growth regions. As the global economy continues to digitise and decentralise, those who recognise and act upon these trends will likely find themselves at a significant competitive advantage, poised to thrive in the evolving landscape of international commerce.