Stablecoins are gaining traction in high-cost cross-border payment routes in emerging markets as they alleviate some of the inefficiencies of traditional foreign exchange (FX) infrastructure, according to research firm Delphi Digital.
As traditional FX corridors are costly, with total fees that can reach up to 8% when sending money to Argentina or Nigeria, stablecoins have emerged as the cheapest alternative for moving US dollars in emerging markets.
Delphi said in a Monday article in X that 81% of the cost of these corridors comes from developing the underlying banking infrastructure, arguing that this gives stablecoin rails a structural advantage.
“Stablecoin Rail eliminates most of the factors that increase the operating costs of these corridors.”
“Settlement is atomic, so there is no longer a need for up-front liquidity sitting in local currencies,” Delphi said, adding that volume standards and intermediary chains will also become obsolete as stablecoins are settled directly against the US dollar.
Related: High-yield stablecoins soar as Washington scrambles for yields
Delphi’s predictions highlight the real-world impact of stablecoins in emerging markets. There, locals are using stablecoins to bypass traditional banking infrastructure and reduce transfer costs to the penny or send instant transactions.
sauce: delphi digital
Off-ramp remains a challenge for stablecoin adoption
The company says that off-ramps, such as bank accounts and access to interbank rails, remain critical barriers when value needs to be moved between on-chain and legacy environments.
sauce: delphi digital
Most of the “friction” is outside the blockchain, they say. Minting and burning a stablecoin takes seconds, but when bank wires are sent to these systems, batch processing schedules create significant delays.
“Bridging the gap is as much a regulatory issue as it is a technical one.”
The company added that stablecoins will not replace major currency corridors overnight, and those in emerging markets where “infrastructure costs have trivialized currency risks and banks have all but given up on competing.”
Related: Stablecoin payment startup Kast raises $80 million at $600 million valuation: report
Stablecoin supply is increasing despite falling crypto prices
Despite falling crypto valuations, stablecoin supply has increased by 2.5% over the past month, from $308 billion on the 17th of last month to $316 billion as of Tuesday, according to DeFiLlama.
Delphi said emerging markets remain one of the most obvious sources of stablecoin demand, particularly where users need cheap access to dollar liquidity and cross-border transfers.
Total supply of stablecoins, historical chart. Source: Defilama
Investment firms continue to pour capital into stablecoin payment providers. On Tuesday, Singapore-based digital payments company Dtcpay raised $10 million in a Series A funding round led by investment firm Vertex Ventures Southeast Asia & India to fuel the expansion of its compliant stablecoin-based payments network.
magazine: Cryptocurrencies wanted to topple banks, now they are becoming banks in the fight against stablecoins
