Stablecoins account for a small share of global e-commerce despite their many advantages. Regulatory barriers and a lack of diversity in options other than the USD are limiting the growth of this market.
Despite their growing popularity, stablecoins still account for just 0.2% of global e-commerce transaction value, according to a new report by strategy consulting firm Quinlan & Associates and blockchain developer IDA. The report, released on November 27, highlights the potential of stablecoins to revolutionize online payments, but also points out the significant challenges that are hindering the growth of this market.
According to the report, the salient features of stablecoins, powered by blockchain technology, include programmability, low costs, high transparency, 24/7 operations, and fast processing speeds, outperforming the traditional financial system.
Source: Quinlan & Associates, IDA
Mr. Lawrence Chu, co-founder and CEO of IDA, affirmed that the above advantages can create a breakthrough in the payment field. However, the reality shows that stablecoin applications are still mainly concentrated in the Web3 ecosystem.
Legal barriers and the dominance of the US dollar
One of the biggest obstacles identified in the report is regulatory uncertainty, which 81% of retailers surveyed cited as a major barrier to accepting digital assets, including stablecoins, as a formal payment method. Benjamin Quinlan, CEO of Quinlan & Associates, stressed that this issue is significantly limiting the adoption of stablecoins in e-commerce.
In addition, the over-reliance on the USD is also seen as a factor that inhibits the development of stablecoins. The report points out that 83% of countries in the world do not use the USD as an official or secondary currency, and about 40% of international payments are made in currencies other than the USD. This shows the urgent need for stablecoins pegged to currencies other than the USD.
Currently, the total stablecoin market capitalization is around $200 billion, but the majority of that is USD-pegged stablecoins. Tether (USDT) and USD Coin, the two most popular stablecoins, dominate the market with capitalizations of $130 billion and $40 billion, respectively, according to data from CoinMarketCap.
Recognizing the potential and market demand, IDA is planning to issue a stablecoin pegged to the Hong Kong dollar (HKD) to facilitate payments between Hong Kong and global markets. The move shows the trend of diversifying stablecoins, aiming to meet the needs of international payments in different currencies.
The report also addresses the impact of stablecoins on the short-term US Treasury bill market. The US Treasury Department believes that the growth of stablecoins, which are largely backed by Treasury bonds or Treasury-backed repurchase agreements, may have contributed to increased demand for short-term Treasury securities.
The issue of stablecoin regulation is also of concern in the US. Former Senator Pat Toomey predicts that US lawmakers will push for stablecoin regulation from 2025. He believes that issues related to reserve requirements, bank deposit insurance, and the legal authority of stablecoin issuers need to be clarified before a formal legal framework is put in place.
Several important cryptocurrency bills, including Senator Bill Hagerty’s “Clarity for Payment Stablecoins Act,” are set to be considered in the upcoming congressional session.