Select a page

Banking News

Stablecoin Collapse Impact on Payments Innovation

Stablecoin Collapse Impact on Payments Innovation

(19 May 2022 – Global) Stablecoins are facing a crisis following the loss of TerraUSD (UST)’s peg, creating unique challenges for payments projects using Blockchain / distributed ledger technology (DLT).

Until this month Stablecoins were considered the safe haven of a very volatile cryptocurrency market. Following TerraUSD suffering an unprecedented collapse this week, significant doubt has been on the viability of Stablecoins as the safe choice for digital currencies. As volatility continues to spread among Stablecoins, the payments sector and financial services are reconciling the issue with long term development plans. The enormous unpredicted volatility has inflicted major concerns around the perception of Stablecoins as a reliable, trustworthy way to digitise funds transfers and as a result significantly jeopardise ongoing innovation in the space.

“The crisis comes as the cross-border payments industry is increasingly exploring the potential benefits of cryptocurrencies, in particular through the use of Stablecoins. PayPal is developing a Stablecoin, which is expected to be used for consumer remittances, while a consortium of US banks are currently developing their own stablecoin, USDF, for P2P and B2B money transfers” commented FXC Intelligence Head of Content, Lucy Ingham.

“There have already been numerous calls for greater regulation of the cryptocurrency space, and the stablecoin crisis is only going to increase the justification for increased transparency, standards and controls. It is possible that the current situation could ultimately create a perception among regulators that for-profit stablecoin makers are not to be trusted, and that the best approach would be to instead restrict such digitisation of currencies to banks. Central bank digital currencies are in development all over the world, and with Stablecoins increasingly being proposed as the future of money, CBDCs may ultimately be seen as a better way to retain security, trust and financial sovereignty” Ingham added.

Comment on this article


Your comments will not be published. Required fields are marked *


Please enter the word you see in the image below:


Subscribe to our mailing list

Sign up now to keep up-to-date with the latest
market news and insights in B2B banking.

* indicates required

For more information please read our Terms and Conditions and Privacy Statements.