20 October 2021

Stablecoins and Next-Gen Payments: Marching Toward Institutional Adoption of DeFi in Europe

Cryptocurrencies and stablecoins will likely play a more noticeable role in the future global payments ecosystem, as consumers and businesses increasingly embrace cryptocurrencies and investments in digital currencies continue to gain ground.

Related: NEW REPORT: Capturing the Global Cryptocurrency Payments Opportunity

According to a recent PYMNTS report on global cryptocurrency use, the potential of stablecoins and next-gen payments for consumer and business payments is catching the eye of banks and other financial service providers who are looking at the potential of utility tokens and blockchain-based assets for the clearing and settlement of accounts.

Recent data from the International Monetary Fund (IMF) shows that the market capitalization of stablecoins, which are digital currencies pegged to a stable asset like the U.S. dollar in order to eliminate the high volatility of first-generation cryptocurrencies, has quadrupled to over $120 billion in 2021, with stablecoin trading volumes overtaking those of all other crypto assets.

In the PYMNTS report, published in collaboration with digital payment and banking provider i2c, Pavel Matveev, CEO of multicurrency digital wallet and money transfer service Wirex, told PYMNTS that these digital assets — central bank digital currencies (CBDCs) and stablecoins — will eventually dominate the cryptocurrency payments space.

“To be honest, nobody will be using Bitcoin as a payment method because it serves another purpose — it’s digital gold,” Matveev said. “So, I think stablecoins and CBDCs [are two] of the main trends in the payments space. I think once we have a technology [to support them] and once we have regulation for that technology, I think that’s when we’ll see exponential growth in the [digital currency] payments space.”

Merging TradFi and DeFi 

In what is considered one of the biggest steps toward institutional adoption of decentralized finance (DeFi) to date, Société Générale-Forge (SG-Forge), an affiliate of French multinational banking giant Société Générale (SocGen), has applied for a loan of up to $20 million in DAI stablecoins using bond tokens issued by the bank as collateral.

Read more: Societe Generale Taps Temenos To Modernize Corporate Banking

According to a recent CoinDesk report referencing the proposal made to MakerDAO, the organization behind the DAI U.S. dollar-pegged stablecoin, the tokens, which are recognized under French law, were issued in May 2020 at a 5-year fixed interest rate of 0% and have been assigned a AAA rating from both Moody’s and Fitch rating agencies.

PYMNTS