Stablecoins: From exploration to strategic imperative

This podcast episode is based on the Deloitte Luxembourg article below and includes content generated, assisted, or edited using artificial intelligence technology. It has been reviewed by a human prior to publication. The voices featured are synthetic. This podcast is provided for general information purposes only and does not constitute any kind of professional advice rendered by Deloitte Luxembourg. Deloitte Luxembourg accepts no liability for any loss or damage whatsoever sustained by any person who uses or relies on the content of this podcast. 

Context

Despite several waves of infrastructure modernisation over the last few decades, moving money through global payments networks still suffers from structural inefficiencies, resulting in suboptimal cost efficiency and slow process turnaround times.

The combination of multiple intermediary layers operating sequential workflows and batch-based processes across siloed infrastructures—without fully automated regulatory checks— has added multiple layers of fees but also hindered end-users’ convenience through delays and limited levels of transparency.

Recent years have seen meaningful progress led by specialized fintechs that disintermediate the value chain and lower fees. Yet currency volatility challenges remain unresolved, and pre-funding models have not solved the challenge at scale or with sufficient cost efficiency.

In parallel, end-users’ needs and expectations for more responsive, cost efficient, truly global, transparent and secure value transfer mechanisms have dramatically increased, creating a disconnect with legacy industry capabilities and triggering the need for a fundamental infrastructure reset. 

This is where stablecoins enter the picture.

Value proposition and use cases crystallisation

In essence, stablecoins are digital assets designed to maintain a stable value against a given underlying, typically pegged 1:1 to fiat currencies (e.g., US dollar, Euro), commodities (gold), crypto-collateral or through algorithmic stabilisation mechanisms.

In the context of this paper, our focus is on “classic” stablecoins pegged to established fiat currencies such as USD or EUR.

Irrespective of their form, the purpose of stablecoins is to enable continuous, near-real time, borderless and programmable value transfers while solving for volatility considerations attached to traditional crypto-assets.

Key attributes

• Availability: Continuous operations 24/7/365 transcending traditional banking hours and cut-off considerations.
• Stability: 1:1 peg with HQLA (high-quality liquid assets).
• Speed:  Near-instant wallet to wallet settlement with embedded delivery-versus-payment rules.
• Global: Borderless transferability supporting enhanced financial inclusion.
• Programmability: Smart contract enabled, creating opportunities for material operational efficiencies through built-in business logics, autonomous rules enforcements and reduction of human error and fraud risk.
• Cost efficiency: Substantial cost reduction driven by public infrastructures and fully disintermediated wallet-to-wallet transactions.
• Transparency:  Full transaction trail accessible on-chain through relevant block explorers and on-chain analytics tools.

At its core, the value proposition of stablecoins is to remove frictions and enhance end-user’s utility. Their pervasive nature, combined with the breadth and depth of applications across industries, is a key reason they are rapidly becoming a “killer app” for digital assets.

Not only are established use cases scaling, but new use cases are rapidly emerging. Peer-to-peer transfers, cross-border payments, digital assets—including crypto-assets and tokenized real-world assets—settlement layer, programmable lending, and corporate treasury management are just a few areas where stablecoins can deliver meaningful value and utility to end users.

Essentially, wherever there is a value transfer — irrespective of the industry considered —, stablecoins have the potential to improve the status quo, provide superior outcomes, and improve stakeholders experience.

Looking ahead, the AI agent economy might be the next stop for stablecoins as current payment infrastructures are unlikely to meet autonomous commerce needs while stablecoins provide all the required features to scale the model. We are certainly still early here but the market potential is huge.

Market outlook

Over the last five years, stablecoins have demonstrated explosive growth, moving from less than $10Bn market capitalisation to $300 billion and accounting for almost 10% of the total digital assets market capitalization as the time of writing.

Key quantitative facts

• USD dominance: U.S. dollar–denominated stablecoins represent 99% of the total circulating supply.
• Market concentration: USDC (Circle), USDT (Tether), and USDe collectively account for 90% of overall supply.
• Transaction scale: Annual stablecoins transaction volume has surpassed that of traditional payment networks such as Visa and Mastercard, with ACH emerging as the next comparative benchmark.
• Growth trajectory: The stablecoin market is projected to reach $2 trillion by 2028, underscoring its accelerating adoption.

At industry level, convergence between historically distinct worlds is materialising through major partnerships between financial services incumbents and digital assets players, sustained capital markets activities and infrastructure developments, creating a positive feedback loop and driving further adoption.

Key qualitative facts 

• Strategic M&A activity: Stripe’s acquisitions of Bridge and Privy signal growing conviction in stablecoin infrastructure and wallet capabilities.
• Network investment: Visa’s strategic investment in stablecoin infrastructure provider BVNK underscores increasing alignment between traditional payment networks and digital asset rails.
• Public markets milestone: Circle went public and launched its proprietary payment network, marking a significant step toward institutionalization.
• Protocol innovation: Coinbase introduced the x402 protocol, embedding native stablecoin payments into HTTP requests and paving the way for agentic commerce.
• Bank-led momentum: A wave of stablecoin initiatives from major banks—including JPMorgan, Citi, Bank of America, and Société Générale—highlights accelerating institutional engagement.

Regulatory perspectives and key risk considerations

Once fragmented or largely absent, regulatory frameworks have advanced significantly over the past 24 months as governments increasingly recognize that stablecoins are not a passing phenomenon but a force with the potential to reshape global finance. Europe led the way with the enactment of the Markets in Crypto-Assets (MiCA) regulation in 2023 — fully effective for stablecoin issuers since June 2024 — followed by the GENIUS Act in the United States and the Stablecoin Ordinance in Hong Kong in 2025. Lately, the concept of stablecoins was also taken up into the Market Integration and Supervision (MIS) package proposed by the Commission in December 2025 as a key lever to foster the development and deeper integration of European markets, and to streamline the distribution and payment of financial instruments within them.

At the time of writing, numerous other pieces of legislation are being developed across the globe and while each regional/local stablecoin regulation may vary to some extent, stablecoin issuers compliance is typically articulated around the following core design principles inter alia:

• Robust reserve requirements: High-quality assets must fully back issued supply, supported by regular audits and attestations.
• Stringent liquidity standards: Issuers are required to maintain sufficient liquidity to meet redemption demands and market stress scenarios.
• Asset segregation: Clear separation between reserve assets and the issuer’s own funds enhances investor protection.
• Redemption rights: Defined frameworks safeguard users’ ability to redeem stablecoins in a timely and transparent manner.
• Capital, governance, and risk management: Comprehensive prudential requirements promote operational resilience and oversight.
• Cross-border controls: Supervisory measures help manage risks associated with multi-jurisdictional issuance and distribution.

While stablecoins may effectively solve real business problems and address existing industry pain points, they also expose users to important risks considerations that should be acknowledged and properly mitigated:

• De-pegging: Stablecoins may technically lose their peg against their underlying reserves. This may be triggered by inadequate reserves (or the perception thereof), a bank-run on the financial institution holding these reserves or dysfunction of minting/burning processes for example.
• Safekeeping: As with other types of crypto-assets, securing the private keys granting access and control over stablecoins—and establishing a strict security and control environment—is critical to prevent asset misappropriation.
• Regulatory divergence: While regulatory clarity has improved significantly and core principles are relatively similar across main regions, some divergences persist and must be addressed to cope with the global nature of stablecoins (i.e. dual issuance model).
• Legal claim on underlying assets: Stablecoins issued by private entities (as opposed to governments or central banks) do not de facto represent a claim on the underlying reserves. Regulatory provisions and redemption rights as defined in issuer terms and conditions mitigate that risk but consumers are encouraged to engage in proper due diligence to understand the rights effectively attached to their holdings.

Have we reached the inflection point?

Zooming out across the current industry dynamics, we observe the conjunction of several factors that have a compounding effect on each other and that are likely to lead to an inflection point for stablecoins in the very short term (if not already here):

• Rising expectations for seamless transfers: Consumers increasingly demand fast, low-cost, and convenient ways to move value.
• Growing comfort with digital wallets and assets: Improved user interfaces and positive early experiences have driven broader participation and adoption.
• Legacy rails losing relevance: Despite incremental upgrades, traditional infrastructure struggles to compete at scale or match the combined benefits of stablecoins—affordability, availability, and programmability.
• Technology reaching institutional grade: Advances in distributed ledger performance, wallet infrastructure, and on-chain analytics have strengthened reliability and scalability.
• Advancing regulatory maturity: While not yet perfect or globally harmonized, regulatory frameworks across major regions have progressed enough to support confident market participation.

How to prepare and move forward?

Stablecoins are not new anymore but for many market participants, they may remain an obscure concept closely tied to unbacked crypto-assets and outside their risk framework. Yet ignoring the possibilities offered by stablecoins and the current industry dynamics may entail even more business risk, if not impacting market relevance in the long run.

In our view, the risk of inaction is now higher than the risk of exploring and/or adopting.

We therefore encourage all decision-makers and executives to start raising their awareness, to become familiar with the ecosystem and industry dynamics, to envision the opportunity for their business and to assess their potential plays.

Only then will they be able to make informed decisions in the best interests of their business and stakeholders.

Slow first, fast later.