Navigating the Maze of Stablecoin Use Cases and Global Regulations

Stablecoin applications have diversified significantly beyond their original function as trading pairs for cryptocurrency exchanges. Current use cases for stablecoins include cross-border payments, remittances, savings, DeFi protocols, and enterprise treasury management.

Real-World Applications

Cross-border payments represent one of the most compelling practical applications for stablecoins, addressing long-standing inefficiencies in the traditional international payment system. Research indicates that traditional cross-border payments can take 3-5 business days to settle and cost 6-10% in fees, particularly for remittance corridors serving developing countries.

Stablecoins enable near-instantaneous settlement at costs typically below 1% of transaction value. This efficiency gain is particularly significant for remittance flows to Latin America, Sub-Saharan Africa, and Southeast Asia, where traditional money transfer services charge high fees and offer limited accessibility.

The regional adoption patterns are quite distinct.

• In Latin America, there is high adoption driven by currency instability and remittance needs.
• Southeast Asia sees growing usage for cross-border business payments.
• Sub-Saharan Africa is experiencing emerging adoption for financial inclusion applications.
• North America and Europe show primarily institutional and B2B usage.

Research on remittance usage finds that stablecoins can provide particular benefits in corridors where recipients have limited access to traditional banking services. The ability to store value in stablecoins provides an alternative to volatile local currencies while maintaining digital accessibility. Case studies from regions with high stablecoin adoption show that users primarily value the speed, cost efficiency, and 24/7 availability compared to traditional alternatives. However, adoption barriers include regulatory uncertainty, technological complexity, and limited merchant acceptance in some jurisdictions.

Decentralized Finance Applications

Stablecoins serve as fundamental infrastructure for the DeFi ecosystem, providing stable units of account, collateral, and liquidity for complex financial protocols. The total value locked in DeFi protocols using stablecoins has grown to hundreds of billions of dollars, indicating their critical role in this emerging financial sector.

Lending and Borrowing Protocols use stablecoins as both collateral and lending assets. Platforms like Aave and Compound allow users to lend stablecoins to earn interest or borrow against cryptocurrency collateral. This functionality enables leverage, yield generation, and capital efficiency for cryptocurrency holders.

Automated Market Makers (AMMs) rely heavily on stablecoins to provide liquidity for cryptocurrency trading. Stablecoin pairs serve as low-volatility trading pairs that enable price discovery and reduce slippage for traders. Research indicates that stablecoin liquidity pools represent some of the largest and most stable sources of AMM liquidity.

Yield Farming and Staking applications often use stablecoins as the base asset for reward calculations and liquidity provision. These applications enable users to earn returns on stablecoin holdings while providing essential liquidity infrastructure for DeFi protocols. Academic research on DeFi applications suggests that stablecoins' role as "money LEGO" enables composability between different protocols, creating complex financial instruments that were previously impossible. However, this composability also creates systemic risks if key stablecoin infrastructure fails or becomes unstable.

Enterprise and Institutional Applications

Traditional businesses and financial institutions have increasingly adopted stablecoins for various operational purposes, moving beyond speculative trading to practical business applications. Enterprise adoption has been driven by the operational efficiencies and cost savings that stablecoins can provide for specific business processes.

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Corporate Treasury Management represents a growing use case, with companies using stablecoins for cash management, particularly for subsidiaries in multiple countries. Stablecoins enable real-time visibility and control over global cash positions while reducing foreign exchange complexity.

Supply Chain Finance applications use stablecoins to streamline payments between suppliers, manufacturers, and distributors. The programmable nature of stablecoins enables automated payments based on delivery confirmations or other trigger events, reducing administrative overhead and payment delays.

Payroll and Employee Payments have emerged as practical applications, particularly for companies with international workforces. Stablecoins enable near-instantaneous salary payments across borders without the high fees and delays associated with traditional international wire transfers. Research on enterprise adoption indicates that companies primarily value stablecoins for operational efficiency rather than speculative purposes. Key benefits include reduced settlement times, lower transaction costs, improved cash flow visibility, and enhanced automation capabilities.

Financial Inclusion in Emerging Markets

Stablecoins have demonstrated significant potential to improve financial inclusion by providing stable value storage and efficient payment systems to populations with limited access to traditional banking services. This application is particularly relevant in emerging markets with volatile local currencies or underdeveloped financial infrastructure.

Unbanked and Underbanked Populations can access stablecoin services through mobile devices without requiring traditional bank accounts. Research indicates that smartphone penetration often exceeds banking access in developing countries, creating opportunities for stablecoin-based financial services.

Savings and Store of Value applications are particularly important in countries experiencing high inflation or currency devaluation. Citizens can preserve purchasing power by holding stablecoins rather than local currency, though this creates policy challenges for local governments.

Merchant Payments enable small businesses to accept digital payments without expensive point-of-sale systems or banking relationships. The low transaction costs and fast settlement of stablecoin payments can benefit merchants while providing customers with convenient payment options. Academic research on financial inclusion applications suggests that stablecoins' impact depends heavily on local regulatory environments, technological infrastructure, and cultural acceptance of digital payments. While the potential benefits are substantial, successful implementation requires careful attention to user education, regulatory compliance, and integration with existing economic systems.

The Regulatory Landscape

The European Union's MiCA Regulation

The European Union has put in place one of the most comprehensive stablecoin rulebooks through the Markets in Crypto-Assets (MiCA) regulation. MiCA formally became EU law in June 2023, with its stablecoin provisions taking effect in June 2024 and the remaining requirements fully applicable since December 2024. Together, these phased rules now provide harmonized oversight across all 27 member states, aiming to protect consumers and safeguard financial stability.

Under MiCA, stablecoins are classified into two categories. The first is Asset-Referenced Tokens (ARTs), and the second is E-Money Tokens (EMTs). E-Money Tokens are stablecoins pegged to a single official currency and are subject to existing e-money regulations. Asset-Referenced Tokens include stablecoins pegged to baskets of currencies, commodities, or other assets and face additional requirements.

Key MiCA requirements for stablecoin issuers include maintenance of full reserves, regular third-party audits, and authorization from EU financial authorities. The regulation also establishes limits on daily transaction volumes and requires comprehensive risk management procedures. These requirements aim to ensure that stablecoins can fulfill redemption requests even during periods of market stress. USDC has achieved MiCA compliance, with Circle obtaining necessary authorizations in 2024. However, Tether (USDT) has not achieved compliance, leading to delisting from several European exchanges. This regulatory divergence has created market segmentation, with MiCA-compliant stablecoins gaining preference in European markets.

The United States Regulatory Approach

The United States has adopted a fragmented approach to stablecoin regulation, with multiple agencies asserting jurisdiction over different aspects of stablecoin operations. The Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), Treasury Department, and state regulators all play roles in stablecoin oversight.

Current U.S. regulatory efforts focus on establishing federal legislation for stablecoin issuance and operation. Proposed legislation would require stablecoin issuers to maintain full reserves in government securities or cash equivalents and obtain federal authorization. The legislative approach aims to provide regulatory clarity while preserving innovation and maintaining U.S. dollar dominance in global stablecoin markets.

State-level regulation varies significantly, with some states like Florida passing legislation to ban state payments using central bank digital currencies while allowing private stablecoins. This patchwork of state regulations creates complexity for stablecoin issuers operating across multiple jurisdictions. The Federal Reserve has expressed concerns about stablecoins' potential impact on monetary policy transmission and financial stability. Research by the Fed suggests that widespread stablecoin adoption could reduce the effectiveness of traditional monetary policy tools by creating alternative monetary systems outside central bank control.

Global Regulatory Trends

International coordination on stablecoin regulation has increased through organizations like the Financial Stability Board (BIS) and Bank for International Settlements (BIS). These bodies have issued recommendations for consistent global approaches to stablecoin oversight, recognizing that the global nature of stablecoins requires coordinated regulatory responses.

The Bank for International Settlements has identified stablecoins as potentially systemically important if they achieve sufficient scale. BIS research suggests that global stablecoins could pose risks to financial stability through bank runs, fire sales of reserve assets, and disruption of traditional payment systems. Asian jurisdictions have adopted varied approaches, with Singapore establishing comprehensive frameworks for stablecoin issuance while China has banned most cryptocurrency activities including stablecoins. Japan has created specific regulations for stablecoins while maintaining openness to innovation in digital payments.

For a more detailed exploration, you can read the full academic paper, Stablecoins in the Modern Financial System.