Will stablecoins lead electronic payments to the economic boom of the next decade?

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Compiled by: AididiaoJP, Foresight News

Stablecoins are reshaping the underlying architecture of the global financial system. As a new type of digital asset, its core value is reflected in three dimensions: the programmability at the technical level allows it to be embedded in smart contracts for automatic execution; the borderless nature at the geographical level breaks through the regional barriers of traditional finance; and the high speed at the efficiency level shortens settlement times from the traditional T+1 or even T+3 to nearly real-time.

However, beyond payment functions, stablecoins are quietly enhancing the speed of currency circulation: changing the frequency of use of every dollar, the direction of flow, and the speed of stimulating economic activity. The impact of stablecoins on the speed of currency circulation presents a unique "double helix" effect: on one hand, automated clearing through smart contracts releases idle settlement margins from traditional finance; on the other hand, the 24/7 uninterrupted global liquidity pool significantly improves capital turnover efficiency, an effect that is particularly evident in cross-border B2B transactions.

This phenomenon is reminiscent of the transformation of early currency and value circulation methods by the Internet twenty years ago. Electronic payments primarily optimized payment efficiency, while stablecoins restructured the complete closed loop of value storage, transfer, and creation based on enhanced efficiency. To understand the current role of stablecoins, we need to return to the fundamental concepts.

Note: The 2024 Chainalysis Global Cryptocurrency Adoption Index ranks 151 countries based on four sub-indicators that measure the usage of various cryptocurrency services. The ranking results are adjusted for population and purchasing power parity, averaged, and normalized to a range of 0-1. This data is based on estimated transaction volumes from traffic to cryptocurrency service websites and has been cross-verified with local expert survey results.

Definition of Currency Circulation Velocity

The velocity of money refers to the rate at which money is exchanged in an economy, typically calculated using the following formula:

Velocity of circulation = Gross Domestic Product (GDP) / Money supply

It measures the production efficiency of each unit of currency. A high circulation speed means that the currency is frequently used to purchase goods and services; a low circulation speed indicates that the currency is being saved or idle.

However, "currency" is not a singular concept. Economists categorize it into different levels:

M1: Cash + Demand Deposits, the most liquid form of currency.

M2: M1 + savings accounts + time deposits below $100,000 + money market funds.

M3 (no longer used in the US): M2 + large time deposits + institutional money market funds + other large-scale financial instruments.

A stablecoin fully backed by fiat currency and redeemable at any time, its behavior is similar to M1: extremely high liquidity, available for immediate use.

The Rise and Fall of Currency Circulation Speed in the Internet Era

From the late 1990s to the early 21st century, the rise of the Internet significantly increased the speed of currency circulation:

E-commerce has achieved a comprehensive upgrade in consumption.

Email has accelerated transactions and contract signing.

Market access globalization.

Digital banking makes currency more liquid.

This early efficiency improvement has driven the growth of M1 circulation speed.

But with the maturity of the internet, another trend has taken the lead:

Capital appreciation has created enormous wealth.

These assets are saved and invested in stocks, bonds, and real estate.

More funds are used for investment rather than consumption.

The velocity of circulation has slowed, but GDP continues to grow as capital formation gradually replaces pure consumption activities.

M3 Money Supply and Historical Growth Trends of the S&P 500 Index

How Stablecoins Enhance the Speed of Global Currency Circulation

Stablecoins are now introducing similar dynamics: they significantly enhance the speed, accessibility, and usability of currency. However, unlike the early internet, this transformation has been global from the very beginning. Here are the specific manifestations:

1. Borderless Transfers 24/7

In the field of cross-border payments, stablecoins enable instant settlement 24/7. Issuers such as Circle and Tether have built a global payment network that allows fund transfers to no longer be constrained by the operating hours of traditional banking systems and cross-border limitations. This efficiency improvement is particularly notable in the remittance market, where traditional cross-border remittances take 3-5 business days, can be completed within minutes using stablecoins.

2. On-chain Finance and DeFi

The development of decentralized finance (DeFi) has further amplified the economic value of stablecoins. On platforms like Aave and Compound, stablecoin holders can participate in the lending market, turning idle funds into productive capital. This improvement in capital utilization efficiency directly promotes an increase in the velocity of money circulation, with platforms like Morpho Labs and Pendle allowing users to use stablecoins for lending, yield products, or liquidity provision.

3. Remittance and Payment

APIs developed by stablecoin and other startups enable businesses to integrate stablecoin payments into existing cash flows, while supporting 24/7 global real-time settlement, reducing foreign exchange costs, and reaching markets that traditional finance has difficulty covering.

Another example is the cryptocurrency debit card, which allows users to directly use their on-chain stablecoin balances for everyday purchases. By connecting with major payment networks like Visa and Mastercard, these cards instantly convert stablecoins into local currency at the time of purchase, without the need for additional exchanges. This bridge between on-chain and the real world makes stablecoins an active medium for purchasing daily necessities, travel, and other everyday needs, thereby enhancing the speed of global currency circulation.

4. Unlicensed Dollar Access

In countries like Turkey, Argentina, and Nigeria, stablecoins serve as an important financial tool, allowing users to store dollar value and trade freely with just a mobile phone and an internet connection. By reducing reliance on intermediaries and enabling instant, borderless payments, stablecoins activate local capital efficiency more effectively and bring more participants into the economic system.

For small and medium-sized enterprises (whether in manufacturing, agriculture, digital services, or local retail), stablecoins enable direct connections between international buyers and suppliers, reducing friction in cross-border trade, eliminating settlement delays, and protecting businesses from sudden depreciation of local currency. Stablecoins allow individuals and businesses to maintain capital circulation within the local economy, which not only accelerates the velocity of money but also enhances economic resilience in a high-volatility currency environment.

Stablecoin Practices in Southeast Asia

In developing markets such as Thailand, Vietnam, and the Philippines, the adoption of stablecoins is being accelerated through P2P and over-the-counter trading channels. For example, Siam Commercial Bank (SCB) in Thailand has partnered with Lightnet through its innovative division SCB 10X to facilitate cross-border payments and remittances using stablecoins on a public blockchain. This is Thailand's first settlement case based on stablecoins, setting a benchmark for the regional financial industry. By integrating Fireblocks' custody infrastructure, the service ensures institutional-grade asset security, enhancing trust among all parties. In the future, SCB and Lightnet plan to expand the service to corporate clients to achieve two-way remittances while providing the same efficiency and cost advantages to retail users.

Euromonitor mobile payment data

Short-term Impact: Improvement of Economic Efficiency

The increase in the velocity of currency circulation driven by stablecoins in the short term has brought significant economic benefits:

GDP Growth: Faster circulation of the same capital pool has promoted economic activity.

Increased productivity: Instant, low-friction payments and faster working capital cycles optimize business efficiency.

Enhanced financial inclusion: gig economy workers, creators, and merchants can transact using stable dollar assets without relying on traditional banks.

This unlocks the long-term suppressed economic potential in emerging markets. Just as the early internet accelerated business development by eliminating friction in communication and distribution, stablecoins are doing the same for value transfer, allowing funds to flow freely, around the clock, and at almost zero cost.

Long-term Impact: From Speed to Scale

The long-term effects are more complex.

As emerging market users gain access to US dollars and stablecoins, some of the capital is not used for consumption, but rather saved or invested:

Stake in DeFi to earn passive income.

Used for purchasing assets (real estate, tokens, stocks).

Reserved for business expansion.

These actions remove funds from the short-term trading cycle, reducing the local circulation speed. However, this is not a negative outcome. Similar to the early 21st century, it reflects a shift from speed-driven consumption to wealth accumulation and capital formation, which is a sign of economic maturity.

Even if the frequency of currency turnover decreases, its efficiency of use is higher. In the early growth stages, emerging economies tend to consume, focusing on infrastructure development and catching up with developed economies. As income increases and financial instruments become more widespread, the savings rate gradually rises, and households begin to accumulate wealth and invest in long-term assets. Stablecoins can accelerate this transformation.

Conclusion

Stablecoins are changing the way funds flow globally, increasing transaction speed while deepening financial inclusion. In the short term, they are accelerators of circulation speed, and in the long term, they are builders of capital formation.

The velocity of money, as a key indicator of economic vitality, is calculated as the ratio of GDP to the money supply. The emergence of stablecoins has injected new meaning into this traditional economic concept. Stablecoins that are fully backed by fiat currency and can be redeemed at any time possess liquidity characteristics similar to M1 money, but their operational efficiency far exceeds that of traditional fiat currency.

It is important to note that the circulation speed does not operate in isolation; its economic impact depends on the following factors:

Interest rate: High interest rates encourage savings and reduce the velocity of circulation.

Inflation expectations: If prices are expected to rise, people will accelerate consumption.

Tariffs and capital controls: these may restrict the use of stablecoins in specific regions.

Fiscal policy: Government transfer payments, taxes, and subsidies all affect the circulation of money.

Nevertheless, the result is the birth of a new type of global economic model: stablecoins can flow instantly, settle automatically, and remain robust in development. Just as the early internet reshaped communication and commerce, stablecoins are doing the same to currency itself. This transformation is not about printing more money, but about utilizing existing resources more efficiently.

Source: Foresight News