Technology, Payments, and the Rise of Stablecoins

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Technology, data, and changing societal values are reshaping how people and institutions move money and trade financial assets.
This issue of F&D brings together academics and policymakers to assess innovations such as crypto assets and stablecoins, and their implications for payments, liquidity provision, and financial stability.
Publication details in source: GITA BHATT, September 2025.

Stablecoins are described as a form of digital asset backed by currencies or government bonds.
Stablecoin companies have racked up millions of users globally, transacting across borders 24/7 at very low cost.
Dollar-pegged stablecoins have become a financial lifeline for people in some economies with high inflation.

Potential benefits noted:
- Faster and cheaper cross-border payments.
- Expanded access to low-cost payment rails and financial services.
Potential macroeconomic and geopolitical concerns (as assessed by Hélène Rey):
- Risk of dollarization (where the dollar is used in parallel with the local currency).
- Capital flows and exchange rate volatility.
- Potential weakening of the banking system.
- Money laundering and other financial crimes.
Her assessment: widespread adoption of US dollar–denominated stablecoins is “likely to create major financial stability risks.”

The global financial landscape has changed, yet the rules remain largely unchanged (Yao Zeng).
Observed market-structure shifts:
- Lightly regulated nonbanks are providing more liquidity.
- Lenders increasingly rely on AI and big data to speed loan approvals, reduce collateral requirements, and reach borrowers traditional banks often overlook.
Key risk assessment: “Stablecoins may function well in good times, but they can falter under stress.”

Public and private sectors both drive innovation in payments.
Some governments and central banks sponsor systems to meet consumer demand for fast, efficient payments.
Case example from IMF research: India’s Unified Payments Interface interconnects hundreds of banks, platforms, and apps and carries out more than 19 billion transactions a month.

New entrants (fintechs, big techs) and new products (crypto, stablecoins) challenge incumbent financial institutions.
Iñaki Aldasoro, Jon Frost, and Vatsala Shreeti (Bank for International Settlements) conclude that forward-looking public policies must accompany radical innovation to achieve the most impactful breakthroughs.

Criminals were among the earliest adopters of crypto, underscoring the need for vigilance.
Payment systems must balance privacy and speed with preventing tax evasion, money laundering, and terrorism financing.
Stanford’s Darrell Duffie and coauthors propose a practical approach to staying ahead of these risks.

Balance risks and benefits through clear regulation that:
- Protects consumers and investors.
- Limits spillovers to the broader financial system.
Forward-looking public policies should accompany innovation to manage competition, financial stability, and systemic risks.
Authorities should maintain openness to innovation while ensuring payment systems and financial markets improve in ways that protect users and the system.

Source: Technology, Payments, and the Rise of Stablecoins — F&D Magazine, GITA BHATT, September 2025.

Technology, Payments, and the Rise of Stablecoins
- Technology, Payments, and the Rise of Stablecoins (Markdown version)
- Technology, Payments, and the Rise of Stablecoins (PDF)
fd-september-2025
- fd-september-2025 (Markdown version)
- fd-september-2025 (PDF)