10. Drivers of Stablecoin Market Growth:

a. Increase in Participants: Currently, there are only two major players, primarily USD-denominated, indicating the industry is still in its early stages.

b. Expansion of Use Cases: Stablecoins are mainly used for crypto trading or hedging, but future applications may include consumer payments. Currently, VISA and Mastercard support stablecoin payments, and merchants also accept them. Switzerland even allows tax payments in USDT. The Philippines permits USDT for social security contributions.

Merchants accept stablecoin payments primarily because: a) Lower transaction costs, with on-chain instant settlement reducing supply chain payment cycles; b) Access to crypto-savvy customers—companies like Microsoft and Tesla have already integrated them.

c. Financial Market Applications: Through wealth management tools or U.S. stock investments; retail investors can earn interest via stablecoin lending on exchanges, with rates as high as 10%.

d. Cross-Border Payments: Usage in regions like Nigeria.

Existing cross-border cases include e-commerce clients converting USD to USDT to buy Bitcoin. However, adoption in foreign trade remains limited due to trust and cost issues.

Currently, only 5-10% of USDT’s $150B market cap is used in formal trade. For example, due to forex controls, Nigerian importers pay a premium to convert USDT to Hong Kong traders, who then exchange it for CNY or HKD. Demand exists in Nigeria and similar markets, but scale is nascent.

As regulations mature and fiat conversion pathways clarify, traders may adopt stablecoins more widely. Traditional banks and SWIFT may see reduced roles, with stablecoins becoming an alternative.

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