Stablecoin payments explained: Use cases and alternatives

Key takeaways

• Stablecoins are a type of cryptocurrency that maintains a stable value, usually by pegging to traditional currencies and commodities. 

• You can use stablecoins to send and receive payments globally, though there’s still regulatory uncertainty, integration challenges, and potential counterparty risk in the cryptocurrency space. 

• Fintechs like Airwallex offer modern payment solutions that can give you the same benefits of stablecoins, without the volatility and uncertainty. 

Cryptocurrency prices can swing, new tokens can appear overnight, and regulations aren’t always clear. But not all cryptos are alike: stablecoins offer more control and certainty in a volatile space, as their values are typically pegged to fiat currencies or commodities. For businesses exploring digital currencies, stablecoins offer a practical way to access crypto, with less volatility.

Read on to learn how stablecoins work, how they’re used in payments, and where they may fall short. We’ll also explore alternatives to help you decide what’s right for your business.

What are stablecoins?

Stablecoins are a type of cryptocurrency that aims to maintain a stable value by pegging their value to another asset, which can include fiat currencies, commodities, or other assets held in reserve. For example, when you peg a stablecoin to the US dollar, the stablecoin issuer will aim to keep its value as close to US$1 as possible, regardless of market conditions.

Stablecoins offer access to digital assets designed for price stability within the cryptocurrency ecosystem. Unlike more volatile cryptocurrencies like Bitcoin or Ethereum, stablecoins are typically pegged to fiat currencies – such as the US dollar – making them a more dependable medium of exchange and store of value for everyday use, payments, and cross-border transfers. 

Today, stablecoins are changing how we use digital currencies. Beyond individual users, businesses are increasingly adopting them as well. According to a 2025 report that surveyed 20 stablecoin-based payment companies, business-to-business (B2B) stablecoin payments ‌surged to over US$3 billion in monthly volume in early 2025, up from under US$100 million early 2023. This growth shows that more businesses are using stablecoins to make payments, including vendor payments and supplier invoicing. Stablecoin adoption is particularly high in emerging markets with limited banking access and high remittance fees.

Types of stablecoins

There are the four main types of stablecoins:

1. Fiat-backed stablecoins

Fiat-backed stablecoins are usually pegged to one or more fiat currencies held in reserve, often issued by regulated entities. A reserve may include cash, cash equivalents, and short-term government securities. The reserve is meant to match the total supply of stablecoins in circulation, so each stablecoin can be exchanged 1:1 for the corresponding fiat currency. Examples include USD Coin (USDC) and Tether (USDT), both of which are pegged to the US dollar.

2. Commodity-backed stablecoins

Commodity-backed stablecoins are backed by physical assets like gold, silver, and oil. Their stability comes from the generally stable market prices of these commodities. For example, Pax Gold (PAXG) is backed by gold, with each PAXG token representing one troy ounce of gold.

3. Crypto-backed stablecoins

Crypto-backed stablecoins derive their value from other cryptocurrencies. To create this type of stablecoin, users need to lock up a certain amount of cryptocurrency (like Bitcoin, Ethereum, or other tokens) as collateral. This collateral is held in a smart contract or a custodial wallet. To keep prices stable, users often need to lock up more crypto than the stablecoin is worth. An example is DAI, a stablecoin designed to maintain a stable value of US$1.

4. Algorithmic stablecoins 

Algorithmic stablecoins use algorithms and smart contracts to automatically increase or decrease the stablecoin’s supply to keep its price stable. For example, if the stablecoin’s market value exceeds its target price, the algorithm will increase its supply to bring the price back to its intended level. Before its collapse, TerraUSD was an algorithmic stablecoin that aimed to maintain a 1:1 peg with the US dollar. Its collapse shows that this approach can be risky, as it’s highly dependent on market confidence.

Stablecoins can be backed by multiple asset types

There are four main types of stablecoins, but stablecoins may not always be purely fiat-backed or commodity-backed. A stablecoin can be backed by more than one kind of reserve asset. For example, Tether is backed by US Treasury bills, cash equivalents, precious metals, Bitcoin, and more. While stablecoins are designed to be stable, they can still be volatile, especially if they are backed by more volatile assets. 

How stablecoins are used in payments

Stablecoin adoption is rising. In the US, major financial institutions like Wells Fargo and JPMorgan Chase are discussing the creation of a joint stablecoin, demonstrating the potential of stablecoins to integrate traditional finance with decentralised finance. Recent movements, such as the passing of the Genius Act, signal the current administration's growing confidence in stablecoin.

Today, investors and businesses are already using stablecoins to send and receive cross-border payments, purchase goods and services, and trade other crypto assets. USDT and USDC are widely used in emerging economies for cross-border payments, trade finance, and digital commerce. 

Let’s take a look at some of these use cases:

eCommerce payments

Using stablecoins as an alternative payment method can unlock new opportunities for eCommerce businesses. Some eCommerce platforms allow merchants to accept stablecoin payments from customers. Merchants can settle payments directly in stablecoins, reducing transaction fees and settlement times. 

Supplier and vendor payouts

Stablecoins let businesses pay international suppliers quickly and directly without a middleman. This speed of payments can improve cash flow and strengthen supplier relationships, but it’s worth remembering that there are fintechs that offer the same benefit. 

Payroll and remittance

In regions with limited banking access or high remittance costs, such as Latin America, Africa, and Southeast Asia, employers can use stablecoins to pay employees quickly, bypassing traditional banking systems. For example, some businesses process payroll by sending USD to a payment provider. That payment provider converts the funds to stablecoin and sends them to employees’ digital wallets. Another option could be to partner with a fintech with access to local payment rails, which would allow businesses to transfer funds in local fiat currencies.

Treasury management

Holding stablecoins is especially useful in regions where local currencies are volatile or where access to fiat currencies, like the US dollar, is limited. Stablecoins let businesses store value in USD-equivalents without a USD bank account, protecting their funds from local inflation and reducing foreign exchange (FX) risk. For example, Tether (USDT) and Circle (USDC) are backed by a combined US$166 billion in US Treasury bills – government-backed assets that are generally stable. These stablecoins are generally redeemable 1:1 for US dollars, even in times of market stress.

Gateway to other cryptocurrencies

Stablecoins are highly liquid assets that businesses can use to purchase other cryptocurrencies. They can make fast swaps directly on centralised or decentralised exchanges without converting to fiat currencies, saving on time and conversion fees. 

Advantages of stablecoin payments

Stablecoins are generally more stable than other cryptocurrencies, but can face more risks than fiat currencies depending on their stability mechanism and underlying assets. Here are the benefits of stablecoin payments compared to those using traditional banking networks:

• Bypass traditional banking networks: When you make transfers using stablecoins, you go directly through blockchain networks without intermediaries and their fees.

• Fast settlement: Stablecoin payment settle almost instantly on blockchain networks, letting you send and receive funds quickly. You won’t have to wait days for payments to settle due to banking hours, compliance checks, and intermediary processing. You might face delays when you on-ramp (convert fiat to stablecoins) or off-ramp (convert stablecoins to fiat) stablecoins due to regulatory and compliance checks, especially if the funds don’t have a clear, traceable source. 

• High transparency: Stablecoin transactions are recorded on public or private blockchains. This transparency makes it easier to track and audit payments.

• Global reach: Stablecoins can be accessed and used by anyone with an internet connection, including individuals in regions with limited banking infrastructure.

Fiat-backed stablecoins combine the stability of fiat currencies with the efficiency and transparency of blockchain technology, making them an attractive option for global payments. It’s worth noting that some fintechs offer solutions that give you similar benefits using fiat currencies, even to emerging market regions. 

For example, with Airwallex, you can send funds in local currencies to 200+ countries, with 120+ countries leveraging local payment rails. Transfers are near-instant, and either free or significantly cheaper than SWIFT. Our network even reaches emerging markets like Latin America and Africa – regions where stablecoins are gaining popularity – offering a faster, more cost-effective alternative without the crypto complexity. 

Risks of stablecoin payments

While stablecoins offer some advantages for global payments, they also come with certain risks:

Regulatory uncertainty

Many regions, including the US, Switzerland, Japan, Singapore, Hong Kong, and the United Arab Emirates, have implemented regulatory frameworks on stablecoins. But regulations are still evolving and aren’t consistent across jurisdictions, making it harder to stay compliant and adopt stablecoins as a payment method. 

On/off-ramp challenges

Even if a business uses stablecoins to transact, the reality is that most will need to convert their stablecoins to fiat to use it in the real world to pay suppliers, taxes, and other expenses. This process is also known as “off-ramping”. And unlike fiat funds, which typically originate through legitimate business sources and go through regulated and centralised payment networks, stablecoins may not. That makes it more difficult to tell whether a stablecoin payment has come from a legitimate source and whether those funds have passed Know Your Customer (KYC) and Anti-Money Laundering (AML) processes. All of these complications can slow down the off-ramping process.

Similarly, on-ramping (converting fiat into stablecoins) can also face delays for the same compliance reasons, especially in regions with strict KYC/AML requirements.

Market volatility

While stablecoins are designed to maintain a stable price, they’re not immune to market volatility. A stablecoin’s value can fall when its backing asset’s value drops or when the mechanism maintaining its stability fails. If this happens, users may cash out quickly in a panic. 

Counterparty risk

Many stablecoins depend on centralised issuers to hold reserves and manage issuance. If these issuers refuse to let users cash out, mismanage funds, or aren’t transparent about their assets, it becomes risky for users who depend on them. In contrast, major fiat currencies are regulated by government-backed central banks and are subject to strict oversight and regular audits, offering greater financial security. 

Security concerns

Stablecoins depend on blockchain technology and digital wallets, which can be more vulnerable to cyber attacks, hacking, and theft. Centralised issuers, in particular, may be targets of cybercriminals. If an issuer’s systems are compromised, the stablecoin’s value would be at risk and its users could lose access to their funds. Fiat currencies, on the other hand, are protected by a combination of physical security, legal frameworks, and regulatory oversight.

Integration limitations

Getting stablecoins to work smoothly with existing banks, payment systems, or merchant tools can be complex. Compatibility issues, technological barriers, or a lack of standardised processes can make businesses hesitant to adopt stablecoins. 

Stablecoin alternatives for global payments 

There are alternatives to stablecoins that can also facilitate fast and cost-efficient global payments. Let’s look at what these alternatives are and how they compare to stablecoins:

Central Bank Digital Currencies (CBDCs)

Central Bank Digital Currencies (CBDCs) are digital versions of a country's fiat currency, issued and regulated by its central bank. They combine the efficiency of digital payments with the stability and trust of fiat currencies.

Pros

• Offers greater trust as they’re government-backed, secure, and regulated.

• Facilitates faster, low-cost payments, as they don’t rely on physical cash and traditional banking infrastructure.

• Integrates with blockchain for added security and transparency.

Cons

• Requires significant infrastructure upgrades to implement. 

• May face lower adoption in regions with privacy concerns over government surveillance.

Hybrid solutions

Hybrid solutions combine blockchain technology with trusted banking systems. For example, JPMorgan launched a deposit token (the digital version of a bank deposit) to let its clients move money across borders faster and more easily, while maintaining a close connection with traditional banking systems.

Pros

• Offers a way to move money across borders within a regulated environment. 

• Integrates easily with existing banking and treasury systems.

Cons

• May still rely heavily on banks and payment networks, limiting speed and efficiency.

• May involve higher fees and slower processing than pure blockchain-based solutions.

Fintech solutions

While stablecoins offer some advantages, many fintech solutions not only provide similar benefits, but also go further. By leveraging existing banking infrastructure, these platforms enable fast, global payments using local banking rails and fiat currencies, without the need to open a stablecoin wallet or convert funds to and from stablecoins. Many are regulated and integrate seamlessly with existing systems like accounting, payroll, and ERP tools. For example, our platform, Airwallex, offers all of these capabilities and more. 

Pros

• More highly regulated than stablecoins, providing greater trust and security.

• Many use trusted and familiar local fiat currencies, without the need to convert funds to and from stablecoin.

• Many offer competitive FX rates for fiat-to-fiat conversions.

• Integrates with existing banking, accounting, payroll, and ERP systems.

• Many offer robust customer support, which can further aid business growth.

Cons

• Many fintechs don’t support automatic, programmable transactions the way that stablecoins can be built into smart contracts on blockchains.

Future of stablecoins

Based on current trends, the daily transaction volume of stablecoins could reach at least US$250 billion in the next three years, up from US$30 billion in 2025. Considering its growth, you might be assessing how stablecoins fit into your business strategy, and whether it should replace any of your traditional banking in the first place. 

Fiat currencies still dominate daily transfer volumes, with stablecoins making up approximately 1%, so it’s unlikely that stablecoins will replace traditional payment rails in the near future. But with increasing regulation, stablecoin  may become a part of global financial infrastructure, and a business might make stablecoin payments alongside local currency payments.

Stablecoins aren’t the only way to make cross-border payments

Today, businesses that use stablecoin are doing so because traditional alternatives are slow and expensive, especially when transacting in underbanked regions. But stablecoins aren’t the only way to send cross-border payments. Fiat currencies are still a reliable choice for cross-border payments, as they are widely accepted, highly regulated, and deeply embedded into banking and finance systems. 

With the right partner, you can still send payments globally via local currencies, without having to rely on stablecoin and exposing you to the risks and regulatory uncertainties that come with them. Our platform, Airwallex, lets you make global transfers in local currencies. Transfers can be near-instant and low-cost when you leverage our local payment rails in 120+ countries, which also lets you reach fast-growing markets like Brazil, Mexico, Colombia, and more. 

With the 60+ licences and permits we hold globally, you get built-in compliance support that lets you expand with confidence. Our platform is licensed and regulated worldwide, including by the Financial Crimes Enforcement Network (FinCEN) in the US, the Monetary Authority of Singapore (MAS), and Australian Transaction Reports and Analysis Centre (AUSTRAC).

Our platform also offers the APIs and tools that lets you sync your payments with popular accounting software, so you can automate reconciliation and get transparent audit trails easily. 

Frequently asked questions

How do stablecoins work?

Stablecoins maintain their stable value by pegging to traditional assets such as fiat currencies or commodities. This makes them more predictable than regular cryptocurrencies, which can be highly volatile.

How can businesses use stablecoins?

You can use stablecoins to send and receive payments globally, particularly in emerging markets. They’re also useful as liquid assets that you can hold to maintain your purchasing power while reducing FX exposure. You can also use stablecoins to purchase other cryptocurrencies, without conversion into fiat currencies.

What are the potential risks associated with stablecoins?

Regulatory uncertainty puts stablecoin stability at risk. There’s also a risk of centralised issuers not fulfilling redemption requests or mismanaging reserves, as well as the possibility of a stablecoin losing its value and being liquidated.

What are the alternatives to stablecoins for global payments?

Some alternatives to stablecoins are Central Bank Digital Currencies (CBDCs), hybrid solutions like deposit tokens, and fintech cross-border payment solutions.