Amid a push toward the use of cross-border payments, the financial services industry is holding back on stablecoin payments as it awaits consumer adoption and regulation.

Stablecoin is cryptocurrency that aims to keep a stable value relative to a specified asset like government-issued currency or gold. Other cryptocurrencies like Bitcoin are not pegged to an asset and are more volatile, making them difficult to use for payments. 

Leading banks including BNY, Citi and JPMorgan have pilot programs for using stablecoin for payments. 

In February 2019, for example, $3.4 trillion JPMorgan launched JPM Coin, a stablecoin with its value pegged to the U.S. dollar. The bank says JPM Coin is converted to U.S. dollars or euros to make instant payments settlements.  

Regulatory uncertainty 

Small and medium-sized businesses are prime potential clients to use stablecoins, Kumar Narayan, executive director and global head of U.S. dollar clearing at JPMorgan, said during a panel discussion at the recent Fintech Meetup in Las Vegas. More than $7 trillion worth of SMBs payments are processed globally each year, he said. 

“Stablecoins are addressing a lot of the cross-border problems in terms of speed, transparency, traceability,” Narayan said. “But there’s a huge deep negative risk that comes with stablecoins.” 

Concerns include regulatory uncertainty about handling stablecoins across jurisdictions, Narayan said. 

However, while financial institutions wait for regulatory clarity, they continue to invest in tech, Emanuela Saccarola, global head for cross-border payments at $1.6 trillion Citi, said during the discussion. 

“We have got a global presence,” she said. “We see markets or areas where the technology is developing fast … [and] we try to team up with innovators there.” 

Stablecoins could become like APIs, in the sense that very few people were talking about APIs a decade ago, but today they are a must-have, Saccarola added. 

User comfort 

While regulations might be the biggest holdup for now, user comfort is also a major hurdle to overcome before stablecoins become mainstream, Saujin Yi, chief executive of cross-border payments company LiquidTrust, told Bank Automation News. 

Unless stablecoin can be embedded seamlessly into existing payments rails as an option, many “businesses would feel nervous about using it,” she said. 

While major banks wait for user adoption and regulatory clarity, they are developing stablecoin infrastructure in preparation, Yi said. 

“I think the technology is ready,” she said. “I’m not sure if all the different things around it are ready.” 

However, providing consumers with use cases — rather than technology — might be the best driver for stablecoin adoption, JPMorgan’s Narayan said. 

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