The initial appeal of cryptocurrencies was subversive and antiestablishment. Bitcoin was intended as a system that could not be corrupted or controlled by governments and whose assets, custodied by users, could not be seized.
For businesses, this looked like an interesting decentralized computing and payment system, but of little immediate practical use. The arrival of stablecoins changed that and will eventually change all of finance as well.
Stablecoins are useful because they take a technical revolution — blockchains — and make it practical for businesses. If you had to transact on-chain in a cryptocurrency, you would be adding foreign exchange risk to all your transactions. Volatility may be fine for some investors, but for most companies, it is a bug, not a feature.
As the regulatory environment for digital assets continues to mature, stablecoins are popping up everywhere for a relatively simple reason: Blockchain networks are fast and efficient. Switching from traditional banking rails like wire transfers to blockchain can cut the cost of international money transfers by as much as 90%.
If you are still thinking of blockchains as slow, clunky and expensive, do not feel badly. As is the story of many emerging technologies, they evolve quickly.
Ethereum is a great example. Five years ago, the network could handle about a million transactions a day and when it got congested, transaction fees tended to skyrocket into tens or hundreds of dollars for a single transaction. Each transaction also had a large carbon footprint.
Fast forward to 2025 and, after a series of network upgrades known as "hard forks," ethereum can handle somewhere between 200 to 450 million transactions a day. Carbon footprint for each transaction is now 99.5% lower and transaction fees are reliably low. Dozens of stablecoins in a range of currencies are now also available.
Not only have the blockchain networks improved, but also the connectivity has as well. In 2024, EY became the first company to receive a fully automated B2B payment using stablecoins. This one came from PayPal's own digital wallet, using PayPal's stablecoin, PYUSD, to EY's institutional crypto account at Coinbase. PayPal made the payment using SAP's Hana ERP system and when the money arrived at Coinbase, it appeared in EY's instance of SAP as cash paid against an invoice.
When you combine the tokenization of money as stablecoins with the tokenization of business or financial assets, you have the foundation of a very efficient business operating model. From procurement to trade finance, all business agreements are really about exchanging money for products under the terms of a contract.
Having both the money and the product as digital tokens and the agreement itself as a digital smart contract offers incredible speed and efficiency. In work EY has done for clients, we have cut the time required to administer the contract by 99% and cost by 40%.
Stablecoins are cheap, useful and increasingly easy to implement. When running on programmable public blockchains like ethereum, they form the foundation of an entirely new digital financial system.
The magic ingredient is programmability. Using smart contracts, you can do much more than just define a simple payment; you can cover deposits, lending and futures. Nearly every service banks offer today can be reconstructed (really already has been reconstructed) as a purely on-chain financial service.
One of the best examples is AAVE, an on-chain lending protocol. Users can deposit assets (collateral) and borrow against the value of those assets. The protocol uses an algorithm and data from past volatility and the supply of stablecoin lenders to assess what percentage of the asset value can be borrowed and at what rate.
The absence of regulatory frameworks has limited the growth of this category of service, known in the world of crypto as decentralized finance, or DeFi. Despite that, AAVE has accumulated over $20 billion in assets and the sector as a whole currently has about $100 billion "locked" in these automated smart contract systems.
This is the early stage of a DeFi revolution. $100 billion only seems like a lot if you do not consider that there are some $800 trillion in assets worldwide. Despite the small share, sites like DeFi Llama (a good data source) are tracking more than 4,000 services and protocols.
DeFi services are still often hacked or unreliable. Few of those operating today are likely to survive. Despite that, as with blockchains themselves, banks and financial institutions should not turn their back on the space.
Stablecoins pose significant competition to banks, risking both fees from payments systems and profits from banking services.
Today, using stablecoins and DeFi services is neither simple nor seamless. Those barriers will not last for long, however, as companies from SAP to Visa and Mastercard begin integrating these services. Banks have a limited window of time to prepare for this new world.
