Stablecoins are expanding quickly, but to hear it from John Wu, president of the blockchain company Ava Labs, there's still miles to go before this category of cryptocurrency — which ties its value to that of a government-issued currency — offshoot is widely used in the market.
"We need scalability. Not just tens of millions of people. We need billions," Wu said after a virtual conference with Circle CEO Jeremy Allaire.
Avalanche, an Ava Labs blockchain platform that powers cryptocurrency transactions, is a new partner for Circle, the Boston-based cryptocurrency exchange and issuer of the USDC stablecoin.
The two firms are attempting to make stablecoin payments accessible to a broader audience by making the underlying technology regulated, easier to understand and use, and applicable to a broader range of use cases.
"A lot of the energy in blockchain is around crypto and speculative money," said Alenka Grealish, a senior analyst at Celent in Portland, Oregon.
Stablecoin issuers need to develop and highlight use cases that have social value to stand out from the general public perception of cryptocurrency, Grealish said. "There needs to be safety and education. Right now you have crypto ATMs showing up at
Building blocks
The race to make stablecoin payments mainstream has been shaken up following
"Stablecoins are not all the way there where they can be used at every point of sale," Allaire said during the virtual conference. "There's a last mile or user experience layer."
Stablecoins were developed as a hedge against the volatility of cryptocurrencies. While this is an important step to mainstream acceptance, there also needs to be a way to access stablecoins in a manner that more resembles traditional currency, according to Allaire.
Circle and the New York-based Ava Labs
While companies like Circle can offer infrastructure to make it easy to use stablecoins, many people remain unconvinced that there are use cases that merit the introduction of a totally new currency, according to Talie Baker, a strategic advisor for Aite-Novarica in Denver.
"They are a great tool for making cross-border payments more efficient and stablecoins are great for providing the on and off ramps between traditional currencies and cryptocurrencies such as bitcoin," Baker said. "But no one is really moving off the needle to use stablecoins yet. Stablecoins are kind of like blockchain, a solution looking for someone to see the value in the problems it solves."
As part of the Circle partnership, Avalanche's developers can access Circle's application programming interfaces, which have been rebuilt to support USDC. Ava Labs' recent deployments include a
A growing market
There's more than $140 billion worth of stablecoins in circulation as of the end of 2021, up from less than $40 billion a year earlier. That growth is fast enough to
"The concept of what a digital asset is is not always clear to everyone," Wu said. "There needs to be a layer that allows the transaction to be seamless … [peer-to-peer] apps look messy under the hood but they are easy to use."
Circle also recently renegotiated its deal with Concord Acquisition Corp., the New York-based special-purpose acquisition company that plans to publicly list it. The new SPAC deal doubled Circle's valuation to $9 billion, potentially creating more funding for Circle. In an email, a Circle public relations representative said being public is part of the company's core strategy to enhance trust and credibility in Circle.
"Circle has the opportunity to be the bridge between
Ava Labs and the new SPAC deal would both help Circle expand among blockchain users. Circle also supports the Steller Network, a permissionless blockchain that is designed to process payments, covering a network of hundreds of exchanges and wallets that enable payments in both cryptocurrency and traditional money.
Other blockchain partners include Solana, which scales data services; Algorand, which provides technology tools to build financial services apps; and Ethereum, the largest blockchain for decentralized applications.
The goal is to reach an audience of merchants and consumers that doesn't necessarily know the difference between a blockchain or a traditional payment process, Allaire said.
"There's already lots of use cases emerging," Allaire said. "We're optimistic."