Stablecoins are one of the few investment options to do well during the recent tariff-driven volatility, though the broader economic shock could harm the growth of the digital asset's use for payments.
While President Trump said he's
The expansion in stablecoin investment is not a surprise, given the role of stablecoins as a hedge against currency and other market volatility. But firms that are betting on an increase in payments might not be as lucky. Major banks such as
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"The main effect of the tariffs on stablecoins will be in the investment market, as investors move capital into stablecoins to hedge against volatility," Lorien Carter, a stablecoin analyst at Juniper Research, told American Banker. "The tariffs won't necessarily affect the use of stablecoins as a payment mechanism."
Before the tariffs were announced, 2025 was shaping up to be a year of recovery for payment technology firms and other fintechs. Two major IPOs were on the way for early 2025, Swedish payment company and buy now/pay lender
Amid the tariff storm, Klarna has
Both IPOs were seen as bellwethers for payments innovation. Circle is well known as a stablecoin company, and has also developed more general payment products to compete with Block and PayPal, which has also launched its own stablecoin.
Stablecoins are backed by reserves including U.S. dollars or other established currencies, or U.S. Treasuries. This is designed to avoid valuation swings, making stablecoins the best cryptocurrency for payments, particularly for cross-border transactions that involve foreign exchange or a country with high inflation of unstable currency.
The tariff-driven global instability puts that thesis at risk. "Payments require certainty, which in turn requires trust," Richard Crone, a payments consultant, told American Banker. "Payments innovation thrives on stability. And tariff-driven uncertainty puts that at risk."
Circle did not comment, citing a quiet period following its SEC IPO filing.
"Certainty is exactly what stablecoin issuers are selling. Circle will have a hard time selling that in a market that's anything but stable," Crone said.
Continued volatility and economic instability in the U.S. could hurt U.S.-based stablecoins, even as an investment option.
"As the role of the dollar in international trade declines, non-USD based stablecoins may start performing better," Carter said.
Cryptocurrency firms were more positive than analysts about the potential of stablecoin payments in the current environment. Before the tariff announcement, cryptocurrency was seen as a growth market, given the advancement of
Tether, the market's largest stablecoin issuer, is planning a new stablecoin designed for institutional clients, particularly parties looking to speed settlement between banks.
"There's been a lot of speculation around how new tariffs might impact global payments. In times of uncertainty, people often turn to stable, dollar-linked options — and USDT is frequently one of the first tools they reach for," a Tether spokesperson told American Banker in an email. "We're not rooting for instability. If more people adopt USDT due to macroeconomic stress, it's a sign that something isn't working elsewhere, not something we celebrate."
Charles Wayn, co-founder of decentralized Web3 app Galxe, told American Banker Tether's stablecoin for the U.S. market is "fantastic for the crypto industry" because it's what he called institutional-grade.
"As macroinstability intensifies, we are seeing both pressure and opportunity in the stablecoin sector. Bitcoin, a deflationary asset, has not yet bridged the gap from a store of value to real mainstream payment use. Meanwhile, the stablecoin market is gaining significant traction, particularly among traditional institutions," Wayn said.
Stablecoins have become the "cornerstone" of crypto payments, especially in times of economic uncertainty, according to Michele Crivelli, founder and chief operation officer of NexBridge.
"If inflation climbs, supply chains tighten, or economic volatility rises, we expect demand for stablecoins — especially dollar-backed ones — to grow," Crivelli told American Banker.
This environment only strengthens the case for compliant, transparent stablecoins — those designed not just for speed and efficiency, but for integration into regulated financial ecosystems, Crivelli said. "As the lines between traditional and digital finance continue to blur, we believe stablecoins, backed by strong governance and real-world assets, will serve as a foundational layer for interoperable, cross-border transactions."
