Stablecoins vs. FX: exploring a disruptive shift in global payments (Part 1)

Mirela Ciobanu, Lead Editor at The Paypers, investigates the question: how might stablecoins disrupt the traditional foreign exchange (FX) landscape?

Drawing on research, expert discussions, personal observations, and insights from AI tools like ChatGPT, this article examines the role of stablecoins in cross-border payments, liquidity management, and currency conversion. It aims to offer readers a view on the opportunities, challenges, and potential impact of stablecoins on the future of FX.

Our thesis

Global FX and cross-border payments platforms may soon face serious disruption from stablecoins, particularly regulated ones, which promise a faster, more transparent, and cost-effective alternative to traditional systems. Some players in the cross-border payments space, such as Remitly, have already anticipated this threat and have partnered with stablecoin orchestrators and issuers to offer global transfers at a lower cost. Remitly has partnered with Bridge, a Stripe company, to integrate stablecoin-based rails into its global disbursement network.

Investor Kevin O’Leary echoed this idea of disruption in his keynote at Consensus 25, where he argued that the FX market is outdated, inefficient, and vulnerable to disruption by stablecoins. To fuel a further explosion in stablecoins’ popularity, at the end of June, the US Senate passed a bill to create a regulatory framework for US-dollar-pegged stablecoins. On July 17, 2025, the House of Representatives approved the GENIUS Act. The very next day, July 18, President Donald Trump signed it into law, making it the first federal statute regulating stablecoins in the US.

However, the Bank for International Settlements issued a stark warning on the risks posed by stablecoins and urged countries to move rapidly towards the tokenization of their currencies. The BIS outlined its concerns, including the potential of stablecoins to undermine monetary sovereignty, transparency issues, and the risk of capital flight from emerging economies. Following this announcement, Turkey plans to introduce daily and monthly limits on stablecoin transfers to prevent the rapid outflow of illicit funds.

At The Paypers, we tested this hypothesis: how can stablecoins disrupt FX? Most of the ‘thoughts’ you are about to discover in a three-part series of articles are based on what we read, discussions we had with payment experts, insights from ChatGPT, personal observations, and research.

Initial conclusions

First conclusion: yes, in the short term, stablecoins can disrupt FX markets, especially if we think about retail payments use cases such as remittances. Actors involved in this activity include payment providing companies (PSPs) and small banks, T2 and T3, that do not depend on large volumes of liquidity.

In this case, the main benefits of using stablecoins come from using the new rails that money transfers are based on, which align these transactions with the G20’s objective of making cross-border payments faster, cheaper, and transparent. Additional benefits include the fact that they operate 24/7/365, thus avoiding trapping liquidity, plus they are suited for payment corridors that are based on more exotic currencies (other than the ones used by G7 nations).

In the case of corporate, cross-border B2B payments, which usually require large liquidity and a more robust payments and settlement infrastructure, it is tougher.

Not only because of the need for high amounts of liquidity that FX market participants might not have in the exact moment of transfer, but also because regulatory frameworks remain fragmented and incomplete across major jurisdictions worldwide, and the untested consequences these stablecoin movements have on the monetary sovereignty of each country.

The infrastructure could also be a blocker: if everyone were to move stablecoins in the cross-border B2B payments space, at the same time, would the infrastructure hold it? Still, this problem might be solved with Layer 2 solutions. Layer 2 blockchains (which are built on top of existing Layer 1 blockchains, like Ethereum) play a crucial role in enabling blockchain scalability, particularly for the use of stablecoins in cross-border and wholesale payments, where high transaction volumes and substantial liquidity are involved.

By processing transactions off-chain or bundling them via rollups, Layer 2 solutions like Optimism, Arbitrum, or zkSync significantly increase throughput and reduce costs, making frequent, low-cost stablecoin transactions feasible.

They also improve settlement speed, which is essential for time-sensitive wholesale operations. However, while the technology can technically deliver near-instant, low-cost transactions, the institutional and organisational structures of the traditional payments industry are not yet fully equipped to handle this new pace. Legacy systems, compliance processes, risk frameworks, and cross-jurisdictional coordination still operate on slower rails.

That said, solutions are emerging. Regulated settlement networks like JPM Coin and Partior are actively testing enterprise-grade digital payment rails. Institutional-grade stablecoins (such as USDC issued on compliant blockchains) are gaining traction, and programmable settlement layers using smart contracts are being piloted by firms like Baton Systems and RTGS.global.
In conclusion, if the global B2B payments ecosystem were to shift en masse to stablecoins today, the infrastructure would likely buckle under the weight of scale and complexity. However, innovation is accelerating, and a hybrid future, where stablecoins complement rather than replace existing rails, is fast becoming a viable reality.

Some other questions related to stablecoin’s potential to disrupt FX markets were raised for me

Situation: National central banks play an important role in the foreign exchange markets. They try to control the money supply, inflation, and/or interest rates and often have official or unofficial target rates for their currencies. They can use their often substantial foreign exchange reserves to stabilise the market.

Question: Can an overuse of stablecoins, let’s say pegged on the US dollar/ Singaporean dollar, or the Euro, affect the balance of a central bank's sheet? How should central banks act in a scenario where stablecoin rails are successfully adopted/replace the FX markets? Is there a place for them? Who will control the money supply, inflation, and/or interest rates? Is the market capable of autocorrections? 
While searching for some answers to this question, I found an interesting view on what would happen if dollar stablecoins gained a foothold in domestic transactions in the euro area, coming from the keynote speech of Philip Lane of the ECB (20 March).

Philip Lane’s remarks highlight a growing concern among central banks regarding the increasing use of dollar-pegged stablecoins, such as USDC or USDT, in domestic transactions outside the United States. If these stablecoins gain a foothold in regions like the euro area, they could undermine monetary sovereignty by weakening the role of the domestic currency, such as the euro, as the primary unit of account and medium of exchange.

This shift, often referred to as ‘digital dollarisation’, risks reducing the effectiveness of central banks’ monetary policy tools, including their ability to manage inflation, interest rates, and overall financial stability. 
Beyond the technical implications, Lane also warns of the symbolic impact such a development could have: the euro is not only an economic instrument but also a key symbol of European unity. A diminished role for the euro in everyday transactions, supplanted by a foreign currency via stablecoins, could erode both public trust in the monetary system and the cohesion it represents. 
This underscores why regulators may view the widespread domestic use of dollar stablecoins as a strategic threat, and why they might respond by developing local currency stablecoins or accelerating the launch of central bank digital currencies (CBDCs).

Still, euro-backed stablecoins are already in circulation in the EU, such as Société Générale’s EUR CoinVertible (EURCV), a euro-pegged token fully collateralised with cash deposits held by the bank, which could, in theory, be used for domestic payments instead of dollar-backed ones. However, there is currently no strong domestic pain point for stablecoin use. In stable economies, debit cards, instant bank transfers, and mobile payments are already cheap, fast, and familiar, so the incentive to switch remains low.

Also weighing in on the use of dollar-pegged stablecoins in domestic payments across the euro area, payments expert Piet Mallekoote noted: ‘This could impact the balance sheets of central banks. It’s important to closely examine how this transmission channel works and what the specific implications might be. Naturally, central bank balances would also be affected in the event of a financial crisis triggered by significant instability in the stablecoin market. That’s one of the key reasons central banks are paying close attention to these developments, and why the ECB is now strongly advocating for the introduction of a digital euro. That said, it’s important to acknowledge that a digital euro alone won't address all challenges, such as the ongoing inefficiencies in cross-border remittances.’

Over the next installment, Part 2, we will break down key FX terms, market players, and risks, and explore how stablecoins connect to the global foreign exchange market.

Stay tuned!

About author

Mirela Ciobanu is Lead Editor at The Paypers, specialising in the Banking and Fintech domain. With a keen eye for industry trends, she is constantly on the lookout for the latest developments in digital assets, regtech, payment innovation, and fraud prevention. Mirela is particularly passionate about crypto, blockchain, DeFi, and fincrime investigations, and is a strong advocate for online data privacy and protection. As a skilled writer, Mirela strives to deliver accurate and informative insights to her readers, always in pursuit of the most compelling version of the truth. Connect with Mirela on LinkedIn or reach out via email at mirelac@thepaypers.com.