Stablecoins are rapidly transforming the digital economy, emerging as the go-to medium for internet-native payments. With transaction volumes now surpassing those of traditional payment giants like Visa and Mastercard on blockchain networks, stablecoins are being hailed as the “default settlement layer for the internet.” This bold claim comes from Noam Hurwitz, head of engineering at Alchemy, a leading blockchain infrastructure provider. As financial systems evolve, stablecoins are proving to be more than just crypto derivatives—they’re becoming foundational to how value moves online.
The Rise of Stablecoins in Digital Payments
The adoption of stablecoins has been nothing short of explosive. According to Hurwitz, stablecoin transaction volume on public blockchains has outpaced that of Visa and Mastercard by 7%, marking a significant shift in digital finance. This growth isn’t limited to crypto-native platforms; mainstream fintech companies like PayPal and Stripe are now integrating stablecoins into their payment rails to take advantage of faster settlement times and lower operational costs.
Blockchain infrastructure plays a crucial role in this transition. Alchemy, for example, powers the stablecoin operations of major financial entities including Visa, Circle, PayPal, and Stripe, while also serving as the onchain backbone for Robinhood Wallet. These partnerships illustrate a growing industry consensus: stablecoins are no longer niche instruments but core components of modern financial infrastructure.
👉 Discover how blockchain infrastructure is enabling the next generation of global payments.
Why Are Stablecoins Gaining Widespread Adoption?
Several key advantages explain the rapid rise of stablecoins:
- Speed: Transactions settle in seconds or minutes, not days.
- Cost-efficiency: Cross-border transfers bypass traditional intermediaries, reducing fees.
- Global accessibility: Anyone with internet access can send and receive stablecoins.
- Security: Built on transparent, immutable blockchains.
These features make stablecoins ideal for use cases ranging from international remittances to decentralized finance (DeFi) and prediction markets like Polymarket. Beyond payments, stablecoins are also reshaping capital markets. For instance, Tether (USDT), one of the largest stablecoins, holds approximately **$113 billion in U.S. Treasurys**—more than the national reserves of countries like Germany—and generated $13 billion in profit last year alone.
Hurwitz describes this trend as part of a broader shift toward a tokenized financial system, where money, debt, and assets exist as digital tokens on blockchains. “Tokenized money is the foundation,” he said, calling the innovations built on this foundation “exciting” and transformative.
Challenges Facing Stablecoin Adoption
Despite their momentum, stablecoins face significant hurdles. One major challenge is the fragmented nature of blockchain ecosystems. Multiple chains—each with different protocols, consensus mechanisms, and security models—make it difficult for institutions to deploy stablecoin solutions at scale.
Hurwitz raises a critical question: “Can a small startup really support enterprise-grade operations while building and scaling the services they need?” This highlights the need for reliable, battle-tested infrastructure providers capable of supporting institutional-grade applications.
Regulatory uncertainty has also been a persistent barrier. However, recent developments suggest progress is being made.
Regulatory Clarity Fuels Innovation
A major turning point came with the passage of the GENIUS Act (Guiding and Establishing National Innovation for US Stablecoins) by the U.S. Senate. This legislation establishes federal oversight for dollar-backed stablecoins, setting standards for reserve transparency, auditing, and consumer protection.
Hurwitz views this as a pivotal development: “With the recent passage of the GENIUS Act, the regulatory landscape is becoming clearer and more structured, which encourages innovation while protecting consumers.”
Clearer regulations reduce risk for traditional financial institutions and open doors for broader integration of stablecoins into banking, payments, and capital markets.
👉 Learn how regulatory advancements are shaping the future of digital finance.
Institutional Innovation: JP Morgan’s Kinexys
One real-world example of institutional adoption is Kinexys, a tokenized bank deposit launched by JP Morgan. Unlike public stablecoins such as USDC or USDT, Kinexys operates as a permissioned token on a public blockchain, allowing institutional clients to earn yield while maintaining regulatory compliance.
Features include:
- 24/7 settlement
- Near real-time liquidity
- Interest-bearing capabilities
This hybrid model demonstrates how traditional finance can leverage blockchain benefits without sacrificing control or compliance—pointing to a future where both public and private tokenized money coexist.
Technical Hurdles and the Road Ahead
While adoption grows, technical challenges remain. Many companies want to offer seamless user experiences without exposing customers to the complexities of blockchain—wallets, gas fees, private keys. Achieving this requires sophisticated backend infrastructure that abstracts away complexity while maintaining security and reliability.
Hurwitz predicts that most financial institutions will eventually launch their own layer 2 blockchains—scalable networks built atop existing blockchains like Ethereum—to control performance, monetize services, and ensure interoperability.
The long-term vision? A financially interconnected world powered by seamless crosschain interoperability, where stablecoins flow freely across platforms, borders, and ecosystems.
BIS Critique: Are Stablecoins Really Money?
Not everyone agrees with the “default settlement layer” narrative. A 2025 report from the Bank for International Settlements (BIS) argues that stablecoins fail key monetary functions: singleness (a single unit of account), elasticity (ability to expand supply during crises), and integrity (trust in central authority).
The BIS classifies stablecoins as “digital bearer instruments” more akin to securities than true money. While technically accurate from a central banking perspective, this view overlooks their practical utility in decentralized environments where speed, accessibility, and programmability matter more than centralized control.
Proponents counter that adoption speaks louder than theory. With real-world usage expanding daily—from remittances in emerging markets to DeFi protocols processing billions—the functional role of stablecoins continues to grow regardless of academic debate.
Frequently Asked Questions (FAQ)
Q: What makes stablecoins different from regular cryptocurrencies?
A: Unlike volatile assets like Bitcoin or Ethereum, stablecoins are designed to maintain a stable value—usually pegged 1:1 to a fiat currency like the U.S. dollar—making them ideal for payments and savings.
Q: How do stablecoins maintain their peg?
A: Most rely on reserves (cash, Treasurys) held by issuers. Others use algorithms or over-collateralized crypto assets. Regulated issuers like Circle (USDC) undergo regular audits to verify reserve backing.
Q: Are stablecoins safe?
A: Safety depends on transparency and regulation. Stablecoins backed by high-quality reserves and subject to audits—such as USDC—are generally considered low-risk compared to unregulated or algorithmic variants.
Q: Can I use stablecoins for everyday purchases?
A: Yes—increasingly so. Platforms like PayPal now allow users to pay merchants using stablecoins, and crypto debit cards enable point-of-sale spending worldwide.
Q: Do stablecoins earn interest?
A: Many do. Users can lend or stake stablecoins in DeFi protocols or yield-bearing accounts (like Kinexys) to earn returns, often higher than traditional bank interest rates.
Q: What is the future of stablecoin regulation?
A: With frameworks like the GENIUS Act, the U.S. is moving toward federal oversight. Global coordination through bodies like the BIS may follow, aiming to balance innovation with financial stability.
👉 See how you can get started with stablecoins in a secure and compliant way.
Conclusion
Stablecoins have firmly established themselves as a transformative force in digital finance. Backed by robust infrastructure, growing institutional support, and increasing regulatory clarity, they are fulfilling their promise as the internet’s default settlement layer.
From powering cross-border payments to enabling new forms of programmable money, stablecoins are redefining what’s possible in global finance. While challenges around interoperability, regulation, and design persist, their trajectory is clear: they are not just an alternative to traditional systems—they are building the foundation of what comes next.
For developers, businesses, and users alike, understanding and embracing this shift is essential to participating in the future of value exchange on the internet.
Core Keywords: stablecoins, blockchain infrastructure, tokenized money, digital payments, crosschain interoperability, GENIUS Act, onchain transactions, internet settlement layer