The use of stablecoins for speculative trading in cryptocurrency markets has experienced a consistent, steep decline over the past five years. That’s the key takeaway of “Beyond Speculation: Payment Stablecoins for Real-time Gross Settlements,” a paper that was among the four winning research projects featured at DC Fintech Week 2023.
Led by Circle Chief Economist Gordon Y. Liao, the paper provides empirical evidence that demonstrates how the use of stablecoins for speculative activities in digital assets markets has plunged 90 percent since 2019, a trend that is also unrelated to market frenzies.
While stablecoins started out as blockchain-based cash balances for crypto exchanges and traders, they have evolved over the past few years to resemble a form of general-purpose money tokenized on public blockchains, the paper said. The features that distinguish payment stablecoins, like USDC, from other varieties of stablecoins are twofold: their primary use as a general purpose form of payment, and full-reserve backing by high-quality, liquid assets.
As payment stablecoins have shifted away from speculative activities, they continue to gain traction as a utility for real-world value transfers such as cross-border payments, emergency and humanitarian relief, and remittances.
The full text of the research paper is available here. A video summary is available here.