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2024’s Elite Stablecoins: Your Cross-Border Payment Solution

10 Mins

June 28, 2024

Introduction

Welcome to the dynamic world of digital currencies! These cutting-edge alternatives to traditional payment and settlement methods operate 24/7, with minimal transaction costs, complete and final settlements, and accessibility to anyone with an internet connection. However, the price volatility of many digital currencies can be a concern for businesses. Stablecoins address this issue by pegging their value to stable assets like fiat currencies or commodities, ensuring consistent value and reliability.

In this article, we’ll dive into the essential features and benefits of stablecoins for businesses, and take an in-depth look at the 11 leading stablecoins you need to know about.

Here’s a quick overview of the 11 stablecoins we’ll be covering:

1. Tether (USDT) – The cornerstone of stability.

2. USD Coin (USDC) – Your trusted digital dollar.

3. DAI (DAI) – The decentralized darling.

4. Binance USD (BUSD) – The exchange giant’s gem.

5. TrueUSD (TUSD) – True to its name, and to your business.

6. Frax (FRAX) – The fractional hero.

7. USDD (USDD) – Stability redefined.

8. Pax Dollar (USDP) – Pax your payments with confidence.

9. Gemini Dollar (GUSD) – The twins of trust.

10. Pax Gold (PAXG) – Glittering with value.

11. Tether Gold (XAUT) – Where stability meets gold.

Get ready to explore how these stablecoins can transform your business transactions, making them more efficient, reliable, and secure. Let’s dive in!

What Are Stablecoins?

Stablecoins are the superheroes of digital currency, designed to minimize the price volatility of traditional cryptocurrencies. By pegging their value to stable assets like fiat currencies or commodities such as gold, stablecoins ensure consistent value. Operators either maintain physical reserves or use algorithms to adjust to market fluctuations, keeping prices steady.

These operators are usually private organizations or foundations (e.g., Tether by Tether Limited, USD Coin by Centre, a consortium founded by Circle). Later, we'll explore the different types of stablecoins and their mechanisms.

Running on 24/7 blockchains, stablecoins offer near-instant settlements and can be traded around the clock. Many are interoperable across multiple blockchains, combining cryptocurrency innovation with traditional financial stability. This makes them ideal for cross-border transactions, where traditional banking can be slow, complex, and costly.

Stablecoins currently make up about 10% of the cryptocurrency market by market cap. Despite the 2022 crypto crash, the stablecoin market has rebounded, nearing its 2022 peak in market capitalization and trading volumes. Notably, 75% of digital asset owners now hold stablecoins.

The rise of stablecoins is further evidenced by major companies developing new products and services around them. SAP is testing cross-border payments using USD Coin, and giants like Facebook and Visa are exploring stablecoins' potential. TransFi offers innovative products like Payouts, Collections, and Ramp, all designed to streamline and enhance your financial operations.

Stay tuned to discover how stablecoins are revolutionizing the financial landscape.

Types of Stablecoins

Stablecoins come in four distinct varieties: fiat-collateralized, crypto-collateralized, algorithmic, and commodity-collateralized. Let's delve into each type and uncover what sets them apart:

Fiat-Collateralized Stablecoins

Fiat-collateralized stablecoins, also known as off-chain stablecoins, are anchored by reserves of traditional fiat currencies, such as the US dollar, stored in a bank account or custody service. The supply of these stablecoins matches the fiat currency reserves held. Prominent examples include Tether (USDT) and USD Coin (USDC).

Commodity-Collateralized Stablecoins

Commodity-collateralized stablecoins are tied to reserves of physical assets like gold, silver, or other commodities. Each stablecoin in circulation is backed by a corresponding quantity of the commodity, ensuring the stablecoin’s value reflects that of the underlying asset. Examples include PAX Gold (PAXG) and Tether Gold (xAUT).

Cryptocurrency-Collateralized Stablecoins

Cryptocurrency-collateralized stablecoins, also known as on-chain stablecoins, are secured by reserves of other cryptocurrencies such as Ether (ETH) or Bitcoin (BTC). These stablecoins utilize smart contracts to lock in cryptocurrency reserves. Notable examples are Dai (DAI) and Wrapped Bitcoin (WBTC).

Algorithmic Stablecoins

Algorithmic stablecoins, also referred to as non-collateralized or seigniorage-style stablecoins, rely on algorithms and smart contracts to regulate their supply and maintain their value. When the stablecoin’s price rises above its peg, the algorithm increases supply to bring the price down, and reduces supply when the price falls below the peg. An example of this type is USDD.

11 best stablecoin picks for B2B payments in 2024

best-stablecoin

There are around 100 stablecoins available. Here we look at the largest 11 stablecoins, measured by market cap. (Unless otherwise stated, all data in this section was sourced from coingecko.com & coincodex.com between 27-28 July 2024.)

Tether (USDT)

Launched: July 2014 (as Realcoin)

Type: Fiat-collateralized

Pegged currency/asset: US dollar

Market cap / rank: $112.8bn / 1

30 day average trading volume: $47.85bn per day

Primary blockchains: Algorand, Avalanche, Ethereum, EOS, Liquid Network, Near, Omni, Polygon, Solana, Bitcoin Cash's Standard Ledger Protocol, Statemine, Statemint, Tezos, Tron

Exchanges present on: Around 800

About: Tether, the pioneering stablecoin, is the largest in circulation and market cap. Managed by Tether Limited, USDT maintains its 1:1 peg with the US dollar through a collateral ratio. The company asserts that each USDT is fully backed by fiat reserves, and they provide transparency by regularly updating their reserve status on their website.

USD Coin (USDC)

Launched: September 2018

Type: Fiat-collateralized

Pegged currency/asset: US dollar

Market cap / rank: $32.92bn / 2

30 day average trading volume: $4.98bn per day

Primary blockchains: Ethereum, Algorand, Solana, Stellar, TRON, Avalanche, Hedera

Exchanges present on: Around 580

About: USD Coin (USDC) is managed by the Center consortium, founded by Circle and includes members from Coinbase and Bitmain. Circle asserts that each USDC is backed by a dollar in reserve or other "approved investments," though specifics are not detailed. In June 2021, Circle updated its website language from "backed by US dollars" to "backed by fully reserved assets." USDC reserves undergo regular attestations, available monthly on the Centre Consortium's website, but these attestations are not full audits.

Dai (DAI)

Launched: December 2017

Type: Cryptocurrency-collateralized

Pegged currency/asset: US Dollar

Market cap / rank: $4.87bn / 3

30 day average trading volume: $340m per day

Primary blockchains: Ethereum

Exchanges present on: Around 200

About: Dai is governed by MakerDAO, created through an overcollateralized loan process managed by smart contracts. Users deposit ether or other accepted cryptocurrencies as collateral, borrowing against their value to generate new Dai. When the loan and interest are repaid, the Dai is destroyed, and the collateral is released. Dai's peg to the US dollar is maintained via supply and demand auctions. In March 2020, extreme market volatility caused Dai to trade at $1.11, due to a deflationary deleveraging spiral.

Binance USD (BUSD)

Launched: September 2019

Type: Fiat-collateralized

Pegged currency/asset: US Dollar

Market cap / rank: $4.67bn / 4

30 day average trading volume: $3.3bn per day

Primary blockchains: Ethereum, Binance Chain

Exchanges present on: Around 140

About: Binance USD (BUSD) is a 1:1 USD-backed stablecoin issued by Binance, one of the largest cryptocurrency exchanges, in collaboration with Paxos, a leading blockchain infrastructure provider. Regulated by the New York State Department of Financial Services, BUSD is fully backed by cash and cash equivalents, including US Treasury bills with maturities under 90 days and overnight loans secured by US Treasury securities. Monthly audit reports for BUSD are accessible on the official website. In February 2023, Paxos announced it would end its partnership with Binance for BUSD, halting the issuance of new tokens but continuing to manage the dollar reserves.

TrueUSD (TUSD)

Launched: April 2018

Type: Fiat-collateralized

Pegged currency/asset: US Dollar

Market cap / rank: $2.1bn / 5

30 day average trading volume: $1.4bn per day

Primary blockchains: Ethereum, TRON, Avalanche, BSC, Fantom, Polygon

Exchanges present on: Around 60

About: TrueUSD, managed by Archblock (formerly TrustToken), is a stablecoin backed 1:1 with the US Dollar. It stands out as the first stablecoin to offer live on-chain attestations by independent third-party institutions, ensuring transparency. This data is publicly accessible at tusd.io.

Frax (FRAX)

Launched: March 2019

Type: Cryptocurrency-collateralized and algorithmic

Pegged currency/asset: US Dollar

Market cap / rank: $1.36bn / 6

30 day average trading volume: $34m per day

Primary blockchains: Ethereum, Dogechain, Avalanche, Fantom, BSC, Polygon, Arbitrum, Moonbeam

Exchanges present on: Around 40

About: Frax is a unique stablecoin that blends collateralized and algorithmic mechanisms. The balance between these components shifts based on Frax's market price. If Frax trades above $1, the protocol reduces the collateral ratio. Conversely, if Frax dips below $1, the collateral ratio is increased. Users can mint Frax stablecoins by supplying collateral tokens, currently USDC, along with FXS, the native governance tokens of the protocol.

Pax Dollar (USDP)

Launched: September 2018

Type: Fiat-collateralized

Pegged currency/asset: US Dollar

Market cap / rank: $960m / 7

30 day average trading volume: $250m per day

Primary blockchains: Ethereum, Binance Smart Chain

Exchanges present on: Around 20

About: Pax Dollar (formerly Paxos Standard) is managed by Paxos, which holds a regulatory charter from the New York State Department of Financial Services. This makes Pax Dollar one of the few stablecoins approved by Wall Street regulators. Collateralized 1:1 with the US dollar, Pax Dollar's reserve levels are disclosed in monthly transparency reports.

USDD (USDD)

Launched: April 2022

Type: Cryptocurrency-collateralized and algorithmic

Pegged currency/asset: US Dollar

Market cap / rank: $738m / 8

30 day average trading volume: $50m per day

Primary blockchains: TRON, Ethereum, BNB Chain

Exchanges present on: Around 25

About: USDD is an over-collateralized stablecoin issued and managed by the TRON DAO Reserve (TDR), composed of nine crypto-native institutions. Its value is backed by a basket of cryptocurrency assets, including Bitcoin (BTC), Tether (USDT), USD Coin (USDC), and TRX (Tron's native token), with collateralization exceeding 200% of USDD in circulation. The peg is maintained through the 'Peg Stability Module' (PSM), allowing 1:1 transfers of USDD for USDT,

USDC, TUSD, and USDJ. The TRON DAO Reserve controls USDD funding within the PSM, and new USDD can be minted by approved TDR institutions by depositing TRX.

Gemini Dollar (GUSD)

Launched: September 2018

Type: Fiat-collateralized

Pegged currency/asset: US Dollar

Market cap / rank: $490m / 9

30 day average trading volume: $70m per day

Primary blockchains: Ethereum

Exchanges present on: Around 10

About: The Gemini Dollar (GUSD) is a regulated stablecoin, overseen by the New York State Department of Financial Services. It is issued by Gemini Trust Company, a prominent digital currency exchange and cryptocurrency custodian. GUSD's dollar reserves are verified monthly by registered public accounting firms, with the results publicly reported.

Pax Gold (PAXG)

Launched: September 2019

Type: Commodity-collateralized

Pegged currency/asset: Gold

Market cap / rank: $492m / 10

30 day average trading volume: $20m per day

Primary blockchains: Ethereum

Exchanges present on: Around 35

About: Pax Gold (PAXG) is a gold-backed stablecoin managed by Paxos, who also oversee Pax Dollar (USDP). Each PAXG token represents one troy ounce (31.1035 grams) of physical gold, securely stored in Brink’s vaults in London. PAXG holders own the underlying gold and can redeem their tokens for equivalent physical gold. Paxos ensures transparency by publishing monthly audits to confirm that the supply of PAXG tokens aligns with the amount of gold held.

Tether Gold (XAUT)

Launched: 2020

Type: Commodity-collateralized

Pegged currency/asset: Gold

Market cap / rank: $486m / 11

30 day average trading volume: $15m per day

Primary blockchains: Ethereum

Exchanges present on: Around 15

About: Tether Gold is managed by Tether Limited, the same company behind USDT, the largest stablecoin. Each Tether Gold token is backed by one troy ounce (31.1035 grams) of physical gold, securely stored in Switzerland. This ensures that each token represents a tangible asset, combining the stability of gold with the convenience of digital currency.

The Pros and Cons of Using Stablecoins for Cross-Border Payments and Settlements

Cryptocurrencies offer numerous advantages over traditional payment methods for businesses, but their volatility often raises concerns. Stablecoins, with their relative price stability, present a more viable option. However, they come with their own set of risks. Let’s explore the benefits and drawbacks of using stablecoins for cross-border payments and settlements.

Benefits

Cost Efficiency

Stablecoins, available on decentralized blockchains, help businesses avoid fees associated with traditional intermediaries, currency conversions, and compliance requirements. A study showed that remittance costs in the foreign exchange market could be reduced by up to 80%. Even when using stablecoins for fiat currency trades, savings are substantial. For instance, transferring funds from Southeast Asia to Europe can be 3-4 times cheaper than using the Swift network, while transfers from Africa to Europe can be 5-10 times cheaper. High-volume businesses with lower risk profiles can access even better rates.

Enhanced Cash Flow

Slow settlements significantly impact business cash flow. Stablecoins facilitate faster transactions, bypassing the delays associated with traditional banking and operating 24/7. This speed ensures working capital is available when needed, simplifying financial planning and improving liquidity.

Market Accessibility

In regions with limited banking infrastructure, stablecoins offer an alternative payment and settlement method. This benefits businesses entering new markets and recipients who can access a broader range of goods and services.

Automation and Smart Contract Integration

Stablecoins often utilize smart contracts, which can automate payment terms and conditions. This reduces operating costs and enhances efficiency, providing faster and more accurate payment processes.

Balance Sheet Diversification

Stablecoins provide a flexible financial strategy, protecting against currency fluctuations and inflation. They enable businesses to quickly rebalance portfolios, enhancing liquidity and value optimization. In high-inflation regions, stablecoins serve as a reliable store of value.

Drawbacks

Depegging Risks

Stablecoins can sometimes lose their peg to their underlying asset. For example, in March 2023, USD Coin (USDC) dropped to 87 cents due to $3.3 billion of reserves held at the failed Silicon Valley Bank. This caused a redemption rush of over $1 billion, resulting in price slippage. Similarly, Tether (USDT), the largest stablecoin by circulation, briefly lost parity with the dollar in May 2022, falling as low as $0.9959. Though these fluctuations might appear minor, their impact can be significant for businesses relying on stablecoins for payments or as assets. Algorithmic stablecoins, like TerraUSD, have been even more prone to depegging, often losing value rapidly when market confidence wanes. This was starkly illustrated in May 2022 when TerraUSD lost its peg and most of its value.

Counterparty Risk

Most stablecoins are issued and managed by central companies, introducing counterparty risk such as inadequate management, operational vulnerabilities, and cyber attacks. Traditional financial systems offer more regulatory protections against these risks. An example is the closure of Fei, an algorithmic stablecoin, in August 2022 due to "mounting technical, financial, and future regulatory risks." Holders were forced

stablecoins have failed, highlighting the importance of trusting only well-managed stablecoins. Businesses can mitigate these risks by using third-party fintech platforms that handle stablecoin exposure, such as TransFi, to incorporate stablecoins into fiat payment and settlement flows.

Regulatory Uncertainty

The regulatory landscape for stablecoins is still evolving. Major disruptions in the cryptocurrency market, like FTX's collapse, have intensified scrutiny. Proposed regulations in the US suggest Federal Reserve approval for non-bank stablecoin issuers, including those offering stablecoins on US exchanges. These regulations would require issuers to maintain and prove reserves, demonstrate technical expertise, and promote financial inclusion and innovation. The EU's MiCA framework and the UK's FSMB impose similar transparency and consumer protection obligations on stablecoins. Leading stablecoin issuers are responding to this regulatory pressure. For example, Tether Limited has improved its financial reporting, Paxos is reviewing its operations amid potential regulatory action, and Circle faced scrutiny after USDC's brief depegging post-Silicon Valley Bank collapse.

As regulations continue to develop, stablecoins are likely to become more secure and widely accepted, offering a promising alternative for global business transactions. However, businesses must navigate these risks carefully to leverage the benefits effectively.

Conclusion

In this article, we’ve ranked and reviewed the top stablecoins for cross-border payments and settlements in 2024. Here are our 11 best stablecoin picks:

1. Tether (USDT)

2. USD Coin (USDC)

3. DAI (DAI)

4. Binance USD (BUSD)

5. TrueUSD (TUSD)

6. Frax (FRAX)

7. USDD (USDD)

8. Pax Dollar (USDP)

9. Gemini Dollar (GUSD)

10. Pax Gold (PAXG)

11. Tether Gold (XAUT)

These stablecoins were selected based on their market size, representing 98% of all stablecoins by market cap. This criterion is crucial, as larger, more established stablecoins are better equipped to withstand market volatility and navigate regulatory changes.

Of these 11 stablecoins, those with fiat-collateralized mechanisms—such as Tether, USD Coin, Binance USD, TrueUSD, Pax Dollar, and Gemini Dollar—offer businesses the simplest way to bridge traditional and cryptocurrency payment rails. This flexibility is vital for companies like TransFi, supporting a seamless approach to adopting stablecoins for cross-border transactions.

Stablecoins with mature infrastructure, deep liquidity, and significant scale provide a robust foundation for businesses to leverage the benefits of digital currencies while minimizing risks. As the regulatory landscape continues to evolve, these top stablecoins are well-positioned to offer secure and efficient solutions for global business transactions.

TransFi Team

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