Armstrong Discusses the Role of Stablecoins in International Payments

Coinbase CEO Brian Armstrong discussed the role of stablecoins in the global financial system in an interview with Rick Rubin. According to him, such assets allow people in different countries to use a digital equivalent of the dollar and send it almost instantly, with the transfer fee in some networks being less than one cent. This model is particularly important for regions where access to dollar bank accounts is limited by currency regulations or the peculiarities of the local financial system. A cryptocurrency wallet is sufficient for storing and transferring funds, and transactions are not necessarily tied to bank operating hours. The US Federal Reserve also notes that stablecoins can reduce the number of intermediaries in international settlements and the associated costs. According to the Bank for International Settlements, about 98% of the value of existing stablecoins is accounted for by assets denominated in dollars, which contributes to the expansion of the use of the American currency in the digital environment.

At the same time, a stablecoin cannot be equated to a dollar bank deposit. For example, the value of USDC is maintained at one dollar, but owning this token does not mean that the user has an insured bank deposit. Circle indicates that USDC in a Circle Mint account is not protected by a bank deposit insurance system. The ability to directly exchange the token for dollars depends on the user's compliance with the company's requirements, legislation, and the rules of a specific jurisdiction. It is also necessary to consider the difference between the transfer fee within the blockchain and the total cost of an international transaction. If the sender buys tokens with national currency and the recipient then exchanges them back, conversion costs, exchange rate differences, and withdrawal fees arise. Therefore, a transfer for fractions of a cent does not guarantee that the entire operation will be equally cheap. Research by the Federal Reserve and the Bank for International Settlements highlights these additional costs.

The main change is related to the ability to move dollar value without the traditional chain of correspondent banks. According to the Federal Reserve, more than 60% of large international payments go through at least one intermediary. If both parties use stablecoins, the transfer can occur directly between wallets, although banks are still needed for exchanging regular money for digital assets and vice versa.

This scheme can simplify cross-border settlements but simultaneously creates risks for countries with unstable national currencies. The Bank for International Settlements warns of the likelihood of digital dollarization: residents may increasingly store savings and conduct transactions in dollar tokens instead of local currency. If this practice spreads not only to savings and transfers but also to everyday payments, prices, and salaries, central banks will find it more difficult to influence the economy through the national monetary system. Thus, the spread of stablecoins expands users' access to digital dollar assets but may have implications for the monetary sovereignty of states.