The global usage of cryptocurrencies, particularly stablecoins, in online transactions is still quite limited, accounting for only 0.2% of e-commerce transaction value, according to a recent report by IDA Finance and Quinlan Associates. One of the major hurdles for merchants in accepting crypto payments is the volatility of digital assets. Despite the introduction of Fiat-referenced stablecoins to mitigate this issue, concerns about regulation, governance, KYC, and AML requirements still deter merchants from fully embracing crypto payments.
The lack of well-defined legal frameworks for stablecoins leads to uncertainty among merchants, who are hesitant to adopt stablecoins as a mainstream payment option. Users are also wary of the lack of transparency regarding reserve holdings of some unregulated stablecoins, which creates doubts about the safety and reliability of these assets. This uncertainty surrounding stablecoins hinders their widespread adoption as a form of payment in the mainstream economy.
The report emphasizes the various risks that regulatory ambiguity exposes stablecoin users to, including market risk due to fluctuating asset values, management risk due to lack of oversight, and liquidity risk in fulfilling redemption requests. Robust regulations like the European Union’s Markets in Crypto-Assets law aim to address these transparency issues and provide guidelines for safe and open usage of stablecoins. However, despite growing adoption of cryptocurrencies, cash and fiat still dominate transactions, with outlets often converting stablecoins to fiat through external payment processors.
The cautious approach of merchants and users towards stablecoins highlights the challenges of mainstreaming crypto payments. Without clear regulations and transparency in the stablecoin market, both merchants and users face risks that could undermine the credibility and reliability of these digital assets. As the crypto market continues to evolve, addressing these regulatory and transparency issues will be crucial in promoting the widespread adoption of stablecoins in online transactions.
In conclusion, while the use of stablecoins in online transactions is still limited due to volatility and regulatory uncertainties, efforts are being made to address these challenges through robust regulations. With clear legal frameworks and transparent practices, stablecoins have the potential to become a mainstream form of payment in the global economy. As the crypto market continues to mature, addressing these issues will be essential in promoting trust and confidence in stablecoin transactions.
