Stablecoins will relay electronic payments to bring economic takeoff in the next decade?

Written by: Level  

Translated by: AididiaoJP, Foresight News  

Stablecoins are reshaping the underlying architecture of the global financial system. As a new type of digital asset, their core value is reflected in three dimensions: technical programmability allows them to be embedded in smart contracts for automatic execution; geographical borderlessness breaks down the regional barriers of traditional finance; and efficiency-driven high speed shortens settlement time from T+1 or even T+3 in traditional finance to near real-time.  

However, beyond payment functions, stablecoins are quietly accelerating the velocity of money: changing the frequency of use, flow direction, and the speed at which each dollar stimulates economic activity. Their impact on monetary velocity presents a unique "double helix" effect: on one hand, automatic liquidation via smart contracts releases idle settlement margins in traditional finance; on the other hand, 24/7 global liquidity pools significantly improve capital turnover efficiency, an effect particularly evident in cross-border B2B transactions.  

This phenomenon mirrors the transformation of early money and value circulation by the internet two decades ago. While electronic payments primarily optimized payment efficiency, stablecoins, building on efficiency gains, are reconstructing the entire closed loop of value storage, transfer, and creation. To understand the current role of stablecoins, we need to return to basic concepts.  

*Note: The 2024 Chainalysis Global Crypto Adoption Index ranks 151 countries based on four sub-indicators that measure the usage of different cryptocurrency services. Rankings are adjusted for population and purchasing power parity, averaged, and normalized to a range of 0-1. The data is based on estimated transaction volumes from cryptocurrency service website traffic, cross-validated with surveys from local experts.*  

### Definition of Monetary Velocity  

Monetary velocity refers to the rate at which money exchanges hands in an economy, typically calculated by the formula:  

Velocity = Gross Domestic Product (GDP) / Money Supply  

It measures the productivity of each unit of currency. High velocity means money is frequently used to purchase goods and services; low velocity indicates money is being saved or idle.  

However, "money" is not a singular concept. Economists categorize it into different tiers:  

- M1: Cash + demand deposits, the most liquid form of money.  

- M2: M1 + savings accounts + time deposits under $100,000 + money market funds.  

- M3 (discontinued in the U.S.): M2 + large-denomination time deposits + institutional money market funds + other large-scale financial instruments.  

Stablecoins fully backed by fiat currency and redeemable at any time behave similarly to M1: highly liquid and immediately usable.  

### The Internet Era and Fluctuations in Monetary Velocity  

From the late 1990s to the early 2000s, the rise of the internet significantly boosted monetary velocity:  

- E-commerce enabled comprehensive consumption upgrades.  

- Email accelerated transactions and contract signing.  

- Market access became globalized.  

- Digital banking enhanced monetary liquidity.  

This early efficiency boost drove growth in M1 velocity.  

But as the internet matured, another trend took hold:  

- Capital appreciation created enormous wealth.  

- This wealth was saved and invested in stocks, bonds, and real estate.  

- More funds were allocated to investments rather than consumption.  

Velocity slowed, yet GDP continued to grow as capital formation gradually replaced pure consumption activities.  

*Annual Growth Trends of M3 Money Supply and S&P 500 Index*  

### How Stablecoins Boost Global Monetary Velocity  

Today, stablecoins are introducing a similar dynamic: they drastically improve money’s speed, accessibility, and usability. But unlike the early internet, this transformation is global from the start. Here’s how it manifests:  

#### 1. 24/7 Borderless Transfers  

In cross-border payments, stablecoins enable instant 24/7 settlements. Issuers like Circle and Tether have built global payment networks, freeing fund transfers from the operating hours and cross-border restrictions of traditional banking systems. This efficiency gain is particularly notable in remittances—what traditionally took 3-5 business days can now be completed in minutes via stablecoins.  

#### 2. On-Chain Finance and DeFi  

The development of decentralized finance (DeFi) further amplifies the economic value of stablecoins. On platforms like Aave and Compound, stablecoin holders can participate in lending markets, converting idle funds into productive capital. This improved capital utilization directly accelerates monetary velocity. Platforms like Morpho Labs and Pendle allow users to deploy stablecoins in lending, yield products, or liquidity provision.  

#### 3. Remittances and Payments  

Startups like Stablecoin have developed APIs that enable enterprises to integrate stablecoin payments into existing cash flows, supporting round-the-clock global instant settlements, reducing foreign exchange costs, and reaching markets underserved by traditional finance.  

Another example is cryptocurrency debit cards, which allow users to spend on-chain stablecoin balances directly for daily purchases. By connecting to major payment networks like Visa and Mastercard, these cards instantly convert stablecoins to local currency at the point of purchase, eliminating the need for additional exchanges. This bridge between on-chain and real-world economies makes stablecoins an active medium of exchange for groceries, travel, and other daily needs, boosting global monetary velocity.  

#### 4. Permissionless Access to U.S. Dollars  

In countries like Turkey, Argentina, and Nigeria, stablecoins serve as a critical financial tool, allowing users to store U.S. dollar value and transact freely with just a smartphone and internet connection. By reducing reliance on intermediaries and enabling instant, borderless payments, stablecoins more efficiently activate local capital and integrate more participants into the economic system.  

For small and medium enterprises—whether in manufacturing, agriculture, digital services, or local retail—stablecoins facilitate direct对接 between international buyers and suppliers, reducing cross-border trade friction, eliminating settlement delays, and protecting businesses from sudden local currency devaluations. They enable individuals and enterprises to keep capital circulating within local economies, not only accelerating monetary velocity but also enhancing economic resilience in high-volatility currency environments.  

### Stablecoin Practices in Southeast Asia  

In developing markets like Thailand, Vietnam, and the Philippines, stablecoin adoption is accelerating via peer-to-peer and over-the-counter channels. For instance, Thailand’s Siam Commercial Bank (SCB) partnered with Lightnet through its innovation arm SCB 10X to implement cross-border payments and remittances using stablecoins on public blockchains. This marked Thailand’s first stablecoin-based settlement case, setting a benchmark for the regional financial industry. Integrating Fireblocks’ custody infrastructure ensures institutional-grade asset security, strengthening trust among participants. SCB and Lightnet plan to expand services to corporate clients, enable two-way remittances, and extend the same efficiency and cost advantages to retail users.  

*Euromonitor Mobile Payment Data*  

### Short-Term Impact: Enhanced Economic Efficiency  

In the short term, stablecoin-driven improvements in monetary velocity deliver significant economic benefits:  

- GDP growth: Faster circulation of the same capital pool stimulates economic activity.  

- Increased productivity: Instant, low-friction payments and faster working capital cycles optimize business efficiency.  

- Greater financial inclusion: Gig workers, creators, and merchants gain access to stable U.S. dollar assets for transactions without relying on traditional banks.  

This unlocks long-suppressed economic potential in emerging markets. Just as the early internet accelerated commerce by eliminating communication and distribution friction, stablecoins are doing the same for value transfer—enabling funds to flow freely, 24/7, at near-zero cost.  

### Long-Term Impact: From Speed to Scale  

Long-term effects are more complex.  

As emerging market users gain access to dollars and stablecoins, some capital is not spent on consumption but saved or invested:  

- Staked in DeFi for passive income.  

- Used to purchase assets (real estate, tokens, stocks).  

- Reserved for business expansion.  

These actions remove funds from short-term transaction cycles, reducing local velocity. But this is not a negative outcome. Similar to the early 2000s, it reflects a shift from speed-driven consumption to wealth accumulation and capital formation—a sign of economic maturity.  

Even as monetary turnover slows, its usage efficiency improves. In early growth stages, emerging economies tend to prioritize consumption, focusing on infrastructure and catching up with developed economies. As incomes rise and financial tools proliferate, savings rates gradually increase, and households begin accumulating wealth and investing in long-term assets. Stablecoins can accelerate this transition.  

### Conclusion  

Stablecoins are transforming global capital flows, both increasing transaction speed and deepening financial inclusion. They act as velocity boosters in the short term and capital formation builders in the long term.  

Monetary velocity, a key indicator of economic vitality, is calculated as the ratio of GDP to money supply. The emergence of stablecoins injects new meaning into this traditional economic concept. Fully fiat-backed and instantly redeemable stablecoins share liquidity characteristics with M1 money but operate far more efficiently than traditional fiat.  

It’s important to note that velocity does not operate in isolation; its economic impact depends on factors like:  

- Interest rates: High rates encourage saving, reducing velocity.  

- Inflation expectations: If prices are expected to rise, people spend faster.  

- Tariffs and capital controls: These may restrict stablecoin use in specific regions.  

- Fiscal policy: Government transfers, taxes, and subsidies all influence money circulation.  

Nevertheless, the result is the birth of a new global economic form: stablecoins that flow instantly, settle automatically, and remain robust amid development. Just as the early internet reshaped communication and commerce, stablecoins are doing the same for money itself. This transformation is not about printing more money, but about using existing resources more efficiently.  

*Disclaimer: The views in this article solely represent the author’s personal opinions and do not constitute investment advice. This platform makes no guarantees regarding the accuracy, completeness, originality, or timeliness of the information, nor does it assume liability for any losses arising from the use or reliance on such information.*