With B2B stablecoin transactions booming, venture capitalists are eyeing startups that help companies integrate stablecoins into existing business models.
The global supply of stablecoins is approximately $239 billion, up from less than $10 billion half a decade ago, according to new research from Artemis, Castle Island Ventures and Dragonfly. Stablecoins, which are digital assets designed to trade 1:1 in tandem with a fiat currency, have started to challenge traditional payment processing infrastructure.
“There is a belief that the tech is better [than Wall Street payment solutions], and when push comes to shove, the incentives for bringing in technical innovation or reinventing financial settlement rails will incentivize people,” said Dragonfly general partner Rob Hadick.
B2B stablecoin payments hit $36 billion in annualized payments in February, according to the report. This vastly eclipses stablecoin-linked loans at $2.5 billion annualized and B2C transactions amounting to $3.3 billion.
The boom in B2B stablecoin transactions comes as Circle is prepping its widely anticipated IPO. Several public and private companies, including Stripe, have recently introduced stablecoin initiatives. This year, US lawmakers may move forward with the GENIUS Act, which would establish a regulatory framework for stablecoins and additional types of digital assets.
Monthly aggregate B2B stablecoin volume has grown from less than $100 million at the beginning of 2023 to $3 billion a month this year, according to the VC firms’ report. Businesses are using stablecoins to pay vendors and suppliers, among other uses.
Stablecoins are collateralized by their issuers, who typically back them with dollars, treasuries and commercial paper. More than 99% of stablecoins are tied to the dollar, according to the report, the monetary equivalent of stablecoins being the 14th-largest holder of sovereign US debt.
Still, stablecoin transaction volumes remain a fraction of fiat-denominated payment processors.
Stablecoins have captured 2.9% of the $194.6 trillion cross-border payment market, according to a recent PitchBook analyst note.
Exchanges of dollars and euros via Visa and PayPal have long been the norm for businesses and consumers. But both companies are now building out their stablecoin business lines as well.
Stablecoin issuers have been carving out payment market share more rapidly than Visa, said Hadick. He’s especially interested in startups building wallets specifically for stablecoins, as well as stablecoin-based compliance products and cheaper cross-border remittance methods.
Featured image by Jenna O’Malley/PitchBook News
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