Stablecoin adoption has been on the rise in recent years. In 2021, 13% of crypto payments on BitPay (a Bitcoin Payment Service Provider) used stablecoins such as Tether. And the total stablecoin circulating supply grew from $29.38 billion in January 2021 to more than $182.14 billion by March 31, 2022.
According to The Block Research’s 2023 Digital Asset Outlook report, stablecoins are making their way into product market and institutional adoption, with widespread use setting new records in 2022. Annual stablecoin-adjusted transaction volume (i.e., payment flow from one address to another on a public blockchain) will exceed $7.2 trillion by 2022, representing a 19% year-over-year volume growth.
What is a stablecoin?
While CBDCs are digital currencies issued and controlled by the government, stablecoins are (in many cases) issued and managed by private entities rather than created, controlled or regulated by a country’s central bank. Since stablecoins are pegged to a major currency, for example the US dollar, they usually have little to no volatility (hence the name) beyond the volatility of the currency they are pegged to. This also means that stablecoin demand remains high even during market swings.
Stablecoins pegged to the USD have seen the most traction to date. Euro-backed stablecoins are the largest group of non-USD stablecoins with a market cap of €581 million (~$605 million USD), compared to a total market cap of $145 billion of all fiat-backed stablecoins. That said, stablecoins pegged to other fiat currencies will become increasingly popular in the coming years as regulatory frameworks evolve, particularly in Europe, Latin America, and Asia.
Stablecoin progress in Australia
Novatti Group Limited, a leading fintech that enables businesses to pay and get paid, has announced that its 1:1 fiat-backed stablecoin, AUDD, is now live on the XRP Ledger (XRPL) – an open-source, low-power and decentralized blockchain.
AUDD will be available for a direct 1:1 swap of fiat Australian Dollars through the XRPL. Transactions on the XRPL are both fast (~3-5 seconds per transaction) and cheap (fractions of a cent per transaction), making it ideally suited to support stablecoins and asset tokenization at scale.
The functionality of AUDD on the XRPL means that users around the world can use AUDD to make payments and trade with other XRP-based tokens through the native decentralized exchange (DEX). User accounts can access AUDD through any XRPL-enabled wallet.
This new implementation marks a further strengthening of Novatti’s success in leveraging the XRPL’s proprietary digital asset, XRP, for cross-border transactions. In April 2021, Novatti leveraged Ripple’s payment solution, which also uses XRP as a bridging currency between two fiat currencies, for cross-border transfers between Australia and the Philippines. Since using Ripple’s payment solution, Novatti has now been able to expand its operations to 58 countries and process billions in annual transaction value. AUDD will also be integrated into Novatti’s existing suite of payment solutions and is designed to meet a range of use cases, including remittance, payment gateway, trading pair, and Stablecoin-as-a-Service. The launch of a fiat-backed stablecoin powered by the XRP Ledger was a natural next step in the company’s evolution.
“Novatti is excited to continue the journey to bring our stablecoin roadmap to life with the goal of providing faster, more secure payments with lower frictional costs for consumers. By deploying AUDD on the XRP Ledger, we will be able to accommodate the growing demand for digital currencies and create new revenue streams for our business, while delivering on our promise to make our solution available to multiple networks.”
Peter Cook, CEO, Novatti Group
Bringing Fiat On-Chain is just the beginning
The growing momentum of stablecoin adoption follows Novatti’s participation in the RBA and Digital Finance CRC’s CBDC pilot, which explores the use cases for a central bank digital currency in Australia.
CBDCs and stablecoins are an extremely exciting and important use case for asset tokenization in the real world, with the promise of better data governance, security and stability for enterprises and financial institutions. In fact, findings from Ripple’s 2023 New Value Report indicate that finance leaders at enterprises and financial institutions are equally or more confident in cryptocurrencies, stablecoins, and CBDCs to meet their business needs compared to traditional fiat.
This marks a major turning point in the journey to the Internet of Value. As more and more assets are tokenized; global liquidity is increasing; and greater financial inclusion brings more participants, companies will be able to tap into new markets, unlock new revenue streams and offer new financial services to customers.
Download Ripple’s 2023 New Value Report: Crypto Trends in Business and Beyond for additional insights.