‘Stablecoins’ have become one of the most prominent innovations in the cryptocurrency space, offering a solution to the volatility that often hinders the wider adoption of digital assets. These digital currencies are typically pegged to a fiat currency (such as the US dollar), making them more stable and usable for everyday transactions. Even in a smaller economy such as Australia, the growth of stablecoins presents significant opportunities, particularly as fintech continues to gain momentum and regulatory frameworks evolve.
Perhaps the most notable development in the regulation of stablecoins is the introduction of the GENIUS Act (Governance of Electronic Networks for the Utilization of Stablecoins) in July of this year. The legislation was designed to provide a comprehensive regulatory framework for the issuance, management, and oversight of stablecoins. While the act is part of broader global efforts to regulate cryptocurrencies, it could help clarify the legal landscape in Australia, creating a more secure environment for businesses and financial institutions to engage with stablecoins.
The GENIUS Act would address key concerns such as financial stability, consumer protection, and anti-money laundering practices, while also fostering innovation within the digital asset space. As stablecoins become more integrated into financial systems, such regulatory clarity is crucial for encouraging adoption by both businesses and consumers.
The stablecoin market – A fast growing ecosystem
The potential for stablecoins to grow globally is significant. While the global stablecoin market is already valued at over $180 billion, the opportunity here in Australia is just beginning to take shape. With a well-established financial sector and high levels of digital adoption, Australia presents a strong foundation for the integration of stablecoins into various industries.
Several factors contribute to the potential growth of stablecoins in Australia, including:
- Financial Inclusion: Stablecoins have the potential to offer greater financial access to underserved or underbanked populations, particularly those in remote areas. With low-cost, cross-border digital transactions, stablecoins can facilitate access to essential financial services for people who might not have access to traditional banking.
- Cross-Border Payments: Australia’s strong international trade and large immigrant population create an ideal environment for stablecoin-powered remittances. Stablecoins like AUDD (Australian Dollar-backed stablecoin) provide a cost-effective, fast, and reliable method for transferring funds internationally, bypassing traditional financial intermediaries.
- Retail and E-Commerce Payments: As businesses move toward digital payment systems, stablecoins offer a practical solution by providing a stable medium of exchange. They can be used for payments in e-commerce, subscriptions, and other retail transactions, allowing businesses to reduce transaction fees and improve payment efficiency.
- DeFi and Investment Opportunities: As decentralized finance (DeFi) continues to grow, stablecoins play a crucial role by offering a stable asset for users to engage in lending, staking, and yield farming. Additionally, stablecoins can appeal to institutional investors looking for a safe, liquid asset in the volatile cryptocurrency market.
Key Use Cases for Stablecoins
Stablecoins present a wide range of use cases, both in Australia and globally. Some of the most prominent include:
- Remittances: By providing a cheaper and faster way to send money across borders, stablecoins can disrupt traditional remittance services. Australians who send money overseas can benefit from the speed and lower fees offered by stablecoin transfers, which can be especially valuable in regions with high fees for traditional money transfers.
- Payments in E-Commerce: As e-commerce continues to grow, stablecoins can simplify payments for both consumers and businesses. Using a stablecoin as a payment method avoids the fluctuations in value typical of cryptocurrencies, offering consumers and merchants a predictable and secure payment method.
- Decentralized Finance (DeFi): Stablecoins are foundational to the DeFi ecosystem, enabling lending, borrowing, and trading without relying on traditional banks or financial institutions. In Australia, DeFi platforms can leverage stablecoins to attract users who want to access decentralized financial services without the risk of volatile assets.
- Asset Tokenization: The tokenization of assets—whether real estate, commodities, or financial instruments—is another use case for stablecoins. These tokenized assets can be more easily divided into smaller, tradable portions, providing opportunities for fractional ownership and democratized investment.
Can you invest in it?
Investing in a stablecoin company is difficult as the industry is mostly held by private equity and venture capital startups. One way to get exposure on the ASX is via listed fintech company Novatti Group (ASX: NOV). Novatti has significant investment holdings in the Australian Dollar-backed stablecoins AUDD and AUDC. The company helped fund and set up the organisation, with the value of its stake now worth around $7m, while its own market capitalisation is only $19.3m.
Novatti’s subsidiary, Novatti Payments, has also developed the necessary infrastructure to support stablecoin transactions, making it easier for businesses to adopt these digital currencies for payments, cross-border transfers, and more. As a publicly traded company on the Australian Securities Exchange, Novatti offers investors a way to gain exposure to the rapidly growing stablecoin and blockchain sectors, with a focus on leveraging these technologies to transform financial services in Australia and beyond.
The potential for stablecoins to drive innovation in the Australian economy, especially as regulatory frameworks solidify, positions Novatti as a key player in the evolving fintech landscape into the future.
