Stablecoins Can Cut Cross-Border Payments Cost by 99%, KPMG Says

Core Insights - Stablecoins are positioned as a transformative solution for cross-border payments, with significant potential to enhance efficiency and reduce costs in the current banking system [1][6] Group 1: Current Banking Infrastructure - The correspondent banking network processes approximately $150 trillion annually, with settlement times ranging from two to five days and transaction costs averaging between $25 to $35 [1] - Institutions are required to maintain large sums in nostro and vostro accounts globally to ensure liquidity, leading to inefficiencies that stablecoin technology can address [2] Group 2: Stablecoin Characteristics - Stablecoins are cryptocurrencies pegged to assets like the U.S. dollar or gold, playing a crucial role in cryptocurrency markets and international money transfers, with Tether's USDT being the largest stablecoin, followed by Circle's USDC [3] Group 3: Advantages of Stablecoin Solutions - Blockchain-based stablecoin solutions can reduce settlement times from days to minutes or even seconds, with transaction costs potentially decreasing by over 99% compared to traditional payment methods [4] - Lower prefunding requirements enhance capital efficiency, improving liquidity and freeing up resources that would otherwise be tied in inactive accounts [4] Group 4: Transparency and Adoption - These networks provide real-time tracking and auditability, increasing transparency and aligning with regulatory expectations [5] - Major financial institutions, such as JPMorgan, are already utilizing blockchain for significant transaction volumes, processing around $2 billion daily [5] Group 5: Market Developments - PayPal launched its own stablecoin in 2023, achieving a market capitalization of $1.17 billion, indicating a strong market demand for stablecoin-driven cross-border payment solutions [6]