Stablecoins: The Next Frontier of Finance 

Paving the Path to a Digital Economy

BitRock Capital’s PoV on Stablecoin Evolution


Stablecoins, digital assets pegged to traditional currencies, are evolving from speculative instruments into a core part of the financial ecosystem. At BitRock Capital, we categorize stablecoins' journey into three distinct phases:


1． Stablecoin 1.0: Foundational Adoption and Market Establishment - The current phase, where stablecoins are primarily used within the crypto ecosystem for trading and liquidity purposes.


2． Stablecoin 2.0: Expanding Use Cases and Growing Institutional Adoption - This phase envisions deeper integration into traditional financial systems, encompassing cross-border payments, business-to-business (B2B) transactions, and e-commerce.


3． Stablecoin 3.0: Mass Adoption and Full Integration into the Digital Economy - The final phase, where stablecoins become integral to global commerce, AI-driven payments, and serve as a foundation for a digital-native financial system.



Current Status in Stablecoin 1.0: Stablecoins are primarily adopted by crypto-native users, with most activity concentrated on trading, hedging, and providing liquidity. While emerging markets are beginning to leverage stablecoins for cross-border remittances and local financial inclusion, adoption in developed markets remains limited.


Transitioning to Stablecoin 2.0:


Several factors are driving the shift toward broader adoption and institutional engagement:


          • Regulatory Clarity: Initiatives such as the European Union's MiCA framework and licensing regimes in jurisdictions like the U.S., Singapore, Hong Kong, and UAE are expected to facilitate institutional involvement.
        • Infrastructure Development: Seamless integration of stablecoins into payment platforms and e-commerce systems will accelerate adoption.
        • Increased Competition: The entry of new players and issuers will drive innovation, expand supply, and create a more competitive ecosystem.
        • Emerging Markets Leading Adoption: Countries with unstable local currencies and underdeveloped banking systems will continue to pioneer stablecoin usage, particularly for remittances and payment settlements. For instance, stablecoin use in Latin America has grown by 300% over the past two years, driven by economic challenges and significant remittance flows.


Outlook for Stablecoin 3.0: Stablecoins are expected to achieve full integration into the global economy when they become widely adopted for AI-driven payments, gaming, and everyday transactions. Achieving this stage will require comprehensive regulatory frameworks, enhanced interoperability, and seamless user experiences to support mass adoption.


Stablecoin 1.0: Foundational Adoption and Market Establishment


Key Characteristics: Stablecoin 1.0 marks the early adoption phase, characterized by its use as a hedge against cryptocurrency volatility. Early adopters, predominantly crypto traders, leveraged stablecoins to maintain stability and liquidity within the decentralized finance (DeFi) and digital asset ecosystems.


Key Data and Developments:

    • Market Capitalization: The stablecoin market grew exponentially from $5 billion in 2020 to $190 billion in 2024, representing a compound annual growth rate (CAGR) of approximately 104%. Projections suggest the market could exceed $9 trillion by 2034.






















        • Market Share: Tether (USDT) remains the leading stablecoin, commanding over 70% market share.
          • Transaction Volume: Stablecoins like Tether now process transaction volumes rivaling traditional financial giants. For instance, Tether’s total transactions in 2024 Q1 exceeded $4.8 trillion, nearly matching Visa’s $3.8 trillion.
            • Emerging Use Cases: Stablecoins have begun to see wider applications, particularly in cross-border transactions and as a store of value in volatile markets, though primarily within crypto exchanges and limited remittance corridors.


            Stablecoin 2.0: Expanding Use Cases and Growing Institutional Adoption


            Key Characteristics: Stablecoin 2.0 signifies broader adoption across traditional finance, especially in cross-border payments, e-commerce, and business-to-business (B2B) transactions. This phase reflects increasing integration into mainstream financial infrastructure, with governments and corporations acknowledging their potential for reducing transaction costs and enhancing global liquidity.


            Key Data and Developments:


            • Cross-Border Payments: Platforms such as Stripe have integrated stablecoins to enhance payment efficiency. Stripe’s $1.1 billion acquisition of Bridge in 2024 exemplifies fintech’s confidence in stablecoins for global payments.
            • Regulatory Clarity: Regulatory frameworks like Singapore’s stablecoin licenses and the European Union's Markets in Crypto-Assets (MiCA) regulation (effective 2025) provide greater certainty, encouraging participation by issuers and financial institutions.
            • Corporate Adoption: Companies such as Shopify and Amazon are exploring stablecoin integration for e-commerce, particularly in regions like Latin America, where banking infrastructure is less developed.
            • Emerging Markets: Adoption in Latin America has surged by over 300% in two years, driven by economic instability and high remittance volumes.


            Key Advantages in Payments:


            • Efficiency: Stablecoins significantly enhance cross-border transactions by reducing fees and settlement times. Traditional systems like SWIFT involve fees ranging from 3-5% and settlement times of 2-5 days, whereas stablecoin transactions settle in seconds to minutes with fees often below 0.1%.
            • Accessibility: In emerging markets, stablecoins provide an alternative to traditional banking systems, enabling businesses and individuals to reduce costs and improve liquidity.
            • Financial Inclusion: Stablecoins bridge disparate financial systems, promoting global commerce without reliance on expensive foreign exchange services.



            Stablecoin 3.0: Mass Adoption and Full Integration into the Digital Economy


            Key Characteristics: Stablecoin 3.0 will be the era of mass adoption, where stablecoins become a primary mode of payment and settle vast transactions globally. This phase will be defined by deep integration into industries like DeFi, AI-driven payments, Security Token Offerings (STOs), and gaming. Stablecoins will no longer just be used for trading or speculative purposes, but will serve as the backbone of an increasingly digital and decentralized financial system.


            Key Data and Developments:


            • AI-Powered Payments: With the rise of AI agents in trading, smart contracts, and machine-to-machine transactions, stablecoins will provide the low-latency, secure, and cost-effective infrastructure required to facilitate these payments. OpenAI forecasts that AI-driven markets will surpass $100 billion by 2025, providing ample opportunities for stablecoin adoption in AI ecosystems.
            • Security Token Offerings (STOs): Stablecoins will enable seamless investments in STOs. With the STO market currently valued at $18 billion and expected to grow rapidly, stablecoins will simplify access to tokenized assets, reducing the need for traditional off-ramps.
            • Global Digital Economy: As global payment networks like Visa and Mastercard integrate stablecoins into their offerings, the global financial infrastructure will move toward digital-native solutions. The total value locked (TVL) in DeFi alone is expected to exceed $200 billion by 2025, with stablecoins playing a critical role in providing liquidity and collateral.


            Conditions for Achieving Stablecoin 3.0:


            Regulatory Maturity: Stablecoin issuers like Tether must obtain comprehensive licenses from major economies to foster mainstream adoption. As more countries like the United States and the European Union create clear licensing regimes, regulatory confidence will increase.

            Institutional Integration: Large institutions must fully integrate stablecoins into their business models, from cross-border payments to securities trading.

            Widespread Adoption in Emerging Markets: The first wave of massive stablecoin adoption is likely to originate from emerging markets, with industries like gaming and AI leading the charge.


            The Road Ahead: From Stablecoin 1.0 to 3.0


            As stablecoins evolve from their early adoption phase (Stablecoin 1.0) to broader institutional adoption (Stablecoin 2.0), the eventual realization of Stablecoin 3.0 will redefine global finance. By 2028, stablecoins are expected to revolutionize the financial infrastructure, supporting not only traditional payments but also emerging areas such as AI-driven transactions, DeFi, and tokenized assets.




















            This evolution of stablecoins positions them as the cornerstone of a truly digital economy. There will be four interconnected domains where stablecoins are set to drive transformation: DePIN, RWA, PayFi, and DeFi. These pillars collectively illustrate the breadth of stablecoin applications, from decentralizing infrastructure to reshaping financial services. By anchoring stability and fostering trust within these sectors, stablecoins will enable seamless interaction across decentralized networks, real-world assets, payments, and innovative financial systems, forming the foundation for a cohesive and inclusive global economy.

            BitRock Capital remains optimistic about stablecoins’ potential to transform finance. As regulatory frameworks solidify and infrastructure advances, stablecoins will become the cornerstone of the next generation of financial services, enabling faster, cheaper, and more transparent global transactions.


            To read our full insights report, please contact us at bp@bitrockpartners.com

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