There’s a reason stablecoins have moved trillions of dollars across borders, platforms, and blockchains in the past few years. They’re fast and cost-efficient, and they solve problems that traditional payment systems can’t.

Still, stability isn’t a guarantee. Some stablecoins are solid, while others can be more erratic. Before you use stablecoins, understand how they work, when they work, and for whom. Below, we’ll break down the pros and cons of stablecoins so you can decide where they fit in your financial operations.

What’s in this article?

• What are the pros and cons of stablecoins?
  
• What are the advantages of stablecoins?
  
• What are the limitations of stablecoins?
  
• How do stablecoins support payments and liquidity?
  
• What risks come with stablecoin usage?
  
• How can organizations evaluate stablecoin trade-offs?
  
• How Stripe can help
  

What are the pros and cons of stablecoins?

Stablecoins were designed to address cryptocurrency’s price volatility. By fixing their prices to other assets, often government-issued currencies such as the US dollar, they offer a digital asset that proposes to maintain steady value.

Here’s what makes them appealing:

• They move quickly: Transfers settle in minutes.

• They move freely: They aren’t restricted by banking hours or borders.

• They’re programmable: Developers can embed payment logic directly into their code.

• They’re designed for stability: When the mechanics work, the value doesn’t change.

As a result, stablecoins process over $1 trillion in monthly volume and power everything from cross-border commerce to on-chain markets.

But they also have trade-offs:

• You rely on issuers and their reserve practices.

• Regulations can differ and change across jurisdictions.

• If you’re new to crypto, there’s a learning curve.

What are the advantages of stablecoins?

Stablecoins combine crypto’s speed with fiat’s familiarity. This can make them a compelling option when you need to move money quickly and cheaply across borders.

Here’s why businesses are paying attention:

• Fast, always-on settlement: Transactions typically clear in minutes, regardless of banking hours or national holidays. This frees up cash that would otherwise sit idle in transit. Stripe CEO Patrick Collison has described it as reducing “trapped liquidity.”

• Lower transaction costs: International transfers in particular can become far cheaper. A payment that might cost 6% of the transaction amount through traditional remittance channels can cost under $1 with stablecoins.

• Broad reach and access: About 1.4 billion adults worldwide don’t have bank accounts. In countries that are experiencing inflation or currency volatility, such as Argentina, Nigeria, and Turkey, stablecoins give people access to dollar-like stability without requiring a dollar bank account and broaden businesses’ potential customer bases.

• On-chain liquidity: Within crypto systems, stablecoins serve as the cash layer. They let platforms, traders, and businesses move value around without constantly converting to and from fiat. And they let companies hold digital dollars without fully exiting the blockchain. Stablecoins give businesses a dollar that moves at internet speed.

What are the limitations of stablecoins?

Despite their strengths, stablecoins can impose real constraints for businesses. Using stablecoins effectively requires understanding where the risks lie and how to manage them.

Keep the following in mind:

• A regulatory environment in flux: Rules differ widely across countries. The EU’s Markets in Crypto-Assets (MiCA) framework has already pushed issuers to adjust. In the US, federal guidance is still developing, with the GENIUS Act going into effect by 2027. The uncertainty can complicate compliance, especially for global teams.

• Issuer and reserve reliance: Fiat-backed stablecoins depend on issuers’ holding safe, accessible reserves. If the reserves aren’t fully backed or transparent, the peg can wobble. USDC’s brief peg slip during a bank collapse in 2023 showed that counterparty risk can still affect even major stablecoins.

• Irreversible transfers: Stablecoin payments are final. There’s no dispute window, no chargebacks, and no one to call if you mistype a wallet address. That means certain types of fraud can be avoided, but it also requires strong internal controls.

• Integration and usability challenges: Wallet setup, custody, and compliance are more straightforward than they once were, but they still require institutions to be familiar with these systems. Not all partners or customers are ready to transact in stablecoins so businesses often need hybrid payment setups.

How do stablecoins support payments and liquidity?

Cross-border bank transfers can take days when multiple intermediaries are involved. Stablecoins are changing how businesses think about timing, cash flow, and access to global markets.

Here’s what that means in practice:

• Faster settlement and better cash flow: Stablecoins settle in minutes and operate 24 hours a day, regardless of geography. That speed improves working capital since money isn’t waiting to clear.

• Lower transaction costs: Fewer intermediaries mean fewer fees. Stablecoin transfers avoid foreign exchange markups and high wire transfer costs, which matters at scale.

• More predictable cross-border commerce: A business in the US can accept USDC from a customer in Brazil without currency conversion. The customer avoids foreign exchange issues, and the company avoids rate volatility.

• Better reach in underbanked regions: In some countries, stablecoins offer a more dependable payment method than local banks. That’s why you might see freelancers in Argentina asking for payment in USDT or fintechs in Nigeria using USDC to settle dollar balances behind the scenes.

• Liquidity for digital systems: In crypto-native environments such as exchanges and decentralized finance, tokens act like digital cash. This provides instant liquidity without reverting to the traditional banking system.

What risks come with stablecoin usage?

Stablecoins are built for stability, but they still have points of failure. When money moves faster and outside of traditional systems, these points shift.

Here are the ones worth focusing on:

• Peg slips and design failures: Not all stablecoins are equally stable. Algorithmic models like TerraUSD can collapse entirely when their peg mechanisms break. Even well-collateralized coins can dip if market confidence wavers.

• Issuer and reserve risk: Without government guarantees or deposit insurance, holders depend on issuers’ asset quality and governance. If an issuer fails or faces legal trouble, users might have limited recourse.

• Changing regulatory obligations: Governments are increasingly focused on stablecoins, but the rules aren’t uniform. The inconsistencies affect everything from redemption rights to tax treatment, especially for businesses that operate across borders.

• Operational security: Transactions are irreversible so the burden is on the user. Phishing, lost keys, or misdirected transfers can permanently remove funds.

• Compliance pressure: Stablecoins can move quickly, but so can illicit flows. That puts a premium on sanctions checks, Anti-Money Laundering (AML) monitoring, and rigorous Know Your Customer (KYC) processes.

How can organizations evaluate stablecoin trade-offs?

Stablecoins are powerful, but they’re not universal solutions. Deciding whether they make sense for your business depends on context, capability, and cost.

Start with the problem you’re solving

Are you trying to reduce settlement delays, lower cross-border payout costs, or reach customers in underbanked markets? Stablecoins excel where the traditional system struggles: fragmented geographies, time-sensitive liquidity, and crypto-adjacent systems. If your business is domestic and your existing systems are efficient, the gain might be smaller.

Examine the underlying mechanics

When you choose a stablecoin, evaluate the following:

• Reserve quality: Is it fully backed by cash or short-term equivalents?

• Issuer credibility: Are disclosures regular and transparent?

• Convertibility: Can you reliably move between stablecoin and fiat?

When in doubt, consider diversifying and avoid holding unnecessary balances on the chain.

Count on partners

You don’t need to build custody or compliance infrastructure from scratch. Payment providers and crypto-native platforms can handle custody, compliance, and conversion for you.

Test before you expand

Start with a controlled workflow, such as a single supplier, a test market, or a specific payout stream. Track where the stablecoin helps and where it breaks, and clarify what internal teams need to understand.

Stablecoins can offer substantial change for your business. The most important part is pairing them with a clear use case, strong governance, and a measured rollout.

How Stripe can help

Stripe Payments provides a unified, global payment solution that helps any business—from scaling startups to global enterprises—accept payments online, in person, and around the world. Businesses can accept stablecoin payments from almost anywhere in the world that settle as fiat in their Stripe balances.

Stripe Payments can help you:

• Optimize your checkout experience: Create a frictionless customer experience and save thousands of engineering hours with prebuilt payment UIs and access to 125+ payment methods, including stablecoins and crypto.

• Expand to new markets faster: Reach customers worldwide and reduce the complexity and cost of multicurrency management with cross-border payment options, available in 195 countries across 135+ currencies.

• Unify payments in person and online: Build a unified commerce experience across online and in-person channels to personalize interactions, reward loyalty, and grow revenue.

• Improve payment performance: Increase revenue with a range of customizable, easy-to-configure payment tools, including no-code fraud protection and advanced capabilities to improve authorization rates.

• Move faster with a flexible, reliable platform for growth: Build on a platform designed to scale with you, with 99.999% historical uptime and industry-leading reliability.

Learn more about how Stripe Payments can power your online and in-person payments, or get started today.