The Rise of Stablecoins as a Payment Vehicle

Stablecoins are increasingly becoming a mainstream payment method, preferred even by criminals to avoid currency risk when transferring large sums of money.

Stablecoins like Tether’s USDT and Circle’s USDC are pegged 1:1 to the U.S. dollar, making them less volatile than cryptocurrencies like Bitcoin. James Smith, founder of blockchain analytics firm Elliptic, emphasizes that the issuers of these dollar-backed tokens can freeze them, adding a layer of control.

Billions of dollars in stablecoins change hands daily — amounting to $94 billion in the last 24 hours, according to CoinGecko. This prevalence creates a demand for tools like Elliptic’s new due diligence suite, designed to analyze wallets and track assets across blockchains, assisting mainstream finance companies, stablecoin issuers, and their partners.

Smith mentions that banks should align with current and evolving regulations while participating in this lucrative space. Major banks are already utilizing Elliptic’s Stablecoin Issuer Due Diligence product, enhancing oversight of the stablecoin market.

Elliptic’s tools are applicable to all stablecoin issuers, though larger issuers like Tether, with $168 billion in circulation, naturally experience more activity compared to others like USDC.

USDT is particularly popular in regions like China and Southeast Asia, particularly on the Tron blockchain, which hosts over $78 billion of USDT. Stablecoin issuers have the power to freeze or blacklist wallets, adding an essential capability to combat criminal activities. For instance, the T3 Financial Crime Unit has successfully frozen over $250 million in assets.

Smith points out that criminal actors rapidly convert assets into non-freezable stablecoins or native assets to evade detection when laundering money. Elliptic’s Issuer Due Diligence app stands apart from traditional static blockchain analytics tools by offering a configurable dashboard for real-time insights, enhancing flexibility and privacy in financial institutions’ workflows.