Interview

What are stablecoins? What role do they play in the context of digital currencies? How do they differ from other cryptocurrencies? What opportunities and risks are associated with their introduction and use? What innovative momentum are they generating? How are regulators intervening to control them? How should financial service providers adapt? What technical and strategic decisions need to be made in this context? What growth and earnings opportunities does the offering of these assets imply?

In this interview, expert Ingo Czok provides the answers.

Czok then turned his attention to blockchain and cryptocurrencies. Recognising the need for a bridge between existing financial IT and Web3-based blockchain networks, he founded nupont, where he is now CEO. As part of an interdisciplinary team at nupont, Czok works to provide companies and banks with secure and ISO 20022-compliant access to cryptocurrencies, tokens, stablecoins and decentralised finance (DeFi) or decentralised autonomous organisations (DAOs) directly from their existing financial systems.

Abstract

Digital currencies are on the rise. The market for so-called stablecoins in particular is growing rapidly and has the potential to significantly change the financial system of the future. Stablecoins are cryptocurrencies whose value is pegged to a stable asset such as fiat currencies (e.g. US dollars or euros), gold or other cryptocurrencies.

This gives them a rare and attractive feature: stablecoins offer price stability – a characteristic that is particularly important in a market known for extreme volatility. At the same time, they promise advantages such as speed, transparency and decentralisation, which are possible thanks to blockchain technology. By integrating stablecoins into various financial systems, they promote broader acceptance of cryptocurrencies. With the rise of tokenised assets and cross-border payments, stable, fast and transparent digital currencies are becoming increasingly attractive. Compared to other cryptocurrencies, which are subject to large price fluctuations, stablecoins create a reliable store of value that is beneficial for both capital investors and consumers.

Experts predict that the market for stablecoins is expected to grow to 500 billion US dollars by 2028. This is an attractive growth market that implies the emergence of potential sources of growth and revenue for many financial service providers. In this interview, we take a look behind the scenes and ask crypto expert Ingo Czok, founder and CEO of nupont, what lies behind the stablecoin business model, how regulation is driving momentum in the market, and what opportunities and growth potential this presents for financial service providers and end customers.

Ingo: Stablecoins are digital tokens on a blockchain that are pegged 1:1 to traditional currencies, i.e. fiat currencies such as the US dollar or the euro. There are different types of stablecoins, but the most relevant ones for businesses are those backed by fiat reserves. These reserves usually consist of bank deposits or short-term government bonds and have a huge volume. Tether, one of the prominent issuers, is estimated to have assets of over 100 billion US dollars in US government bonds and comparable investments. Issuers of stablecoins such as Circle, Allunity and Monerium keep the collateral separate from their own assets and are subject to audit requirements, such as those under MiCAR in Europe or the GENIUS Act in the US. They also publish regular reports on their reserves. Companies should look for transparent reserve reports, daily disclosure and clear redemption terms. Past market disruptions have shown that issuer quality is particularly important.

The business model of stablecoin issuers is based primarily on interest income from deposited reserves. This explains why we have only seen significant stablecoin issuance in Europe since the interest rate turnaround.

What is the difference between stablecoins and central bank digital currencies (CBDCs)?

Ingo: The issuers of stablecoins are private companies, while the issuers of digital central bank currencies are central banks. These enjoy a very high level of institutional trust. However, most central bank currencies are still in the pilot or planning stage and are therefore not available. They are initially focusing on simple payment functions without integrated smart contract capability.

In contrast, stablecoins, as a subcategory of cryptocurrencies, are programmable within their blockchains via smart contracts. This has led to the development of a mature ecosystem in which stablecoins can, for example, be invested at interest or exchanged for other assets. For example, stablecoins denominated in euros can be exchanged for US dollar-denominated stablecoins on popular cryptocurrency exchanges such as Coinbase or Uniswap. Whether there will be a digital dollar remains open: the Fed has not yet made a decision and is continuing to evaluate the matter. The current US administration is prioritising regulated 1:1-backed dollar stablecoins and is examining protective mechanisms against a possible government retail CBDC.

In summary, stablecoins can already be used as a fungible means of payment for companies and private individuals in the main markets. Whether and when digital central bank currencies will become cross-border is currently uncertain. I therefore recommend a hybrid approach and using stablecoins now. This is because they can be integrated technically in such a way that CBDCs are supported as soon as they go live. Both instruments complement each other – CBDCs could even serve as first-class collateral for stablecoins in the future.

The market volume (market capitalisation) for stablecoins is currently estimated at roughly USD 200 to 250 billion. How do you explain the high market capitalisation and thus the demand for stablecoins? Which characteristics and value propositions are decisive for this and why are they particularly interesting for companies?

Ingo: The killer use case for stablecoins is cross-border payments. While traditional payment processing across national borders outside the SEPA area often takes several days, stablecoins can process payments in less than 30 seconds, regardless of the currency used or the countries involved. In the SWIFT system, international payments pass through several correspondent banks before reaching the recipient. This process not only leads to long processing times, but also to significant fees and potential currency spreads if the payment is to be made in a currency other than the original currency. Furthermore, the fees charged by these banks often lack transparency, which in some cases leads to overpayments to cover the fees. These problems do not arise with stablecoin payments, as they are simply entries in a distributed accounting system.

In addition to these practical advantages, stablecoins enable programmable money that allows automatic releases based on specific conditions, for example along value chains. The markets for stablecoins are open around the clock, allowing treasurers to park funds securely and reallocate them in a matter of seconds. All of this explains why stablecoin volumes continue to rise.

Thanks to lower transaction fees, stablecoins now support microtransactions and real-time payments. This bridges the gap between blockchain and the traditional financial world. At the same time, stablecoin trading ecosystems are emerging. In your opinion, what innovative business models are possible with stablecoins in the financial sector?

Ingo: There are a number of exciting use cases that we are seeing, such as embedded payments in marketplaces or SaaS platforms. Here, payments can be accepted in stablecoins and trading proceeds distributed to suppliers within seconds.

Another area of application is yield-bearing wallets, where companies park free liquidity in tokenised US Treasury bills, for example, without losing flexibility.

Another exciting scenario for stablecoins includes IoT-based pay-per-use models, where machines book energy and maintenance fees every second because they can move even cent amounts cost-efficiently.

What other applications are conceivable for businesses?

Ingo: We are currently experiencing a wave of innovation in the market, with numerous teams working on fascinating use cases that can only be realised with digital, programmable money.

These include supply chain escrow, where payments are released as soon as an IoT sensor confirms the arrival of the goods.

A concrete example can be found in shipping: when bunkering ship diesel, a sensor measures the level in the tank and releases a stablecoin payment via smart contract. The ship can set sail again immediately and does not have to wait for the payment to be settled.

Or, in treasury netting, domestic companies settle claims with each other in seconds and save intercompany fees.

Another example is global payroll. Here, freelancers and teams worldwide receive payments in seconds in the local currency of their choice or in USDC. Freelancers use credit cards running on stablecoins to make local purchases.

And then there are large retailers who are planning to become issuers of stablecoins themselves. This allows them to combine cheaper acceptance at the point of sale with the loyalty aspect. Stablecoins can be both a means of payment and a loyalty token.

In the future, stablecoins will also be suitable for institutional stock and bond trading, provided that the necessary regulatory requirements are met.

What is the situation from a business perspective? What tangible cost advantages do stablecoins offer companies?

Ingo: To understand exactly how much a typical international payment costs, we examined a payment of 10,000 US dollars from a German account to the United States. We found that banks often charge a currency spread on top of the fees. This can result in total costs of 200 to 400 euros. In contrast, specialised payment service providers such as Wise, which offer more favourable terms thanks to economies of scale, charge around £60 for such a transaction. A stablecoin payment, including the deposit in fiat and the payout to a US bank account, can be processed via an automated clearing house for less than £10. If both parties have a stablecoin wallet in future, the costs will be almost negligible. In addition to significantly lower transaction fees, the amount of tied-up working capital is also reduced. Instead of waiting two days, the money is available within seconds. This reduces the need for working capital loans. Process costs are reduced because no manual currency conversions or SWIFT tracking are necessary. And there are fewer queries in accounting because every transaction is documented on the blockchain in a tamper-proof manner.

Do consumers also benefit? How do stablecoin transfers differ from bank transfers, and what are the advantages?

Ingo: Yes. For end customers, this means that payments are final worldwide in seconds, even in the evenings or on weekends. And the fees are often in the cent range. Especially for remittance payments, such as transfers from migrants to their home countries, the use of stablecoins can save up to 90 percent of the costs. Under certain circumstances, they may also be suitable for reducing tax payments on international transfers, as recently introduced in the United States. However, the exact legal situation is still unclear.

We have observed an interesting example in the area of wage payments. Seafarers often receive their wages in cash on board large ships. If shipowners and seafarers switched to stablecoins, this would result in many advantages for both parties. Seafarers could use their wages locally in ports worldwide for purchases via stablecoin-based credit cards such as GnosisPay or MetaMask Card. They could also transfer stablecoins to their family members at home within seconds and almost free of charge. The stablecoins can then be used there with a stablecoin credit card or paid out in local currency.

Legislation and regulation can also serve as catalysts for the emergence of innovative business models in the financial system. How does this apply in the context of stablecoins? Which regulations and rules are particularly relevant for this specific market?

Ingo: In Europe, MiCAR has been binding since 2024 for all e-money tokens with core requirements such as 1:1 coverage, reporting obligations and supervision. In the US, the GENIUS Act is creating a nationwide framework with similar requirements. In addition, there are global AML/KYC rules, the FATF Travel Rule and accounting standards such as GoBD and IFRS for the accounting of digital assets. It is therefore important to work with stablecoin issuers and exchanges that comply with these requirements.

Although these regulatory requirements initially increase the level of effort, they offer an important advantage in the long term: they create the necessary trust in the market and provide companies and banks with a clear framework and legal certainty. This makes investment decisions easier. With MiCAR, Europe has taken on a pioneering role internationally. This currently gives European companies and banks a competitive advantage over regions such as the US, where regulatory details still need to be clarified.

What do financial service providers need to consider in terms of their technological orientation if they want to use stablecoins? What preparations and decisions need to be made, and what could an implementation roadmap look like?

Ingo: Banks can offer stablecoins as their own service – from custody accounts and regulated on/off-ramp services to stablecoin-based cash pooling and cross-border FX payments. This allows banks to remain at the centre of corporate banking rather than losing volume to pure crypto providers.

To do this, banks should first look for suitable partners. On the one hand, they need a regulated stablecoin issuer and a platform such as nupont that bridges the gap to companies' ERP and ISO 20022 processes. On the other hand, they need an IT service provider such as adesso at their side to handle process and system integration as well as the development and audit of smart contracts.

In the next step, they work with their partners to define the architecture. This involves defining the wallet infrastructure, signature policies and key management. In addition, considerations are made regarding the integration of the services into digital channels such as web, mobile and API, as well as into internal core systems. Smart contract-based automations can be added for specific offerings.

The project then starts in a sandbox with selected corporate customers, experience is gathered and the system is scaled step by step.

What actually happens if nothing happens? What competitive disadvantages could arise for financial service providers in the long term if they fail to respond to the trend towards digital assets?

Ingo: Those who hesitate now will lose margin to FinTechs and BigTechs offering 24/7 payments. Corporate customers will migrate because they expect global processing and multi-currency wallets. Catching up later will be expensive, as not only the technology but also regulatory backlogs will have to be addressed.

In short, ‘wait and see’ carries more risk than a controlled entry.

Conclusion

The market for stablecoins is growing, and many financial service providers are facing the challenge of seamlessly integrating this technology into their existing systems. Technical expertise plays a crucial role in this process. We support companies in integrating stablecoins into their financial and payment systems by providing tailor-made solutions for connection and implementation. This expertise not only helps financial service providers optimise their processes, but also enables them to meet regulatory requirements such as MiCAR or ISO-20022, thus ensuring a secure transition into the world of digital currencies.