Challenges in Stablecoin Adoption
Of course, the adoption of stablecoins does not come without challenges. First, many businesses lack the internal knowledge needed to effectively deploy stablecoins; boards, CFOs and finance teams often lack a clear understanding of how stablecoins work.
Second, integrating stablecoins with enterprise resource planning (ERP) systems and treasury workstations may seem too onerous, since it requires API connectivity to wallets and exchanges. But this challenge can be overcome by working with banks and providers.
Liquidity shortages are another potential obstacle to stablecoin use. But when liquidity is limited, businesses could initially focus on closed environments where less is required. For example, they could work with a trusted partner on a specific use case that does not involve moving across multiple blockchains or conversion to seldom-used currencies.
And finally, uncertainty about compliance and regulations may discourage companies from experimenting with stablecoins. But businesses can start small by running modest pilots in jurisdictions where the rules are clear. In any pilot, legal and accounting teams should be involved from the beginning, and companies should only work with trusted, regulated partners.
While stablecoins are often considered to be one of the safest digital currencies, they are not without meaningful risk.
Key Risks
It is crucial to have a risk framework in place before adopting stablecoins operationally. Technological evolution will likely mitigate risks; wallets, for example, have evolved to better prevent private-key theft, and blockchains’ on-chain analytics can surveil and screen transactions in real time.
Stablecoins in Treasury Operations
In treasury, stablecoins will likely serve as just one option among payment types, as will tokenized deposits. They will supplement, not replace, current processes. “Stablecoins should be viewed primarily as a payment and settlement rail, not as a new asset class or entirely new form of money. For treasury use cases, they function as an efficient settlement rail,” Dan Fishman, Treasurer of Circle, advises. His colleague, Eddie Radcliffe, Director of Market Education and Analyst Relations at Circle, adds, “Stablecoins are just one component of the broader digital asset ecosystem that treasury teams will increasingly encounter. They are a foundational interoperability layer — an interoperable payment and settlement mechanism that connects different digital assets and treasury use cases.” Before adopting stablecoins, businesses will need to develop appropriate treasury policies, permissions and processes for approval, tracking and reconciliation. Finance, legal, compliance and accounting teams should all be involved in constructing this framework.
Some questions to consider include:
- What problem are we trying to solve?
- Do we intend to hold stablecoins as an asset, or to use them only as a payment rail?
- Is this option better than our current process?
- Who issues the stablecoin?
- How easy is redemption?
- What controls do we need?
- How will stablecoins show up in accounting and reporting?
Choosing the stablecoin itself is less about selecting a single “best” token and more about evaluating the underlying ecosystem, infrastructure and risk profile. Treasury and payments teams can assess factors such as the quality and liquidity of reserves, the trustworthiness of issuers and custodians, regulatory compliance and the blockchain network on which the stablecoin operates. Other factors to consider are interoperability, transaction speed, scalability, integration with treasury systems and ERPs, and the availability of reliable on- and off-ramps into local currencies.
Once a business decides to take the plunge, the best approach is to start small by piloting a low-risk, high-value use case.
An example roadmap might include the following steps:
STEP #1
Define the use case and business case.
STEP #2
Convene internal stakeholders.
STEP #3
Conduct legal, accounting, tax and compliance review.
STEP #4
Select platform, issuer and custody model.
STEP #5
Build controls, approval workflows and reconciliation processes.
STEP #6
Run a pilot.
STEP #7
Review the results and decide whether to scale.