According to Guillaume Poncin, chief technology officer of payment company Alchemy, stablecoins will not overtake established payment platforms like Visa and Mastercard until they incorporate strong consumer protections.
Traditional payment companies provide chargebacks, fraud protection, dispute resolution, and credit options that consumers expect. Poncin mentioned to Cointelegraph that stablecoin projects must add these features to appeal to the average user.
He noted that consumer protection features could be integrated into smart contracts, and that stablecoin issuers and payment platforms could establish insurance pools for fraud payouts. Poncin stated the fusion of traditional payment rails and stablecoins is on the horizon:
“I expect every major payment processor will adopt stablecoins, and every bank will issue its own. The future will see traditional rails enhanced by the efficiency and new use cases of blockchain. For cross-border payments and emerging markets, stablecoins are already ahead.
For domestic retail, we will witness hybrid models that combine instant settlement with consumer protections,” he added.
Offering 24/7, cross-border settlement at much lower costs than traditional bank transfers, stablecoins are proving to be more practical for remittances and international trade. This provides a competitive edge over payment card providers in these sectors.
Related: Coinbase asserts stablecoins are not undermining bank deposits, labeling it a ‘myth’
Banking industry considers stablecoins’ potential impact on the legacy system
Executives from the crypto sector, commercial banks, and market analysts are still debating the effects of stablecoins on established financial institutions in the payments and banking landscape.
In March, US banks and their allies in the Senate opposed stablecoin regulations during discussions regarding the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) bill.
The main concern was the possibility for stablecoin issuers to share some yields from US government securities backing their tokens with customers, which was banned in the final bill.
US Senator Kirsten Gillibrand contended that yield-sharing options would jeopardize the traditional banking structure and the lending services vital to homebuyers and small businesses.
Gillibrand posed a question at the DC Blockchain Summit in March: “If there is no reason to deposit your money in a local bank, who is going to provide you with a mortgage?”
Nevertheless, Jamie Dimon, CEO of JPMorgan, expressed a lack of concern about stablecoins replacing banks, asserting that each entity serves its own clientele and will continue to coexist.
“Some people will prefer to hold dollars through a stablecoin outside the US, ranging from legitimate users to those in countries where it’s preferable to have dollars rather than using the banking system,” Dimon told CNBC.
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