The limitations of traditional fiat currency, like banks freezing accounts or high transaction fees, have led many to explore stablecoins as a potential alternative. But what exactly are stablecoins, what are the main differences between stablecoins vs. fiat currencies, and which one is right for you?

Join us in this blog as we explore the key details of stablecoins and fiat currencies, whether stablecoins can replace fiat, what factors you should consider before choosing, and more. Let’s take a closer look!

What are stablecoins?

Stablecoins aim to provide price stability by tying their value to real-world assets like fiat currencies, commodities, or other cryptocurrencies.

Reserves equal to the value of coins in circulation can back stablecoins, over-collateralize them using multiple reserve assets, or govern them algorithmically without collateral. Their value proposition is to provide fiat stability within crypto and blockchain technology ecosystems.

For example, EURK is a secure euro stablecoin with reserves in Switzerland. Built on multiple blockchains, it is a 1:1 euro-pegged stablecoin that empowers innovation with reliability and efficiency.

If you want to explore euro-based stablecoins more, make sure to check out “Euro Stablecoin Platform” and “Euro Stablecoin Wallet'”!

What are fiat currencies?

Fiat currencies like the US dollar and Euro are government-issued legal tenders not backed by physical commodities. Rather than being reserves, they derive their value from regulation and market demand.

While convenient for daily use, traditional fiat money can face issues like hyperinflation or government interference like freezing accounts. International fiat transfers also tend to have much higher fees than stablecoins or cryptocurrencies.

How are stablecoins different from traditional assets?

While stablecoins aim to minimize volatility like traditional assets, there are some key differences.

Here are some of them:

Accessibility

As long as you have an internet connection, you can use stablecoins globally from any device. The accessibility of stablecoins surpasses that of traditional assets, which are subject to geographical and legal limitations.

Speed

Moving value around using stablecoins is nearly instantaneous, thanks to 24/7 blockchain networks. Traditional wires and transfers can take days to settle. Cryptobunq is a crypto service provider that offers crypto wallets and crypto exchange APIs, allowing for fast, frictionless transactions with stablecoins.

Cost

International payments with traditional systems incur multiple fees, sometimes as high as 5–10% per transaction. Stablecoins have minimal transaction fees of a few cents, saving businesses time and money on crypto payments.

Programmability

Stablecoins operate on open blockchain networks, allowing for new innovative use cases like smart contracts and decentralized applications not possible with other assets. Cryptobunq offers batch crypto payments and e-commerce payment solutions with stablecoins and cryptocurrencies.

The main advantages stem from stablecoins' digital, global nature, which removes barriers to access and improves efficiency versus slow, expensive, legacy means of value transfer. Stablecoin transactions offer a perfect meeting point of speed, cost, and security compared to previous alternatives.

With the power of blockchain technology, you can easily use Cryptobunq solutions to advance your transactions and payments. From custody and wallet to crypto checkout and invoicing, and more, you can benefit your business with CBQ. Explore our case studies to learn more about our services!

What is the main difference between stablecoins and fiat currency?

The major difference between stablecoins vs. fiat currencies lies in their issuance and governance. National governments and central banks determine the fiat money supply and value.

On the other hand, companies privately issue stablecoins based on market demand, algorithmic mechanisms, or collateral backing.

Additionally, fiat currencies exist independently from each other, while stablecoins can work together across blockchain networks. EURK, for example, operates on Ethereum and other chains.

This cross-chain functionality fosters financial inclusion and innovation on a truly global scale, beyond national borders. Another contrast is stability. Stablecoins aim to minimize volatility through collateralization, while fiat values fluctuate based on economic conditions.

Stablecoins transparently hold reserves equivalent to outstanding coins, providing users with greater price predictability than many fiat currencies have historically offered.

All of these dynamics make stablecoins a compelling player in the digital money ecosystem, which is more beneficial than fiat money.

Can stablecoins replace fiat?

While stablecoins address real problems with traditional currencies, completely overtaking fiat currency is still a long way off, according to many experts.

Fiat retains strong governmental and institutional support given its long history in our monetary systems. However, stablecoins are increasingly filling niches where fiat is lacking, complementing rather than competing with national currencies.

Specifically, the power of stablecoins shows promise in powering inexpensive global remittances and cross-border payments, challenging the high costs of legacy infrastructure. They also enable new use cases by leveraging blockchain capabilities, which fiat alone cannot achieve.

Stablecoins and fiat currencies are likely to co-exist, with each serving a purpose depending on the situation. The future of currencies remains nuanced, indicating stablecoins may find enduring space within this evolving landscape.

The benefits of stablecoins for your business

For enterprises and startups leveraging crypto, stablecoins boast several benefits compared to traditional and speculative cryptocurrencies:

• Price stability removes currency volatility and risk from transactions.
• Low transaction fees streamline payments worldwide.
• Transactions can settle instantly thanks to quick finality and processing.
• Programmability via smart contracts.
• Borderless nature for global reach.
• The transparency of blockchain networks is increasing trust.
• Reserve backing alleviates counterparty concerns.

All these factors create opportunities for new revenue streams and operational efficiencies, whether through e-commerce processing, cross-border payments, or decentralized finance applications.

Cryptobunq securely supports stablecoins in crypto custody, crypto trading, and even payroll payments. Stablecoins and Cryptobunq, when combined, unlock incredible possibilities with minimal business disruption. You can easily store, manage, exchange, and make payments with stablecoins with CBQ.

What factors should you consider before choosing a stablecoin?

With various stablecoin projects out there, determining the right stablecoin depends on individual business needs.

• Asset peg: USD, EUR, commodity-backed.
• Chain support: Networks like Ethereum for functionality.
• Regulations: Compliance with local rules impacts acceptance.
• Reputation: Projects managed by experienced teams reassure users about the issuer's reputation.
• Audit records: Transparent attestations instill confidence in backing reserves.
• Maturity: Long-running stablecoins demonstrate price-keeping capabilities over time.
• Adoption level: Network effects enhance liquidity and access to partners.
• Use cases: Evaluate smart contract compatibility and payments experience.

Choosing the right stablecoin offering security, affordability, and functionality tailored to your specific demands will unlock their immense potential as a platform for prosperity. You can easily choose the stablecoin that is right for you by following the tips we have provided above!

Wrapping up

Stablecoins are positioning themselves to deliver inclusivity, efficiency, and innovation on a global scale unmatched by any previous monetary instrument, as this article has demonstrated. While fiat currencies endure as the status quo, the advantages of stablecoins both complement and pressure legacy systems.

With the right due diligence, businesses stand to gain immensely by leveraging the security and opportunity presented by their offerings. Stablecoins’ moment has arrived to mainstream accessible digital value in a new chapter of finance.

If you want to dive into the world of stablecoins without worrying about how to store, manage, or exchange them, Cryptobunq is here for you as a one-stop-shop crypto service provider.

CBQ is an expert in the field of crypto services and offers many benefits for your projects. Contact us today and get started to grow your business and projects fundamentally with Cryptobunq!