Last week, Zodia Markets, an indirect subsidiary of Standard Chartered, said it integrated Circle’s EUROC stablecoin into its OTC cryptocurrency brokerage and exchange. It positioned this as creating a Euro-USD stablecoin based foreign exchange (FX) market, given it already supports Circle’s USDC and Tether.
Stepping back, that’s a pretty big deal. It may operate as an independent subsidiary of Standard Chartered, but the bank is amongst the largest correspondent banks in the world. Correspondent banks make money out of the inefficiencies in cross border payments. Which is something stablecoins aim to tackle.
Institutionally-focused Zodia Markets is UK based, although it also operates in Ireland and the UAE. Two of its jurisdictions – the UK and EU – are both clarifying the status of stablecoins. In the case of the EU, there’s MiCA. And the UK recently published a consultation around specific regulatory proposals.
In a LinkedIn post, it positions stablecoins as reducing the time and geographic restrictions we’ve become accustomed to in banking. Blockchain isn’t the only way to transcend time and geography. For example, the likes of Revolut and Wise enable anyone with a bank account to hold balances in numerous foreign currencies. However, with both of these, the payment arrival is dependent on local clearing and how quickly the recipient bank credits the account, unlike stablecoins.
This comes to the benefit of a stablecoin – its P2P nature cuts out intermediaries in payment transactions – such as banks and correspondent banks. However, for most people it’s tricky to onboard to stablecoins without going through a bank in the first place.
There’s also the open nature of public blockchains. That said, as the number of blockchains proliferates, the cost of navigating between blockchains is not free.
However, sending a cross border payment using stablecoins is considerably cheaper than sending one via a bank. Depending on the public blockchain used, the gas fees are not always cheaper than sending via Wise and its competitors. And the most liquid markets for FX are on Ethereum, where the gas fees are highest. It’s still early days, so as markets get deeper the liquidity should improve on less costly blockchains.