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Category: Digital Assets Regulation

Stablecoin Evolution: Emerging Use Cases, Market Structure, and Regulatory Landscape

Posted on by stg3

Key Insights from the RWA London Summit 2025

 

A recent panel discussion at the RWA London Summit in February 2025 featured experts from across the digital assets industry providing valuable insights into the evolving stablecoin landscape. The panel, titled “Stablecoins: Building the Bridge to Traditional Finance,” was moderated by Mike Manning, former Head of Blockchain & Digital Currencies at Amazon who worked on the digital euro project. Panelists included Dovile Silenskyte (Director of Digital Assets Research at WisdomTree), Jannah Patchay (Founder and Director of Markets Evolution), Lux Thiagarajah (Director of Growth at OpenPayd), and Jude Fredrick (Director of Business Development at Cryptochill by DeusX).

 

Emerging Use Cases

 

The panel highlighted a significant shift in stablecoin usage patterns over the past 18-24 months. While crypto trading remains the dominant use case (accounting for 91% of usage according to Ripple’s research cited by Silenskyte), cross-border payments are emerging as a compelling application driving stablecoin adoption.

 

This shift coincides with a notable decoupling of stablecoin usage from cryptocurrency prices. Historically, stablecoin activity correlated strongly with Bitcoin and Ethereum price movements. However, as Lux Thiagarajah, Director of Growth at OpenPayd, pointed out, around 18 months ago, this pattern began to change, with stablecoin usage continuing to grow regardless of cryptocurrency market conditions.

 

A key catalyst for this transition was the collapse of crypto-friendly banks like Silvergate and Signature, which drove businesses to seek alternative dollar-based settlement rails. Thiagarajah emphasized that payment processors now need to be “rail agnostic,” incorporating not just traditional systems like SWIFT, SEPA, and FPS, but also blockchain networks like Tron and ERC-20.

 

The cross-border payment use case is particularly compelling for several reasons:

  • Greater transparency
  • Faster settlement
  • Lower costs
  • Simplified currency conversion

 

The panelists also highlighted two additional emerging use cases:

 

  • Yield generation: Thiagarajah noted that unlike traditional EMIs and payment processors that cannot offer interest on fiat balances, stablecoins provide opportunities for users to earn yield on their holdings, particularly for clients in sectors like CFDs who need offshore dollar banking.
  • On-chain settlement for tokenized real-world assets (RWAs): Jannah Patchay emphasized that as the tokenization of traditional assets grows, stablecoins are positioned as the primary digital settlement asset, particularly given the absence of widely available CBDCs and the closed-loop nature of tokenized deposits.

 

The Need for Non-USD Stablecoins

 

Lux Thiagarajah highlighted a striking disconnect in the stablecoin market: approximately 99% of stablecoins are USD-denominated, yet the dollar represents only:

 

  • 85% of FX transactions
  • 40% of SWIFT transactions
  • 60% of global FX reserves

 

This disparity highlights a significant opportunity for non-USD stablecoins, particularly in:

 

  • FX markets: Thiagarajah cited research from Warwick Business School demonstrating that EUR/USDC trading on Uniswap consistently remained within 20 basis points of traditional EUR/USD forex rates. This level of efficiency could dramatically reduce costs for companies conducting cross-border transactions.
  • Regional trade development: Jannah Patchay noted that current correspondent banking routes often follow colonial-era paths, creating inefficient payment flows. She provided an example where a payment from Kenya to Senegal might route through London, New York, and Paris before reaching its destination, adding costs and delays. Patchay argued that non-USD stablecoins could facilitate more direct regional trade and payment networks, particularly in Africa and Asia.

 

The emergence of on-chain FX settlement was highlighted as a potential catalyst for non-USD stablecoin adoption, with platforms like Cumberland and Zodiac Markets already demonstrating T+0 settlement for transactions between different stablecoins.

 

Stablecoins vs. Tokenized Treasury Funds

 

The panel addressed the blurring lines between payment stablecoins and yield-bearing financial products like tokenized money market funds. Patchay emphasized that while both maintain a stable value, they serve fundamentally different purposes:

 

  • Payment stablecoins are designed primarily for transactions and value transfer
  • Tokenized money market funds and similar products are intended for investment and collateral

 

Dovile Silenskyte from WisdomTree described their U.S. tokenized funds (including one yielding over 4%) that allow investors to earn returns while maintaining immediate liquidity for payments. However, most panelists, including Patchay and Thiagarajah, agreed that these products would likely remain distinct, with different pricing mechanisms and regulatory treatments.

 

Thiagarajah highlighted how tokenized funds could have provided a solution during the UK’s 2022 gilt market crisis under Liz Truss, allowing pension funds to use tokenized assets as collateral rather than selling underlying assets, potentially preventing the market disruption that eventually required Bank of England intervention.

 

Market Structure and Competition

 

The current stablecoin market is dominated by Tether and Circle (USDC), which together control over 85% of the market. Panel members had differing views on whether this duopoly would persist:

 

  • Jude Fredrick saw significant profit opportunities attracting new entrants, especially with what he perceived as a more crypto-friendly U.S. administration
  • Lux Thiagarajah believed the leaders would maintain their positions while expanding in different directions:
    • Tether continuing to serve higher-risk jurisdictions and “banking the unbanked”
    • Circle focusing on traditional finance institutions, particularly following its acquisition of Hashnote

 

Thiagarajah also mentioned Ripple’s RL USD as a potential emerging competitor due to the company’s established payment networks and banking relationships.

 

Tether’s announcement of Lightning Network integration to improve speed and reduce transaction costs was discussed by Fredrick, who saw it as opening opportunities for new market entrants. However, Thiagarajah questioned whether traditional financial institutions would adopt Tether despite these improvements, given regulatory considerations.

 

Silenskyte also noted an emerging stablecoin innovation generating high returns through basis trading (going long on Bitcoin while shorting futures), though Jannah Patchay cautioned this was more accurately categorized as a financial derivative rather than a stablecoin.

 

Regulatory Considerations

 

While the panel didn’t have time to fully explore the regulatory landscape, Jannah Patchay emphasized the importance of clear terminology and categories. She noted that the term “stablecoin” has become an unhelpful umbrella covering diverse products with different risk profiles and use cases. Patchay explained that regulators increasingly distinguish between:

 

  • Payment stablecoins intended for transactions
  • Tokenized money market funds regulated as securities
  • Other tokenized assets with their own regulatory frameworks

 

Fredrick alluded to the repeal of SAB 121 (Staff Accounting Bulletin) as a regulatory change that could allow large traditional financial institutions like JP Morgan and Visa to enter the stablecoin space. The regulatory clarity (or lack thereof) was recognized by all panelists as a significant factor in institutional adoption and market evolution.

 

Recent Developments

 

Since this panel discussion, several notable developments have occurred in the stablecoin space:

 

  • PayPal’s stablecoin expansion: PayPal’s PYUSD has gained significant traction and expanded its blockchain support beyond Ethereum to include Solana, enhancing its utility for cross-border payments and Web3 applications.
  • Regulatory progress: The EU’s Markets in Crypto-Assets (MiCA) regulation has begun implementation, providing clarity for stablecoin issuers in Europe, while the U.S. continues to work through a patchwork approach at both federal and state levels.
  • CBDC momentum: Several central banks have accelerated their CBDC development efforts, potentially creating future competition (or complementary infrastructure) for private stablecoins.
  • Increased institutional adoption: Major financial institutions like JPMorgan, BNY Mellon, and Franklin Templeton have increased their engagement with stablecoin technology, particularly for settlement and tokenized asset applications.

 

These developments reinforce the panel’s observations about the evolving use cases and market structure of stablecoins, positioning them as an increasingly important component of both traditional and digital financial infrastructure.

 

This article summarizes the “Stablecoins: Building the Bridge to Traditional Finance” panel at the RWA London Summit 2025, which brought together 200 senior executives from institutions including Fidelity, State Street, and LSEG to explore the future of tokenized real-world assets.

Navigating the Regulatory Maze: Key Insights from the RWA London Summit

Posted on by stg3

The Surprising Truth About Digital Asset Regulation

 

The most revealing insight from the “Digital Asset Regulation: The Next Chapter” panel at the RWA London Summit wasn’t about new frameworks or compliance requirements – it was the startling admission that the entire regulatory landscape may be fundamentally misaligned with the nature of digital assets.

 

As Alex Royle, Co-founder and Chief Regulatory Officer at Core Prime, boldly stated:

 

“Regulators are going to need to start understanding that there probably needs to be a slightly different social contract that they have with investors. ” The real issue, he explained, isn’t decentralization but disintermediation – “Regulation is something that bites at the intermediary almost entirely.“

 

In a world where disintermediated finance is increasingly accessible, regulators face an uncomfortable reality: no regulatory framework can prevent retail consumers from accessing DeFi. “The internet exists,” Royle pointed out bluntly.

 

The European Experiment

 

The panel, featuring compliance and regulatory leaders from Solidus Labs, B2C2, Cor Prime, and Galaxy Digital, examined MiCA (Markets in Crypto-Assets Regulation) – the EU’s comprehensive regulatory framework – as a test case for global regulation.

 

Oumou Ba, Head of Compliance at B2C2, highlighted three key impacts of MiCA:

 

  1. Standardization of the market, boosting institutional confidence
  2. A harmonized framework across 27 EU member states
  3. Enhanced investor protection through clear rules for stablecoins and market abuse

 

However, not everyone saw MiCA as a perfect model. Royle pointed out that the EU has produced “15 to 20 times the amount of words written to explain the primary text” – indicating the challenges of implementing a fixed framework in a rapidly evolving ecosystem. “Mica is a regulation, and within pieces of Mica, it defers directly to directives,” he noted, questioning how supervisory convergence would work in practice.

 

The Prudential Regulation Gap

 

Perhaps the most significant regulatory hurdle identified by the panel – and one that’s received surprisingly little attention – is prudential regulation. This critical area determines how financial intermediaries dealing with digital assets will be held accountable by regulators.

 

“The biggest regulatory hurdle that we need to get over, we haven’t really addressed yet. That is prudential regulation,” Royle emphasized. “There’s a huge shoe to drop still as to whether or not a prudential regulator… is going to make any of these business models viable.”

 

Chris Smith from Galaxy Digital reinforced this concern: “If you’re taking a native token in a particular blockchain, a Bitcoin as collateral… it’s very punitive” under current regulatory capital requirements. This creates a significant barrier for institutional adoption.

 

Building a Global Strategy

 

When asked about developing regulatory strategies, the panelists emphasized that jurisdictional choices must follow business plans, not precede them.

 

“Finding a jurisdiction is really having a good balance between the compliance but also the business,” Ba noted. This includes considering talent availability, regulator relationships, and customer base.

 

Royle pointed out that many crypto firms lack well-considered jurisdictional marketing strategies: “There’s probably very few countries globally that actively ban activities… but that doesn’t allow you to market cross border. Where a lot of crypto firms get found out, get fined, get caught…is that they say ‘Well, I’m regulated in the UK. I’ve got an FCA license. What do you mean I can’t call someone in Australia and sell them some crypto?'”

 

The Path Forward

 

Looking ahead, the panel identified several critical developments needed to foster adoption:

 

  • Global Harmonization: Equivalence between regulatory frameworks in the UK, EU, and US is essential.

 

  • Asset Management Clarity: Regulatory certainty for asset managers would bring significant liquidity to the market.

 

  • New Regulatory Paradigm: Rather than trying to prevent access to DeFi, regulators should support regulated firms to intermediate it safely.

 

  • Industry Standards: The digital asset industry needs to mature and establish its own standards rather than waiting for regulators.

 

Delphine Forma, moderating the panel, emphasized this point: “On DeFi also as an industry, we should mature. I think the market is still very immature when we see whatever has happened during the last few months with the launch of those meme coins and insider trading going on, market manipulation. As an industry, we have this opportunity to build up standards and come up to the regulator as a growing up adult in the room.“

 

As Ba concluded, “The technology is here to help… what the technology can do in terms of compliance controls is absolutely fantastic.”

 

The Bottom Line

 

The panel made it clear that we’re at a critical juncture in digital asset regulation. Traditional regulatory approaches that rely on controlling intermediaries face fundamental challenges in a disintermediated financial system. The most successful frameworks will be those that adapt to this new reality rather than fighting against it.

 

For financial institutions exploring digital assets, understanding these regulatory dynamics isn’t just about compliance – it’s about identifying viable business models in a rapidly evolving landscape.

 

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The “Digital Asset Regulation: The Next Chapter” panel at the RWA London Summit 2025 brought together an exceptional group of regulatory experts to discuss the evolving landscape of digital asset regulation. Moderated by Delphine Forma, Policy Lead at Solidus Labs, the panel featured Oumou Ba (Head of Compliance at B2C2), Alex Royle (Co-founder and Chief Regulatory Officer at Core Prime), and Chris Smith (Chief Compliance Officer at Galaxy Digital). The RWA London Summit itself gathered over 200 senior executives from institutions including Fidelity, State Street, LSEG, and BNY Mellon to explore the future of tokenized real-world assets across seven expert panels.