Stablecoin fundamentals: How stablecoin payments unlock faster, cheaper global commerce

Stablecoin fundamentals matter because stablecoin payments are increasingly used to move value across borders with faster settlement, lower fees, and broader access to stable currency than many traditional rails. For fintechs and enterprises, the question is less “what is crypto?” and more “where do stablecoins reduce friction without adding unacceptable risk?”

This guide explains how stablecoins work, which types are used for payments, benefits and tradeoffs, and practical ways businesses can accept stablecoin payments.

Stablecoin fundamentals (types and mechanics): what stablecoins are and how payments work

A stablecoin is a type of cryptocurrency designed to maintain a relatively stable value, typically by referencing (or “pegging” to) an external asset such as a fiat currency (for example, the U.S. dollar) or a commodity (for example, gold). The goal is to combine “digital money that moves like the internet” with a price that behaves more like cash than like volatile crypto assets.

How stablecoins maintain a stable value (in practice)

Many payment-focused stablecoins are designed around a redemption model:

• If a stablecoin is intended to trade at $1, the issuer aims to support 1:1 redemption: holders can redeem 1 token for $1 (subject to the issuer’s terms).
• To support that redemption expectation, issuers typically hold reserves intended to match the value of tokens in circulation (often cash and cash equivalents such as short-term Treasuries).

This redemption mechanism is a key reason fiat-referenced stablecoins are commonly used in payments: users can price goods and settle invoices in a familiar unit of account.

How stablecoin payments settle

Stablecoins run on public blockchains (for example, Ethereum and Solana). When a payer sends a stablecoin:

• The transaction is signed by the payer’s wallet using cryptographic keys.
• The network validates and records the transfer on a public ledger.
• Settlement typically occurs in seconds to minutes, and can be executed 24/7 (including weekends and holidays), depending on the chain and network conditions.

For cross-border value transfer, stablecoins can reduce reliance on correspondent banking and batch-based processes that introduce delays.

Stablecoin fundamentals (types and mechanics): stablecoin types used for payments

Not all stablecoins are designed the same way, and the mechanism matters for payment reliability, operational risk, and compliance posture.

Fiat-backed stablecoins

Fiat-backed stablecoins are designed to be backed 1:1 by reserves such as cash or short-term government securities. Examples include USDC, USDT, and EURC.

Why they’re common in payments:

• Straightforward model (mint/redeem against reserves)
• Typically tighter price behavior around the peg
• Familiar denomination (USD, EUR)

Crypto-backed stablecoins

Crypto-backed stablecoins are overcollateralized by other crypto assets locked in smart contracts. A common model is to mint stablecoins against overcollateralized positions (for example, DAI).

Tradeoffs for payments:

• Collateral value can fluctuate, requiring risk controls (for example, liquidation mechanisms)
• Often viewed as less straightforward for mainstream retail payment flows, even if they are more onchain-native

Commodity-backed stablecoins

Commodity-backed stablecoins reference assets like gold. Examples include PAX Gold and Tether Gold, where tokens are designed to represent a claim on a quantity of the commodity (for example, 1 ounce of gold).

Tradeoffs for payments:

• Value moves with the commodity price, which is not ideal for everyday pricing and payroll
• More commonly used for exposure/hedging than for commerce settlement

Algorithmic stablecoins

Algorithmic stablecoins attempt to maintain a peg through programmed incentives and supply adjustments rather than reserves. Historically, some designs have failed under stress (TerraUSD is a widely cited example).

Why they’re less used for payments:

• Higher risk profile if market confidence breaks
• Less suitable where predictable settlement value is a hard requirement

Benefits of stablecoins for payments (speed, cost, access)

Stablecoins are gaining traction because they can reduce specific pain points in global payments—without requiring merchants to price goods in volatile assets.

Speed: faster settlement, especially cross-border

Stablecoin transfers can settle in seconds or minutes and operate continuously (24/7). This is most meaningful for:

• Cross-border payments that traditionally rely on multiple intermediaries
• Treasury movements outside banking hours
• Time-sensitive payouts (for example, contractor or marketplace payments)

Cost: fewer intermediaries, potentially lower fees

Stablecoin transactions can reduce costs associated with intermediary-heavy flows, particularly for cross-border transfers. In some models, stablecoin acceptance can also reduce exposure to card interchange and related fees.

Important nuance: total cost depends on chain fees, on/off-ramp costs, FX, compliance overhead, and operational design (for example, custody and reconciliation).

Access: stable currency exposure with internet-native distribution

Stablecoins can be held and transferred by anyone with internet access and a compatible wallet. This can matter in regions where:

• Local currency is volatile
• Banking access is limited
• Receiving international payments is slow or expensive

For businesses, this can expand addressable markets—but only if customer UX, compliance, and local cash-out options are handled well.

Reduced chargeback exposure (with different customer support expectations)

On most public blockchains, stablecoin transfers are typically irreversible once confirmed. That can reduce chargeback fraud exposure compared with card payments.

Tradeoff: the same irreversibility shifts more responsibility to merchants and payment providers to design:

• Refund processes (often offchain, or via smart-contract-based workflows)
• Customer support and dispute handling policies

Programmability: payments that integrate into software workflows

Because stablecoins are blockchain-based, they can be integrated into automated workflows, including:

• Conditional payments (release on delivery confirmation)
• Automated revenue splits (for marketplaces/platforms)
• Lower-friction micropayments (where card fee structures can be prohibitive)

This is often where stablecoins move from “alternative payment method” to “infrastructure primitive.”

Methods for businesses to accept stablecoin payments

Implementation choices depend on desired control, risk tolerance, and internal capabilities. Most businesses land in one of three patterns.

1) Accept via a payments platform (processor-led)

In this model, a payments provider handles the onchain complexity while the merchant receives settlement in fiat (or in a balance) and uses familiar reporting and reconciliation tools.

Typical advantages:

• Less direct exposure to wallet/key management
• Easier integration into existing checkout and finance ops
• Potentially simpler customer experience

Typical considerations:

• Provider coverage by region and asset
• Settlement timing and fees
• Compliance responsibilities split between merchant and provider

2) Accept direct wallet-to-wallet (merchant-led)

The business publishes a wallet address and receives stablecoins directly.

Advantages:

• Maximum control over funds and timing of conversion
• Potentially lower dependency on intermediaries

Considerations:

• The business must manage private keys (or custody), transaction monitoring, and operational controls
• Conversion to fiat (if needed) becomes a treasury workflow
• Accounting, reconciliation, and tax processes often need updates

3) Use a crypto payment gateway (crypto-native checkout)

Crypto payment gateways can provide checkout UX (QR codes, widgets, POS support) and may support:

• Auto-conversion to fiat
• Settlement in stablecoins
• Integration with ecommerce platforms

Considerations:

• Gateway reliability and compliance posture
• Dispute/refund design
• Customer support flows

Operational decisions businesses must make (regardless of method)

• Conversion strategy: hold stablecoins vs. convert to fiat, and when
• Security model: self-custody vs. qualified custodian vs. hybrid controls
• Compliance coverage: KYC/AML expectations, sanctions screening, travel rule considerations (where applicable)
• Reconciliation: mapping onchain transactions to invoices, orders, and customer records

Who’s using stablecoins for payments today (real-world usage patterns)

Stablecoin usage spans consumer checkout experiments and serious back-office settlement.

Retail and ecommerce

Some brands have experimented with crypto acceptance, including stablecoins, typically via payment apps or gateways. Ecommerce platforms have also supported stablecoin checkout flows through partnerships where the customer pays in stablecoins and the merchant settles in fiat.

Cross-border payments and remittances

Stablecoins are used to move money internationally with faster settlement and potentially lower fees than traditional remittance channels, especially where local banking access is limited or local currency is unstable.

Corporate treasury and intercompany transfers

Some businesses use stablecoins to:

• Consolidate global funds more quickly
• Reduce friction in intercompany settlements
• Improve treasury responsiveness when operating across multiple currencies and banking systems

Challenges and risks of adoption (regulation, security, custody)

Stablecoins can reduce payment friction, but they introduce new categories of risk that enterprises need to manage explicitly.

Regulatory uncertainty and fragmentation

Stablecoin rules vary by jurisdiction, and multinational deployments must account for:

• Issuer requirements and licensing
• Token availability (including delistings/restrictions)
• Reporting and compliance obligations

Reserve quality and redemption risk

A stablecoin’s stability depends on the issuer’s ability to maintain the peg and honor redemptions. Key diligence areas include:

• Reserve composition
• Frequency and quality of attestations/audits
• Redemption policies and operational constraints

Security and custody risk

If a business holds stablecoins directly, private key compromise can lead to irreversible loss. Common enterprise controls include:

• Multifactor authentication and strict access controls
• Multisignature approvals for treasury movements
• Hardware security modules (HSMs) and institutional custody solutions

Lack of traditional consumer protections

Stablecoins generally do not have native equivalents of:

• Deposit insurance (for example, FDIC coverage)
• Card-network chargeback frameworks

That doesn’t make them unusable—but it changes how risk, refunds, and customer support must be designed.

Integration, accounting, and skills gap

Even with third-party providers, teams need baseline competency in:

• Wallet operations and onchain fee dynamics
• Transaction monitoring and compliance workflows
• Reconciliation and accounting treatment for onchain flows

Challenges and risks of adoption (regulation, security, custody): how stablecoin payments are secured and regulated

Stablecoin payment safety comes from (1) blockchain security and (2) regulatory frameworks applied to issuers and service providers.

Security on the network (technical layer)

• Blockchain integrity: transactions are cryptographically signed, validated by the network, and recorded on a public ledger.
• Enterprise controls: multisig, role-based approvals, and secure key storage are standard for institutional use.
• Programmable safeguards: smart contracts can implement payment logic (for example, conditional release), and some systems can support refund-like mechanisms via application design.
• Transparency and monitoring: public ledgers enable real-time analytics; issuers may be able to freeze funds associated with fraud or sanctions, depending on token design and legal process.

Regulation (policy layer)

Regulation is evolving quickly, with notable frameworks including:

• United States: The GENIUS Act establishes requirements such as 1:1 reserves, monthly reporting, public redemption disclosures, and issuer eligibility criteria.
• European Union: MiCA requires issuer authorization, full reserves, audits, and redemption at par; noncompliant tokens may be restricted in the EU.
• Brazil: The 2022 Virtual Assets Law requires authorization for providers, with oversight by the Central Bank of Brazil.
• Singapore: The Monetary Authority of Singapore regulates single-currency stablecoins with capital requirements and par redemption expectations.
• United Kingdom: Policymakers are moving toward bringing stablecoins under the payments regulatory framework.

Separately, stablecoin payment flows typically intersect with KYC/AML and sanctions compliance expectations, similar to other electronic payment methods.

Conclusion

Stablecoin payments are best understood as a new settlement rail: internet-native transfer of stable value, with meaningful upside in speed, cost structure, and global reach—especially for cross-border commerce and treasury operations. The tradeoffs are real: regulatory fragmentation, reserve and redemption diligence, custody/security requirements, and the need to design refund and support processes without card-network defaults.

Where Polygon fits: Polygon is infrastructure for payments and RWAs, so stablecoin payment flows can be built with onchain settlement, programmable logic, and integration into existing fintech systems—while keeping enterprise priorities (reliability, security controls, compliance readiness) front and center.

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FAQ's

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1. Why do we need stablecoins?

‍Stablecoins exist to combine the stability of fiat currency with the speed and programmability of blockchain settlement. They allow businesses to move value globally without relying on slow, batch-based banking systems or exposing payments to crypto price volatility.

2. What are the advantages of stablecoins for global commerce?

‍The main advantages are faster settlement, fewer intermediaries, and broader access to stable currency across borders. Stablecoins can reduce delays, lower certain transaction costs, and improve cash-flow visibility, especially in cross-border and B2B payment flows.

3. How do businesses use stablecoins in practice?

‍Businesses use stablecoins for cross-border payments, supplier and contractor payouts, intercompany transfers, and online checkout via payment platforms or crypto gateways. Most enterprises either auto-convert stablecoins to fiat or use them selectively where speed and reach matter most.

4. Are stablecoins safer than traditional cryptocurrencies for payments?

‍Stablecoins are generally considered more suitable for payments than volatile cryptocurrencies because they are designed to maintain a stable value. That said, their safety depends on issuer reserves, redemption rights, regulatory compliance, and how custody and transaction controls are implemented.

5. How does Polygon support stablecoin payments?

‍Polygon is commonly used as an execution and settlement layer for stablecoin payments because it supports low transaction costs, high throughput, and fast confirmation times. This makes it practical for payment flows where latency, reliability, and per-transaction cost matter at scale.

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