The 'stablecoin sandwich': Why speeding up payments isn't so simple, according to Mastercard
Stablecoins could enable faster payments, but slow conversions in supporting infrastructure could limit benefits, according to Mastercard executive.
Mastercard's comments on stablecoins highlight a crucial challenge in the quest for faster payments. While stablecoins, which are cryptocurrencies pegged to a traditional currency, have the potential to facilitate rapid transactions, the supporting infrastructure is not yet equipped to handle the conversions efficiently. This "stablecoin sandwich" - where slow conversions are the bread that holds back the benefits of fast payments - is a significant hurdle to overcome.
The issue is particularly relevant for fund managers, who increasingly need to make fast and secure payments to meet investor demands. The use of stablecoins could provide a solution, but only if the infrastructure can support seamless conversions. Currently, the process of converting traditional currencies to stablecoins and back again can be slow and costly, which undermines the benefits of using stablecoins in the first place. This highlights the need for further investment in infrastructure to support the growth of stablecoins.
Looking ahead, fund managers and investors will be watching to see how the infrastructure around stablecoins develops. Key to this will be the evolution of conversion processes, as well as the regulatory environment. As the use of stablecoins grows, it is likely that regulators will pay closer attention to the market, potentially introducing new rules and guidelines. For now, Mastercard's comments serve as a reminder that the path to faster payments is not always straightforward, and that significant challenges need to be addressed before the benefits of stablecoins can be fully realized.
Originally reported by cnbc.com. FundNews adds analysis for finance & markets readers.