As stablecoin payments are incorporated into mainstream financial infrastructure, local currency liquidity and foreign-exchange settlement capability are emerging as key competitive factors.

CryptoSlate, a blockchain media outlet, reported on Aug. 6 that Visa recently unveiled a stablecoin platform, opening a way for banks, fintechs and payment firms to hold, move and redeem stablecoins in an environment managed by Visa. But some point out that the key to wider payment adoption is not how easily funds can be moved, but how smoothly they can be converted into the currency the final recipient wants.

Daniel Arenas (다니엘 아레나스), chief executive of on-chain FX platform Keychain, said stablecoins can simplify cross-border fund transfers, but payments ultimately must be linked to the currency needed at the destination. "Local currency liquidity and FX settlement are becoming increasingly important in the next stage of stablecoin payments," he said.

Even if stablecoins are used as a common payment asset, national currency systems do not disappear. Fintech companies dealing with multiple markets such as Brazil, Mexico and Colombia can move funds via stablecoins, but must go through exchange-rate setting, liquidity provision, currency conversion and settlement in each market. Complexity also increases in the expansion process if they must integrate with different providers by country.

Regulation is also beginning to reflect this structure. Brazil’s central bank views international payments using crypto and the trading and exchange of fiat-pegged digital assets as FX business. That means as stablecoin payments expand, they are more likely to be handled not as simple token transfers but within existing FX regulation and settlement systems.

Even if dollar-based stablecoins spread, demand for local currency does not disappear. Companies pay wages, taxes and domestic suppliers in their home currency, and merchants also price goods in the currency consumers use. This is why, even if USDC or USDT is used as a means of transferring value across borders, conversion into local currency is often needed at the point of actual use.

The role of local currency-based stablecoins such as the Mexican peso or the Brazilian real is also drawing attention. These assets can move local currency on-chain, making it easier to connect with payment infrastructure. But in international payments and trade, dollar stablecoins such as USDC and USDT remain the core source of liquidity.

Arenas said an efficient FX market is needed for the two systems to work together. For example, if a peso stablecoin is to be converted in the payment process into another currency such as USDC or the real, it needs sufficient liquidity, reliable pricing and a stable settlement system. Putting local currency on-chain alone makes it difficult to solve the currency-conversion problem, he said.

As an alternative, on-chain FX infrastructure has been proposed. Traditional FX markets rely heavily on bank business hours, and cross-border payments and currency settlement can take hours to days as transactions pass through multiple intermediaries and correspondent banks. Stablecoins, by contrast, can move 24 hours a day, creating a gap between the speed of payments and the speed of FX settlement.

For payment firms, this can also be expected to simplify infrastructure. The approach focuses on the currency the customer sends and the currency the recipient receives, while a common infrastructure handles liquidity sourcing, currency exchange and settlement underneath. Rather than building new liquidity supply chains and settlement procedures each time they enter a new country, a structure may become possible in which additional currencies are connected to an existing FX infrastructure.

In the end, competition is likely to play out in underlying infrastructure that users do not readily see. Arenas said that the more competitive a cross-border payment service is, the less it will expose complex elements such as stablecoin types and networks, bridges and liquidity sources to users. What matters more for users is which currencies they can send and receive, what the exchange rate is, and how reliably transactions are processed, he said.

As a result, the spread of stablecoin payments is expected to go beyond simply widening the use of digital dollars, with the pace of expansion into real economic activity likely to be determined by how smoothly they connect local currencies and FX markets.