Stablecoins have moved from crypto niche to critical payment infrastructure. In 2024, on-chain stablecoin volumes surpassed Visa and Mastercard combined, and by mid-2025 the market hovered around a quarter-trillion dollars. The question institutions ask is simple: are stablecoins safe enough for real money movement? This post summarizes our new paper on stablecoins and financial safety, focusing on how they work, where the risks are, what regulation now requires, and why businesses are adopting them for practical reasons like faster settlement and lower costs.

What stablecoins are – and why they matter now

A stablecoin is a digital token designed to track a reference value like 1 USD. Most of the market uses fiat-backed designs: each token is redeemable 1 for 1 for dollars, with reserves held in cash and short-term government securities. This stability makes stablecoins useful for payments, remittances, treasury operations, and as a “cash-like” building block in on-chain finance.

Three reasons they are breaking out of the crypto bubble:

• 𝗦𝗽𝗲𝗲𝗱 𝗮𝗻𝗱 𝗮𝗰𝗰𝗲𝘀𝘀: 24 / 7 settlement with near-instant finality.

• 𝗜𝗻𝘁𝗲𝗿𝗼𝗽𝗲𝗿𝗮𝗯𝗶𝗹𝗶𝘁𝘆: the same token moves across wallets, exchanges, payment APIs, and bank or mobile-money ramps, so integration costs shrink.

• 𝗠𝗮𝘁𝘂𝗿𝗶𝗻𝗴 𝗴𝘂𝗮𝗿𝗱𝗿𝗮𝗶𝗹𝘀: clear reserve rules, disclosures, and licensing requirements reduce counterparty and operational risk.

Are stablecoins safe

𝗦𝗮𝗳𝗲𝘁𝘆 𝗱𝗲𝗽𝗲𝗻𝗱𝘀 𝗼𝗻 𝗱𝗲𝘀𝗶𝗴𝗻, 𝗿𝗲𝘀𝗲𝗿𝘃𝗲𝘀, 𝗮𝗻𝗱 𝗼𝘃𝗲𝗿𝘀𝗶𝗴𝗵𝘁. Fiat-backed stablecoins can be run like narrow money funds: fully reserved in cash and short-duration Treasuries, audited, and redeemable at par. That model has held up through stress events, including the 2022-2023 market turbulence, where leading coins briefly deviated from peg but honored redemptions and returned to parity.

Key safety pillars now common across top issuers and new laws:

• 𝗙𝘂𝗹𝗹, 𝗵𝗶𝗴𝗵-𝗾𝘂𝗮𝗹𝗶𝘁𝘆 𝗿𝗲𝘀𝗲𝗿𝘃𝗲𝘀 - cash, overnight deposits, short-term T-bills, and fully collateralized repos.

• 𝗧𝗶𝗺𝗲𝗹𝘆 𝗿𝗲𝗱𝗲𝗺𝗽𝘁𝗶𝗼𝗻 𝗮𝘁 𝗽𝗮𝗿 - clear, enforceable processes that prevent prolonged discounts.

• 𝗥𝗲𝗴𝘂𝗹𝗮𝗿 𝗽𝘂𝗯𝗹𝗶𝗰 𝗱𝗶𝘀𝗰𝗹𝗼𝘀𝘂𝗿𝗲𝘀 𝗮𝗻𝗱 𝗮𝘂𝗱𝗶𝘁𝘀 - monthly breakdowns of reserve composition with independent review.

• 𝗥𝗲𝗴𝘂𝗹𝗮𝘁𝗲𝗱 𝗶𝘀𝘀𝘂𝗲𝗿𝘀 𝗮𝗻𝗱 𝗰𝘂𝘀𝘁𝗼𝗱𝗶𝗮𝗻𝘀 - licensing, fit-and-proper management, capital and liquidity oversight, and bankruptcy-remote reserve structures.

What can go wrong - and how it is mitigated

No payment system is risk-free. The credible ones manage risk in known ways.

• 𝗣𝗲𝗴 𝗶𝗻𝘀𝘁𝗮𝗯𝗶𝗹𝗶𝘁𝘆: Temporary depegs can happen during liquidity shocks. Mitigation - conservative reserves, direct redemption windows, and clear incident playbooks.

• 𝗟𝗶𝗾𝘂𝗶𝗱𝗶𝘁𝘆 𝗮𝗻𝗱 𝗿𝘂𝗻 𝗿𝗶𝘀𝗸: If many holders redeem at once, reserves must liquidate quickly without loss. Mitigation - very short duration assets, cash buffers, diversified custodians, and T+0 or T+1 redemption policies.

• 𝗥𝗲𝘀𝗲𝗿𝘃𝗲 𝗾𝘂𝗮𝗹𝗶𝘁𝘆 𝗮𝗻𝗱 𝗶𝗻𝘁𝗲𝗿𝗲𝘀𝘁-𝗿𝗮𝘁𝗲 𝗿𝗶𝘀𝗸: Yield chasing increases credit and duration risk. Mitigation - narrow eligible assets and daily liquidity.

• 𝗢𝗽𝗲𝗿𝗮𝘁𝗶𝗼𝗻𝗮𝗹 𝗮𝗻𝗱 𝗰𝘆𝗯𝗲𝗿𝘀𝗲𝗰𝘂𝗿𝗶𝘁𝘆 𝗿𝗶𝘀𝗸: Keys, contracts, and integrations can fail. Mitigation - audited code, HSMs and multisig, segregation of duties, and incident response protocols.

• 𝗜𝗹𝗹𝗶𝗰𝗶𝘁 𝗳𝗶𝗻𝗮𝗻𝗰𝗲 𝗮𝗻𝗱 𝗰𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝗰𝗲: Public ledgers are traceable, which cuts both ways. Mitigation - issuer KYC/KYB at mint and redeem, on-chain monitoring, sanctions screening, and address freezing where lawful.

• 𝗖𝗼𝗻𝘀𝘂𝗺𝗲𝗿 𝗽𝗿𝗼𝘁𝗲𝗰𝘁𝗶𝗼𝗻: On-chain transfers are final. Mitigation - better wallet UX, warnings, allow-lists for corporate flows, and clearer disclosures on rights and recourse.

The regulatory picture - real clarity arrives

Policy has caught up, and that changes adoption:

• 𝗨𝗻𝗶𝘁𝗲𝗱 𝗦𝘁𝗮𝘁𝗲𝘀 - 𝗚𝗘𝗡𝗜𝗨𝗦 𝗔𝗰𝘁 (𝟮𝟬𝟮𝟱): Federal framework for payment stablecoins. 1:1 high-quality liquid reserves, monthly attestations, par-value redemption, AML/CFT obligations, and licensing for issuers. No interest paid on balances, which reduces risk incentives and deposit-flight concerns.

• 𝗘𝘂𝗿𝗼𝗽𝗲𝗮𝗻 𝗨𝗻𝗶𝗼𝗻 - 𝗠𝗶𝗖𝗔 (𝟮𝟬𝟮𝟰): Licensing for e-money tokens and asset-referenced tokens, full reserve backing, governance and disclosure rules, and powers to limit systemic risks in the euro area.

• 𝗛𝗼𝗻𝗴 𝗞𝗼𝗻𝗴 (𝟮𝟬𝟮𝟱): Licensing regime with strict reserve, audit, and compliance requirements, plus explicit obligations to monitor on-chain activity.

• 𝗨𝗻𝗶𝘁𝗲𝗱 𝗞𝗶𝗻𝗴𝗱𝗼𝗺 (𝗶𝗻 𝗿𝗼𝗹𝗹𝗼𝘂𝘁): 100 percent high-quality liquid asset backing, daily reconciliation, reserves held in trust for coin holders, par-value redemption with clear timelines, and strong operational resilience standards.

The net effect is convergence on the same safeguards: narrow, high-quality reserves - frequent, transparent reporting - prompt redemptions - supervised issuers and custodians. That is precisely what institutions need to treat stablecoins as safe settlement assets.

How institutions and businesses are using stablecoins today

Payments and settlement

• Intercompany transfers and cross-border payouts settle in seconds, including nights and weekends.

• Merchant settlement and marketplace disbursements benefit from low fees and faster cash cycles, improving working capital.

Treasury and finance

• On-chain treasury rails reduce trapped cash and speed internal liquidity.

• Delivery-versus-payment can be automated in smart contracts, reducing counterparty and operational risk.

Customer products

• Banks and fintechs add stablecoin deposit and withdrawal, remittance corridors, and card settlement options.

• Regulated issuers can offer branded tokens or tokenized deposits under existing rules.

Inclusion and last-mile delivery

• NGOs and fintech partnerships use stablecoins for faster aid and wage disbursements, with KYC at cash-in and cash-out, and better traceability than cash.

Bottom line

With fully reserved designs, transparent reporting, and clear licensing, payment-grade stablecoins are already safe enough for many real-world uses. The benefits are practical, not ideological - faster settlement, lower operating costs, cleaner reconciliation, and machine-readable audit trails. As rules tighten and infrastructure professionalizes, adoption is shifting from traders to operators: finance teams, payment providers, marketplaces, and NGOs. For leaders evaluating a rollout, start with a narrow scope: licensed issuers, a short list of supported chains, policy-based wallet controls, and clear redemption processes. Treat stablecoins like any other critical payment rail - with defined SLAs, playbooks, monitoring, and audits - and you will capture the efficiency upside without taking technology theater risk.

𝗗𝗼𝘄𝗻𝗹𝗼𝗮𝗱 𝘁𝗵𝗲 𝗳𝘂𝗹𝗹 𝗽𝗮𝗽𝗲𝗿: https://www.bpventures.us/downloads/stablecoins-and-financial-safety

Ready to integrate stablecoin into your business?

• 𝗕𝗼𝗼𝗸 𝗮 𝘀𝘁𝗿𝗮𝘁𝗲𝗴𝘆 𝗰𝗮𝗹𝗹: calendly.com/jpbpventures

• 𝗘𝗺𝗮𝗶𝗹 𝘂𝘀: sales@bpventures.us

BP Ventures helps community and regional banks launch white-label apps and hybrid stablecoin rails – in weeks, not quarters. Let’s build the future of digital banking together.