In many parts of the world, having access to dollars signifies financial autonomy. Stablecoins might be the key to unlocking that financial freedom for many.

The argument that stablecoins make international money transfers faster is well-known. However, their potential to provide initial access to money is often under-appreciated. In our previous article, we explored three major issues in global money movement: access, speed, and transparency. Here, we will focus on the challenge of access.

This article will discuss:

• The global difficulties in earning, holding, and spending preferred currencies
• How stablecoins can democratize access to dollars via the internet
• The role of infrastructure providers like Artoh in expanding this access

The Access Challenge

To move money, you typically need a financial institution that lets you hold currency in an account, specifically the currency you need.

Problem 1: A Quarter of the World’s Population is Unbanked

As per the latest World Bank Findex Index (2021), about 24% of the global population, roughly 1.4 billion people, do not have a bank or e-money account, limiting their access to essential goods and services.

In regions with significant unbanked populations, smartphone adoption is rising swiftly. For example, in sub-Saharan Africa, while only 43% of people have a traditional bank account (according to the International Monetary Fund), 55% have smartphone access (according to the GSMA), a number expected to reach 86% by 2030.

This is a significant access issue and presents a major opportunity for stablecoins. Since stablecoins only require an internet connection, they can provide financial services without the need for a bank account.

Problem 2: Billions with Bank Accounts Cannot Access US Dollars

The US dollar is highly valued due to its stability and broad acceptance in global commerce. It offers more purchasing power and better value protection for both businesses and consumers. Let's briefly explore these benefits.

Protecting Value

In 2023, the Turkish Lira experienced 65% inflation, and Argentina saw inflation rates exceed 200%. While these are extreme examples, many local currencies weakened against the US dollar in 2023 after the Federal Reserve increased interest rates. Holding capital in a currency like the Argentine peso leads to faster value erosion compared to holding it in dollars. Similarly, a contractor in the Philippines might prefer being paid in dollars to maintain greater purchasing power than in Philippine pesos.

Network Effects

A currency becomes more valuable as more people use it. The US dollar, as the world's reserve currency, dominates global trade and finance. In 2022, it was involved in 88% of all foreign exchange trades, according to the Bank for International Settlements. Additionally, the dollar was used in over 40% of cross-border Swift payments. Thus, businesses find it easier to pay international suppliers who often prefer dollars.

However, accessing dollars outside the US is complicated by a complex system of correspondent banks, local payment companies, and fintechs.

Why Can’t US Banks Offer Direct Dollar Access Internationally?

Many US banks lack strong international distribution networks to offer their services compliantly. Instead, access to dollars abroad is managed through a network of correspondent banks and intermediaries. For example, an Argentine bank may need a relationship with a US correspondent bank to enable dollar holdings.

Multiple Intermediaries Create Friction

This complex network results in several challenges for businesses:

• Difficulty Opening Accounts: Each intermediary conducts due diligence, making account opening a lengthy and difficult process, especially for startups.
• Higher Fees: Each party in the chain needs to be paid, increasing costs for businesses.
• Increased Counterparty Risk: More intermediaries mean higher risks, with potential failures affecting the entire chain.

Stablecoins Offer Global Dollar Access via the Internet

Fintechs have expanded access to financial services significantly over the past decade. Stablecoins are taking this a step further by providing global access to digital dollars with fewer intermediaries and less friction.

The adoption of stablecoins continues to grow, driven by payment use cases. In 2022, over $11 trillion in stablecoins were settled on-chain, nearly surpassing Visa’s volumes. A Mastercard study found that more than a third of Latin Americans have used stablecoins for payments.

Though compliance steps remain, such as AML and KYC obligations, stablecoins offer global businesses a way to leverage the dollar's value, reaching new customers and paying suppliers even in regions without local fiat banking access.

Infrastructure Providers Scale Access

Companies like Artoh are crucial in scaling stablecoin access and making them useful for businesses. Artoh's platform serves as a user-friendly back office for large payment teams handling stablecoin transactions.

Businesses often need access to multiple stablecoins across different blockchain networks. Artoh partners with issuers like Circle and Paxos and integrates with various blockchain networks through a single API platform. With a framework of global licenses and regulatory approvals, Artoh enables compliant access to stablecoins in different markets.

The Next Step: Facilitating Exchange

While stablecoins address the access problem, the next step is facilitating exchange. In our next article, we’ll discuss how stablecoins accelerate value transfers globally and how Artoh partners with businesses to enable rapid money movement.

For more information or to discuss a new payments project, please get in touch with us.

‍