The Role of Stablecoins in Facilitating Low-Value, Low-Cost Transactions

A stablecoin is a type of digital currency that aims to maintain a steady value by being pegged to a specific fiat currency. For example, if a stablecoin is pegged to the US dollar, that means one unit of the coin is designed to remain equal in value to one US dollar. Stablecoins have now matured beyond their speculative origins and offer serious potential as infrastructure-grade tools for cross-border settlement. For the Interledger Foundation, as stewards of an open, nonprofit payment network that connects disparate financial ecosystems, regulated stablecoins offer an increasingly viable solution to the long-standing settlement gap in our technology stack.

However, the utility of stablecoins is not uniform. The cost-effectiveness, accessibility, and regulatory risks of stablecoins vary dramatically by geography, network, and transaction type. This policy brief outlines when and how stablecoins align with our mission to foster inclusive digital financial systems and sets clear boundaries around the types of cryptocurrencies we believe should play a role in achieving that vision

The Interledger Protocol (ILP) is a messaging and clearing protocol designed to route payments across diverse accounting ledgers. However, it does not natively handle the final movement of value (“settlement”). As a result, nodes on the Interledger network must reconcile balances with their direct peers—often through manual processes or by maintaining pre-funded accounts. While bilateral arrangements are a fundamental aspect of peer-to-peer networks, this approach limits scalability and liquidity, and places the burden of custom infrastructure and coordination on each participant. 

A standardized settlement layer would:

• Enable automated, real-time clearing of obligations across networks;
• Reduce reliance on expensive correspondent banking relationships;
• Increase trust and transparency between counterparties without requiring full custodianship; and
• Support programmable settlement for novel use cases, like Web Monetization-enabled streaming micropayments or AI agents.

We believe regulated, fiat-backed, and transparently issued stablecoins can serve as neutral digital assets to anchor this layer, particularly in cross-border, low-value scenarios.

Lower Transaction Costs

Stablecoins offer only marginal efficiency gains for same-currency domestic payments in high-income markets with instant payment systems or account-to-account systems. A FedNow transaction for a domestic payment in the United States costs $0.045 (which, while low, is still too high for micropayments). The equation changes significantly with regards to cross-border payments, particularly between payment corridors with fragmented infrastructure. 

A native stablecoin transfer can settle a $1 transaction for

• $0.0001 on Aptos
• $0.0002 on Polygon
• $0.0006 on Avalanche.¹

By contrast:

• International wire transfers can absorb 13.32% of the principal through fees and FX spreads.²
• Cross-border fintechs like Wise average 1.89% for the same payment.³

Incremental Gains in Transaction Speed

The global rise of instant payment systems such as Pix in Brazil and UPI in India, which jointly moved $6.8 trillion in 2024, demonstrate the growing expectation of instant payments in retail finance. Cross-border fintechs like Wise now settle over half of their transactions in under 20 seconds using netting models and local connectivity. Even in correspondent banking, settlement in the top 20 payment corridors increasingly occurs same-day, with SWIFT reporting 90% of transactions settling within one hour. 

However, the speed gap remains real for underserved and/or low-volume corridors, particularly in the Global South, such as between the U.S. and parts of Africa. The Interledger Foundation’s priority is to close the persistent speed gap in these underserved corridors by developing open infrastructure that connects local payment systems through regulated, fiat-backed digital assets. By encouraging the voluntary use of regulated stablecoins for settlement in underserved corridors, we believe the Interledger network can improve affordability, reliability, and trust without forcing participants to rely on vertically integrated intermediaries.

Traceability to Prevent Lost Transactions

Owing to the inherent transparency of blockchain networks, stablecoin transactions are generally immutable and can be viewed by all participants in near real-time, providing a level of public traceability that surpasses existing payment systems, including card rails and instant payment systems. This granular transaction-level data can be observed at the network level, reducing the need for manual payment tracing and resolving settlement uncertainty.

Interledger technologies are open, free-to-use, and currency-agnostic and therefore can be used by all virtual assets and securities where compliant with applicable law. However, in the interest of clarity, we wish to be explicit in distinguishing between different types of cryptocurrencies and their relevance to the mission of the Interledger Foundation when it comes to our grantmaking and product development prioritization:

1. We Support Regulated Stablecoins as a Settlement Option

We support the adoption of fiat-backed stablecoins that:

• Are fully collateralized and redeemable on demand;
• Operate under clear regulatory oversight aligned with global standards such as the FATF’s Recommendation 15 and the IOSCO/FSB frameworks; and
• Are issued by entities subject to AML/CFT, consumer protection, and prudential regulations.

These stablecoins may be integrated into the Interledger network as voluntary settlement mechanisms where counterparties agree to their use and local legal frameworks permit.

2. Technology-Neutral and Risk-Based Approach

We echo the Financial Stability Board’s call for a “same activity, same risk, same regulation” principle. Stablecoins should not be treated differently from equivalent payment instruments simply due to their technological format. Regulatory treatment should reflect actual risks, including liquidity mismatches, reserve transparency, and operational resilience.

3. Promoting Interoperability and Avoiding Fragmentation

The proliferation of non-interoperable or proprietary stablecoins risks creating new silos. We advocate for the development and adoption of open standards that can connect stablecoins to the broader Interledger network.

4. Encouraging Global and Regional Coordination

Fragmented regulatory approaches on stablecoins underscore the need for cross-border coordination. The Interledger Foundation supports global alignment with FATF’s Travel Rule.

5. Consumer-Facing Disclosures

We support honest disclosures to consumers on stablecoin usage, redemption, and risks.