Stablecoins Are Transforming the World from the Bottom Up | by Tomer Bariach | The Capital | Jan, 2025
The global south is growing — and it’s growing faster than the global north.
In fact, the GDP of the global south is already larger than that of the global north.
This shift began around 2008 and has been accelerating ever since. Yet, we’ve only scratched the surface of the potential growth.
Here’s a staggering statistic: 89% of people under the age of 25 live in the global south.
Let me repeat that: 89% of people under the age of 25 live in the global south.
This demographic will shape the future of the global economy.
But these kids are not their parents. They’re far more connected to the world than previous generations, thanks to:
- Access to the Internet
- Global trading agreements (e.g., Preferential Trade Agreements — PTAs)
trading agreements (PTA Preferential trade agreement)
However, what’s not working in their favor is largely out of their control: a functioning financial system.
Let’s start with inflation: Inflation is when the same money buys you less over time because things get more expensive — for a person living off $774.75 monthly (median income in India), a 20% inflation doesn’t mean his coffee is more expensive, but that he needs to increase his income by 20% to survive, inflation is a pain for the north, but a silent killer for the south, see inflation rates in the map bellow.
Access to banking:
Banking at its most basic level means a safe place to store your money, a risk we can’t even start to imagine, but is a day-to-day struggle for people with no access to formal banking.
See PwC’s report on emerging markets here
Access to Credit: in today’s world, it’s almost impossible to live without credit, no access to credit would usually mean accessing credit at 3–9% monthly when needed, for health services, education, emergency, or filling up your business supply.
These are just a few examples. Basic services that the global north takes for granted are still an expensive privilege for billions in the south.
Inadequate solutions
Over the past 10 years, Fintech and open banking have promised change, and indeed have improved greatly on local antiquated systems, in the forms of neo banks, new credit companies, and more, but the infrastructure these companies are building on top of is fragmented and broken, with 100 different countries in the global south, each with different regulation, different currency, different banking system, moving between countries often takes the same effort of starting a new company rather than a growth strategy.
Leaving a significant portion of the population unserved.
The fragmentation problem described above, of regulation, banking, and currencies doesn’t affect blockchain, as it’s a completely new global infrastructure
For the first time, opening a financial account has 0 barriers, no ID required, no regulation, only a connection to the internet and you can open a wallet, due to the decentralized nature of blockchain.
Not only that, but unlike the traditional financial system that is built of multiple data sets (multiple banks are needed for a transaction) blockchain is a single global database — the following image is taken from the Visa website explains how a simple payment works, involving at least 2 institutions (in global transactions it could reach even 4 banks), and money transfers might take days.
https://developer.visa.com/capabilities/visa_direct/docs
Now see how a blockchain transaction works –
The Internet revolutionized information by moving us from local to global data sources.
Blockchain is revolutionizing value by moving us from local monopolies to global value stores.
This new global financial system allows us to reimagine how money is created, how credit scores are set, and what we can or cannot do with our money.
This isn’t 2017 anymore. We’ve moved beyond philosophy to product-market fit, and that product-market fit is called stablecoins.
Interestingly, the Internet’s first product-market fit was email — a digital version of the most common method of passing information.
Blockchain’s product-market fit comes in a similar way: USD, the most common way to pass value, is now available on-chain as USDT or USDC.
Stablecoins are a type of cryptocurrency designed to have a stable value, unlike other cryptocurrencies like Bitcoin, which can go up and down in price a lot.
USDC and USDT maintain their value simply by being backed by real-world assets, like USD, US Bonds, and a small portion of commodities.
Stable coin’s initial usage was for trading, people selling their BTC, or any other crypto asset, prefer to sell it to a stablecoin, until they get into a new position.
But, have found their “own life” detached from crypto trading
See the graph below taken from the Castle Island report — Stablecoins — The Emerging Markets story
It is clear that even when crypto trading volume is low, the volume of sending stablecoins on a chain only keeps on going up, where?
Stablecoins in Emerging Markets
With transaction cost of less than a cent, global payment system, ownership, and easy hedging to inflation, see the image below of crypto adoption, and compare it to the images above, of inflation and lack of access to banking and credit.
Remittance
At the center of the utility stands the portion of GDP in countries built on money remittance of family members who moved out of the country, see below the comparison of the cost of sending 200$ to sub-Saharan Africa.
Hedge
Once the money is there, usually unless immediately needed the users would prefer holding it in a dollar-pegged asset rather than in the local currency, none the less some people would also convert their fiat to stablecoins just for hedging.
Onchain savings
Using stablecoins on chains creates an amazing opportunity for people who are unbanked/underbanked — they can deposit their money and earn interest in DeFi protocols like AAVE/Morpho etc.
Images above are taken from chain analysis beautiful stablecoins report
The true revolution of information didn’t happen when we simply imitated real-world behaviors on the internet. It happened when we imagined new ways to share information.
Communication evolved from one-to-one (email) to one-to-many (websites) to many-to-many (social media). This shift occurred when barriers to participation dropped, enabling user-generated content to surpass that created by companies.
A similar transformation is underway in the revolution of value. DeFi has simplified participation in financial tools like liquidity provision for over-collateralized loans or trading, allowing anyone to take part, serving the “commodities” of the crypto market, BTC, ETH, etc.
If history repeats itself, the current wave of stablecoin adoption paves the way for new networks where anyone can offer essential financial tools — credit, insurance, liquidity for remittance — addressing the trillions of dollars in gaps that affect 89% of the population under the age of 25 in the global south. These networks have the potential to surpass traditional financial markets, much like how social media revolutionized and overtook traditional content giants.
Let me make a bold bet that nobody will remember: by 2035, stablecoins usage will surpass the usage of fiat in the global south.
