As the gig economy explodes and goes global, companies are finding it necessary to pay people farther and farther abroad, which can get more and more complex the farther you go.
And yet, particularly in developing countries, payments in local currencies can take a long time or just be too complex by traditional rails, which take days and are very costly — the same reason that crypto firms have been targeting the remittance market.
Increasingly, it’s a segment of international payments that crypto firms have been targeting, and now stablecoins are pushing into the market. Most notably, Circle’s USDC, which has found marked success pushing out of the crypto trading world, where stablecoins lubricate cryptocurrency transactions.
Though its $49 billion market cap is substantially lower than the $68 billion of No. 1 Tether’s USDT, USDC has a far more stable reputation supported by its transparency and direct peg to easily liquifiable assets. Tether, by contrast, has had issues with its peg in the past, including multimillion-dollar settlement with the Commodity Futures Trading Commission (CFTC) and New York’s attorney general over its claims that USDT was backed one-to-one with dollars.
However, there’s a reason that crypto companies are interested in gig economy payments: They’re growing. Very, very fast.
In a report last October, “Payments Are Eating the World,” JPMorgan noted that Mastercard estimates that the gig economy will grow to $455 billion by 2023. But thanks in part to the pandemic, the gig economy is up from $300 billion in 2020. That may be smaller than the $630 billion that the International Monetary Fund (IMF) said in May at which it expects 2022 remittances to come in.
Cross-border transaction fees remain shockingly high for gig workers — sending a few thousand dollars between Europe and the U.S. can cost more than $100 — but the cost isn’t the only problem.
Gig workers, JPMorgan has noted, “have a distinct set of financial needs and circumstances that traditional financial products aren’t providing for.”
The big four were the need to get paid quickly, with many willing to switch job platforms for speedier payment; very low savings, even for emergencies; volatile income to the point that most don’t know where their next check will come from or how much it will be; and fragmented income coming from multiple platforms.
FinTechs, the bank said, “are stepping in to fill the gaps.”
One of the leading payments processing companies doing that is Stripe, which in April rolled out crypto payments in Circle’s USD Coin (USDC) stablecoins to 70 countries, saying that, particularly in developing countries, payments in local currencies can take a long time or just be too complex to offer.
On Sept. 26, Stripe announced that it had expanded Stripe Connect Crypto Payments to 110 countries, meaning 4.4 billion people to be paid in minutes rather than days, the company said.
The product is aimed at “creators, freelancers, sellers and solopreneurs,” like Vivek Singh, a Mumbai, India-based, self-taught crypto engineer who connected with NFT gaming company Stardust on Braintrust, a blockchain-based “decentralized talent network” connecting freelance knowledge workers with employers, Stripe said in the announcement.
Connecting with Stardust let Singh work from home rather than traveling around the country in search of work, as well as quintupling his earnings over three months to $50,000.
Working through Braintrust’s partnership with Stripe, Stardust can pay Singh in either Circle’s USD Coin stablecoins — which takes a few minutes to clear into his digital wallet around the clock seven days a week — or in rupees, which can take several days, Stripe said.
Aside from speed USDC is, like most stablecoins, denominated in U.S. dollars — a strong, stable currency that is highly desirable in many developing countries like the 40 that Stripe just added to its Crypto Payments program. And many exchanges that provide off-ramping service will do so in U.S. dollars, as well as local currencies.
Because USDC is backed 100% by an audited reserve of U.S. dollars and short-term Treasuries, its dollar peg has proven very stable and is being used by a growing number of payments processors like Checkout.com and FIS Worldpay, which both added USDC support in the past six months.
Reach is another benefit of crypto payouts, Stripe said, with crypto product manager Karan Sharma saying in April that “outside of major markets,” getting paid can be difficult for freelancers in countries due to the complexity of building local payments systems.
“Millions of talented freelancers live in countries where it’s hard, if not impossible, to open a local bank account,” Stripe said in the announcement on Monday (Sept. 26). “For example, a majority of the people in Djibouti, El Salvador, and Bhutan don’t have bank accounts.”
This connects back to the remittance market’s need for a way to offramp dollar-denominated stablecoins. in June, more remittance-focused MoneyGram announced a partnership with the Stellar Development Foundation to provide an on- and off-ramp for USDC transfers on that blockchain had gone live in several markets, including the U.S., Canada, Kenya and Philippines.
At the same time, accepting pay in stablecoins doesn’t take all that much technology. A smartphone and digital wallet app will do, and off-ramping can generally be done through exchanges — which shouldn’t present much of a barrier to entry for freelance knowledge workers looking for clients globally.
For one thing, there is a great deal of opposition to stablecoins in the financial field from regulators, elected officials, and international organizations — the European Central Bank in August said that while bitcoins were the worst option for cross-border payments, stablecoins were “a close second” while calling central bank digital currencies (CBDCs) a “holy grail.”
Read also: CBDC Weekly: ECB Sees a ‘Holy Grail’
Another problem is the regulatory push that in some countries is discouraging the use of stablecoins for payments — India’s government has been very clear that they will soon be banned for payments. Add that to China, which has banned all digital assets except its own digital yuan central bank digital currency, and you’ve got well more than a third of the world’s population off limits.
For all that, stablecoin boosters say the benefits are more immediate than financial insiders’ concerns
“Access to reliable economic infrastructure can vary depending on where our talent lives,” said Mark Williams, vice president of infrastructure at Freelance Labs, the Braintrust developer. “The global reach of Stripe Connect levels the field. We were able to get up and running with Connect crypto payouts quickly. Instead of building a giant money movement organization, we’re able to focus on our mission.”
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