Stablecoins ‘Perform Poorly’ as Money and Could Face Uphill Payments Battle

When Mastercard announced Monday (June 23) that it is partnering with Paxos to advance the Global Dollar Network, the move added more weight to stablecoin payments, a trend reshaping financial infrastructure.

Mastercard isn’t alone. Competitors like Visa, Fiserv and Stripe have all begun integrating stablecoin functionality into their platforms. On the surface, the momentum suggests that stablecoins are gaining traction as a reliable alternative to fiat for global payments. With over $250 billion in circulation and growing merchant interest, stablecoins are arguably the cryptocurrency sector’s most mature product from the point of view of traditional financial services.

However, their ongoing march toward widespread adoption may end up being less inevitable than it seems.

On Tuesday (June 24), the Bank for International Settlements (BIS) issued a chapter from its full BIS Annual Economic Report 2025 that will be published Sunday (June 29), saying stablecoins “perform poorly” as a form of sound money. The document argued that most stablecoins fail critical criteria for a currency, such as price stability, universal acceptability and trust. It also pointed to the fact that stablecoins are frequently exploited by criminals and lack the elasticity of credit that underpins modern financial systems.

Additionally, stablecoins may remain far from being the silver bullet for digital payments their proponents allege thanks to numerous user experience (UX), compliance and technological frictions that are features, not bugs, of their utility.

Read also: FinTech Partnerships Look to Crack Stablecoin On- and Off-Ramp Challenges

Unpacking the Promise of Stablecoins Versus Their Reality

Stablecoins are at a crossroads. On one hand, they’ve gone from niche crypto tools to serious considerations by legacy financial institutions. On the other, they continue to fail the basic tests of stability, acceptability, trust and utility.

The BIS isn’t wrong in its critique, but neither are firms like Mastercard and Visa misguided in exploring stablecoin potential. As with any transformative technology, the early phase is messy, marked by high hopes and hard lessons.

For stablecoins to truly work as money, and not just as digital chips in a speculative casino, they’ll need to overcome deep infrastructural, compliance and economic hurdles, which may take years. But the groundwork is being laid, and the attention stablecoins are getting from the financial establishment is no accident.

“The biggest problem in crypto is not adoption; it’s the user experience,” Mesh CEO and co-founder Bam Azizi told PYMNTS in an interview posted in May. “You need to make payments so simple that even a grandmother will use it one day, maybe without even knowing that the mechanism behind the scenes is a stablecoin … to do that, you need to do a lot of heavy lifting.”

Among the most glaring challenges is interoperability. While traditional payment systems are governed by unified standards, stablecoins operate on fragmented blockchains, such as Ethereum, Solana, Avalanche and others, and each comes with its own set of protocols. Bridging tokens across these chains can be clunky at best and introduce security risks at worst.

See also: Making Sense of Where Stablecoins Fit in the Issuer-Merchant-Acquirer Stack

Identity, Compliance and the KYB Bottleneck

Stablecoins also introduce new wrinkles in compliance, particularly around know your business (KYB) and know your customer (KYC) requirements. Most blockchains are pseudonymous, meaning identity verification requires external, often cumbersome, tooling. This lack of embedded identity has made stablecoins a popular tool for money laundering and illicit finance.

“We sell trust,” Conduit CEO Kirill Gertman told PYMNTS in an interview posted this month. “We take your money and send it somewhere else. You need to trust us that it’s going to land where we say it will.”

“But the challenge happens when you actually need to use USDC or USDT for something,” he added.

Another critical barrier to mainstream adoption is user experience. While developers are comfortable with crypto wallets, average users are not. Signing transactions, managing private keys, and navigating gas fees make stablecoin payments a chore for the uninitiated.

“All of this comes down to what consumers and businesses want,” Raj Dhamodharan, executive vice president, blockchain and digital assets at Mastercard, told PYMNTS in an interview posted in May. “It’s not just about cost, but also trust, simplicity and convenience. Customers want an end-to-end experience.”

Moving money isn’t the same as creating a complete use case,” he added. “You need to build trust and a great user experience.”

Still looming large over the entire stablecoin ecosystem is the question of regulation. In the United States, momentum is accelerating behind a key legislative effort, the GENIUS Act, which aims to bring stablecoins under federal oversight and has passed the Senate and moved onto the House.

This lingering, but potentially waning, uncertainty has hampered adoption by banks and merchants who don’t want to navigate compliance ambiguity.