Traditional foreign exchange trading is seeing a decline in revenue for global banks, while stablecoins are becoming increasingly popular for cross-border transactions. According to Matthew Sigel, Head of Digital Assets Research at VanEck, FX and rate trading revenue is projected to decrease by 17% year-on-year, with a staggering 98% decline specifically in FX desks. This marks the lowest revenue reported since before the pandemic.
On the other hand, stablecoins like Tether (USDT) and USD Coin (USDC) have seen a surge in market capitalization, reaching $188 billion as of November 2024. Monthly stablecoin transactions have averaged $425 billion, indicating a growing adoption beyond just digital asset trading. A survey revealed that 69% of respondents in emerging markets are using stablecoins for currency substitution, while 39% are using them for cross-border payments.
Matthew Sigel emphasized the need for banks to adapt to the changing landscape, stating that it would be “insane to think of any bank not building out a crypto desk.” The contrast between the declining traditional FX revenues and the increasing popularity of stablecoins highlights the need for banks to integrate digital assets into their services to stay competitive.
As stablecoins offer faster and more accessible cross-border transactions, banks will need to consider incorporating them into their offerings. This shift in the financial landscape signifies a changing tide in how transactions are being conducted globally. It will be interesting to see how banks navigate this new terrain and what strategies they employ to remain relevant in the evolving financial market.