Unlocking Efficiency: How Stablecoins Can Drive Cost Reductions for Telcos and Other Consortia

There are perpetual challenges in the ever-evolving landscape of telecommunications. To achieve increased efficiency and continue to reduce costs, it becomes necessary for the industry to grapple with the ongoing issue of complex and costly financial transactions. Emerging technologies, such as stablecoins, could become a potential pathway toward offering streamlined and cost-effective solutions that advance how business is conducted. Built on similar digital infrastructure to cryptocurrencies, stablecoins differ from other digital assets in that they are pegged to a stable reserve, usually a real-world fiat currency or a basket thereof (e.g., SDR). This brings a level of predictability and stability to financial transactions that traditional cryptocurrencies, such as Bitcoin, lack. For telcos and other similar consortia, this stability offers a myriad of benefits, creating a ripple effect across operations.

Instantaneous and low-cost

Traditional financial transactions, especially those involving cross-border payments are hindered by fees, delays, and the exchange rate fluctuations of differing fiat currencies. One of the primary advantages of stablecoins for settlements in telecommunications is the reduction in transaction costs.

With the benefits of crypto and additional stability, stablecoins act as a bridge between the old and new financial systems, enabling seamless, rapid and low-cost transactions. E.g., A transaction of $200 transferred via stablecoin remittance can cost a few cents (Blockchain “gas fees”), versus the global average charge of $12, (or even up to $30 in some jurisdictions) for transferring traditional cash. With stablecoins, telcos can avoid the complexities associated with multiple currency conversions and international wire transfers. Telcos can mitigate currency risk by conducting transactions using stablecoins, ensuring that the value of assets remains consistent. This stability not only protects against potential losses but also provides a foundation for better financial planning and budgeting.

The instantaneous and low-cost nature of stablecoin transactions significantly reduces the time and resources required for financial settlements, providing an attractive and effective alternative to traditional banking systems. The infrastructure underpinning stablecoin transactions streamlines payroll, vendor payments, and other financial transactions. It eliminates the need for intermediaries in cross-border transactions. The associated fees can result in substantial cost savings, allowing telcos to allocate resources more strategically to vital projects. Overall, the speed and resource-saving capabilities foster smoother collaboration and quicker decision-making internationally.

Innovative financial solutions

Across industries, it’s clear that the versatility of stablecoins extends beyond the realm of financial transactions for telcos. These digital assets can be utilized for a variety of purposes including loyalty programs, incentive schemes, and even customer rewards. For example, there is potential to use stablecoins to enable automated payments with concepts such as non-fungible tokens (NFTs) or in the metaverse. As the market share for digital assets continues to grow, forecast to reach $56.4 million in annual revenue in 2023 and 994 million users by 2027, it makes sense for telcos to explore creative ways to integrate stablecoins into their business models. This further fosters customer engagement and loyalty while reducing the operational costs associated with similar customer loyalty and digital asset products utilizing mainstream technology.

As of 2021, the World Bank still classifies 1.4 billion people globally as ‘unbanked’, but recognizes that digital financial services signal a reduction in this figure. Around 18% of the global population have limited or no access to financial infrastructure to facilitate easy payments or other financial services. Blockchain and stablecoins represent financial inclusion for this segment of the world’s population, providing access to digital financial services for individuals and entities excluded from traditional banking systems. The only barrier to entry is the need for access to a smartphone. In regions with limited access to banking infrastructure, telcos can use stablecoins to think innovatively regarding the financial solutions they are providing. In turn, we can reach a broader market share than was previously possible, fostering economic growth globally.

Maximizing the benefits

The adoption of stablecoins in the telecommunications sector is not without its challenges. Regulatory uncertainty is an ongoing problem, especially in the United States where the slow pace of policy development leaves the U.S. falling behind in the global race to lead in the field of digital assets. The importance of regulatory clarity is seen especially in regions such as the European Union which is developing more in-depth guidance, strengthening its position in the future of digital assets.

Security concerns, such as the potential for smart contract code vulnerability which can lead to potential stablecoin theft, also stymies large-scale adoption. Overcoming these concerns is crucial for stablecoins to achieve the adoption needed in the telco industry. At the same time, security issues can be overcome with sufficient funding for security research, community engagement, and industry-wide collaboration. This is true even as new security issues inevitably will arise. All of the above must be addressed to ensure a smooth transition to this new structural paradigm for settlements.

Stablecoins offer immense promise for the industry. From cutting transaction fees and mitigating currency risk to enabling faster, more transparent financial processes, stablecoins offer a transformative solution for many industries, particularly telecommunications. As these digital assets continue to gain traction, the telecommunications sector has a unique opportunity to embrace innovation and push the world towards a more international, financially accessible, efficient, and cost-effective future.