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The use of stablecoins or stable currencies is gaining more and more strength in the field of international transactions. Meanwhile, banks’ profits from trading in the foreign exchange market are plummeting. This is a reality that marks a clear trend in the mandatory evolution of banks towards crypto adoption.
According to Matthew Sigel, head of digital asset research at VanEck, stablecoins become an inevitable step for banks. In a publication in X, the expert highlights that global banks are going through a strong period of ebb.
This decrease is evident in foreign exchange operations and exchange rates. Meanwhile, stablecoins continue to gain traction as an alternative in the field of cross-border transactions. The analyst comments that banks are close to reporting falls in exchange rates for the first time since before the pandemic.
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He adds that this decrease represents a year-on-year decrease of -17%, which is combined with a specific drop of 98% on the currency desks. At the same time as this is happening, stablecoins are gaining strength at an accelerated pace. Viewed in perspective, this situation reflects a trend that is likely to become more acute in the future. It should not be lost sight of that the adoption of stablecoins is only in the early stages.
Global Banks are on track to Report the Lowest Revenue from FX and Trading Rates Since Pre-Pandemic
“Macro trading revenues have been hit by tighter margins, industry competition, and advancements in electronic trading.” pic.twitter.com/OhVaT61e8d
— matthew sigel, recovering CFA (@matthew_sigel) November 29, 2024
Stablecoins will take the lead in cross-border payments
The situation of TradFi platforms in the forex trading sector seems very delicate with this significant decline in profits. At the same time, the stablecoin market reaches a capitalization of $198.8 billion, according to data from CoinMarketCap.
Meanwhile, monthly transactions with these tokens add up to an average monthly volume of $425 billion in 2024. “Global banks are on track to report the lowest revenue from foreign exchange and fee operations since before the pandemic,” he underlines. VanEck analyst.
The expert affirms that two factors are behind this context: tighter margins and accelerated advances in electronic commerce. Sigel agrees with LondonCryptoClub’s conclusion. They describe it as “crazy to think of a bank that does not build a Cryptocurrency desk.” With the latter, it is clear that large global financial institutions need to evolve towards this new trend.
As can be seen, these different paths taken, on the one hand, by FX trading with TradFi platforms and, on the other, by stablecoins, yield an obvious conclusion. This consists of the need for banks to open up to cryptocurrencies to remain competitive.
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