Stablecoins – Aid to Indian SMEs to accelerate payments and access USD - Hindustan Times

Stablecoins – Aid to Indian SMEs to accelerate payments and access USD

ByHindustan Times
Nov 07, 2023 10:14 AM IST

This article is authored by Winston Hsiao, co-founder and group chief revenue officer, XREX.

In a world where financial landscapes are undergoing rapid transformation, the rise of stablecoins presents a significant turning point. For Indian Small and Medium-sized Enterprises (SMEs), often grappling with complex monetary hurdles in accessing the US dollar and optimising payment channels, stablecoin payment is a game-changer in improving the efficiency and lowering the cost of doing business with overseas companies.

Crypto (REUTERS)

SMEs, particularly those from emerging markets like India, have been diligently seeking pathways to simplify and accelerate their payment processes. According to Paypal’s MSME Digital Readiness Survey, 94% of the 250 surveyed Indian MSMEs said cross-border trade can help grow the business and expanding or exploring cross-border trade is a priority within the next 12-months. This can’t be done without smooth and affordable international payment methods. Traditional systems, steeped in multiple intermediaries, and often unpredictable costs, have posed formidable challenges. And stablecoins offer a valuable alternative and play a crucial role in this context.

One of the biggest advantages of stablecoins is the reduction in transactional costs. This is a boon for SMEs, which often operate on thin margins and are constantly seeking avenues to optimise costs. The conventional banking realm is replete with intermediaries, – each with its toll gate, extracting fees and prolonging transaction times. In stark contrast, stablecoins, powered by the blockchain finance, eliminates this convoluted web. Consider using the world’s largest USD stablecoin USDT issued by Tether on the Tron network (TRC-20). A transaction between parties typically charges a low and fixed 2.5 USDT for transactions. Some blockchain platforms and centralised exchanges take cost-efficiency a notch higher, entirely waiving off fees for verified users transacting within their ecosystem. The result is a trifecta of financial efficiency, agility, and robust security that SMEs can harness.

Stablecoins also solve the perennial challenge of accessing the US dollar, especially for SMEs in emerging economies. The dollar, being the global lingua franca of trade, holds the key to unlocking vast international markets. Historically, SMEs have found this door challenging to unlock, hamstrung by regulations, red tape, and financial bottlenecks. Stablecoins promise an end to this quest. With primarily a digital wallet or an account on a cryptocurrency exchange, any SME can effortlessly exchange their local currency and utilise assets like USDT, making the entire process streamlined.

Imagine the Indian entrepreneur, perhaps from the hinterlands of Gujarat, collaborating with a vendor in distant South America. The conventional financial route might involve a cascade of currency conversions, each laden with fees and potential delays. But with stablecoins, this transaction is seamless, efficient, and direct. Such efficiency is not just a logistical boon but also an economic one, as SMEs can realise significant savings, which can be reinvested into their businesses.

With the advent of digital escrow systems, integrated into many stablecoin transactions by centralised exchanges, trust is implicit. These systems, by holding onto funds till both parties fulfil their respective obligations, greatly reduces the room for fraud or defaults. For SMEs, which often lack the financial muscle to weather frauds, this is a lifeline.

Volatility is the nemesis of predictability. In business, particularly for SMEs with limited financial buffers, wild currency swings in local currencies against USD can wreak havoc on profitability forecasts. This is where the "stable" in stablecoins becomes particularly poignant. Pegged to assets, often the US dollar, these digital assets ensure that SMEs are not at the mercy of financial storms and severe local currency depreciation. They can transact with the confidence that the value of their asset will remain largely consistent.

As the adage goes, "time is money." This rings particularly true in the fast-paced world of international business. A delay in payments, often a by-product of traditional banking systems with their restrictive operational hours and interminable international transfer protocols, can sometimes be the difference between profit and loss. Stablecoins, operating in the 24/7 realm of the blockchain, ensure that funds traverse continents at lightning speed, allowing businesses to operate at the pace of thought.

In wrapping up, as Indian SMEs set their sights on global horizons, the stablecoin revolution, with its myriad benefits, offers a robust wind beneath their wings. This isn't just about finance or technology; it's about empowerment, financial sovereignty, and truly realising the potential of global trade. India tops the ranks for grassroots crypto adoption, according to Chainalysis' 2023 crypto adoption index. As stablecoins continue to gain traction and are adopted for cross-border payments, they might well be the compass that guides Indian SMEs through the vast and often turbulent seas of global commerce.

This article is authored by Winston Hsiao, co-founder and group chief revenue officer, XREX.

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