If we buy something online overseas we often pay 3% or more in addition to the purchase price just for changing Australian dollars to the currency of the website. 

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In a few years we will likely be able to pay with a stablecoin, for example the JP Morgan stable coin, with JP Morgan being the biggest US bank, or perhaps the Westpac stablecoin and there will be no or very small payment costs. VISA and Mastercard among many others are running small pilot projects at the moment and in September 2025 the Australian regulator approved AUDM, a stablecoin issued by a new, unknown company, Macropod P/L, owned by two former NAB bank executives. 

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Clearly, stablecoins are in their infancy but in banking it takes a lot of effort even to just get approval for a new type of product. It will take a while, though, until stablecoins become mainstream. 

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A stablecoin is a type of cryptocurrency that is backed by real assets. If we buy some bitcoin, the most famous cryptocurrency, there is nothing backing bitcoin. Nobody trustworthy like a government says that they are backing the value of bitcoin. It is pure supply and demand which can collapse or go to the moon in price at any time.

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For example, at the time of writing bitcoin is down 29% from the all-time high it reached earlier in the year.

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A stablecoin is also a cryptocurrency but the issuer is in many but not all cases backing the stablecoin with real assets. The name ‘stablecoin’ comes from the fact that the issuer keeps the value as closely as possible to 1 US dollar or one of another currency.

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The US has formalized this with a piece of legislation called the ‘Genius Act’ which gives the government’s blessing to those stablecoins that use US government bonds as the underlying assets. US government bonds are considered among the safest assets of the world as they are backed by the US government which has the power of taxation, i.e. can always get more money from the US population or the rest of the world via tariffs.

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Hence, a stablecoin that is truly and verifiably backed by US government bonds is likely to be quite safe and there is strong competition between emerging stablecoins, lowering transaction costs and perhaps even paying interest in the future. There are already 300 billion dollars in US dollar based stablecoins.

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There are also stablecoins which are the equivalent of owning UK pounds or Euros or Japanese Yens or a combination of these. We are at the stage where anything may happen perhaps even stablecoins backed by gold or silver if there will be trustworthy providers.

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The Australian stablecoin mentioned above claims that it is fully backed by Australian dollars.

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For Australians the benefits from stablecoins are a convenience but not really a big deal. We can use Wise or one of its competitors to transfer money quickly and cheaply overseas and very few Australians get a letter from their bank saying that the bank will close their accounts because the bank does not wish to deal with them in the future, a process which is called debanking. Those few debanked people currently have a real problem if other banks also refuse service. Debanking is a much bigger problem in other countries where people can be debanked for political reasons. With stablecoins those people will have an alternative.

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In many other countries it is quite different to Australia. People often don’t trust those governments which is one reason for the gold price being so high, or there may be a lack of trust due to bouts of strong inflation or currency controls or it is difficult or impossible to change the local currency into US dollars etc. 

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Now these people are expected to soon have an alternative. They can use stablecoins and, depending on the level of government control, can quickly move from their own currency en masse into stablecoins.

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For the governments of the US, and the UK where the Bank of England just published guidelines for stablecoins, there is a boon here in a new big source of demand for their government bonds. Japan has also just allowed issuing of such stablecoins for the Japanese Yen, hoping to get backing for a big amount of government spending. That could turn out to be not so good if governments are less disciplined about spending.

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On the other hand, a mass escape from a currency to stablecoins is a powerful warning for a government that important parts of its population do not agree with their current policies.

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Money is of central importance to all governments in the world and a new form of money as presented by stablecoins will make a big difference behind the scenes and in the near future even for retail clients like us. As usual it pays to be careful about something like new money but it also shows just how much the world is changing at the moment.

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Stablecoins seem less important in Australia because we have a government that doesn’t debank us, but, if a lot of people lose confidence in the Australian dollar due to another bout of inflation or government policies, they may move a portion of their cash to stablecoins instead which are the equivalent of owning US dollars or UK pounds or Euros or Japanese Yens or a combination of these. We are at the stage where anything may happen.