When crypto meets stability: the rise of stablecoins
Hugo Pinart, Eva Brakonier, Yann Grutzmacher and Marie-Catherine Motingea (Left to right) Montage: Paperjam
Imagine using cryptocurrencies without worrying about their wild price swings. That is exactly what stablecoins promise: digital currencies that keep the innovation of blockchain but add the trust of traditional money. As banks and institutions join in, stability might just become crypto’s next big breakthrough.
Stablecoins are a special type of cryptocurrency designed to do one simple thing that Bitcoin and others often fail at. Instead of swinging wildly in price, their value stays mostly stable. There are different methods that their issuers use to hold their value. Some stablecoins are fully backed by fiat reserves—government-issued currency like the euro or dollar, held by regulated institutions. Others use crypto collateral, and a few rely on algorithmic mechanisms, though these have proved more fragile. This is what makes them so appealing: Stablecoins form a bridge between the world of traditional finance and the innovation of blockchain. They enable fast and borderless transactions without the extreme volatility that defines the crypto market in everybody’s head, while also adding speed and innovation of the blockchain. As investors and institutions look for reliability in the digital economy, the demand for this kind of digital stability continues to rise.
Old innovation booms
Stablecoins have been around for over a decade, but lately, they’re getting attention from more than just crypto nerds. Even big banks, payment providers, and regulators are joining the party. And it’s not hard to see why: in August 2025, the total monthly transaction volume of stablecoins actually beat the volume of Visa transactions, which is definitely very appealing for traditional institutions to enter this market.
For traditional institutions, getting into stablecoins isn’t just about being trendy; it’s about staying relevant. Stablecoins let money move 24/7, across borders, almost instantly. No “banking hours,” no waiting for SWIFT transfers, and no mysterious “processing delays.” That’s a big deal for banks and fintechs who’ve been stuck with systems that simply aren’t made for the speed of today’s digital economy.
And there’s more: stablecoins open up new ways to make money. Banks can offer custody services, payment providers can speed up settlements, and even fund platforms can tokenise assets to reach more investors. Plus, this technology can help extend financial services to people in unbanked regions, turning inclusion into a real business opportunity.
Regulators are still catching up with laws like MiCA (Markets in Crypto‑Assets Regulation) in Europe and the upcoming GENIUS Act in the U.S., trying to make sure things don’t get out of hand. And yes, if everyone lost trust and tried to cash out at once, there could still be a “digital bank run.” But that’s exactly why trustworthy institutions getting involved is such a game changer: people are far more likely to trust a coin backed by a real bank than by a mysterious startup with a cool logo.
In short, stablecoins are helping traditional finance level up. They’re blending the speed of crypto with the reliability of the old system with a solid customer base and it looks like both worlds might actually get along.
The advantages
Stablecoins offer multiple advantages compared to traditional currencies. First, they enable faster and cheaper cross-border transactions, especially in emerging countries where banking systems are costly and less efficient. Since stablecoins are decentralised, users don’t have to rely on financial intermediaries such as banks or payment processors for their transactions, thus significantly decreasing fees and boosting autonomy. This efficiency is particularly relevant for remittances, where international money transfers often involve high fees and extended processing times. With stablecoins, payments are executed almost instantly and at a lower expense, making them an attractive alternative for migrant workers sending their money back home.
Next, cryptocurrencies promote financial inclusion by providing access to payment systems for people who are unbanked or underbanked, especially in emerging countries where traditional banking infrastructure is limited. By offering digital access to stable-value assets, users are able to save, transfer and receive money even without owning a traditional bank account. This enables new opportunities for small businesses and entrepreneurs who can engage in online trade or participate in the global digital economy without geographical restrictions.
From a technological point of view, blockchain technology also brings significant advantages. The transparency of blockchain ensures that stablecoin transactions remain resistant to manipulation and are traceable, improving accountability and reducing corruption risks. Moreover, blockchain’s immutability and security features protect users from unauthorized alterations or double-spending, strengthening trust in digital transactions.
Finally, stablecoins can act as a bridge between traditional finance and the crypto ecosystem. By maintaining a stable value while operating on blockchain networks, they facilitate trading, lending and investments in digital assets without exposure to extreme volatility. As such, stablecoins act as a key tool for integrating digital innovation into global finance while promoting efficiency, transparency and inclusion.
The disadvantages
However, stablecoins also present numerous disadvantages and risks. The goal of these virtual assets to be perfectly stable is often not reached, as their peg depends on the credibility and liquidity of their reserves.
The downfall of the algorithmic stablecoin TerraUSD, also known as UST, illustrated this vulnerability in 2022. Its mechanism for maintaining a one-to-one peg to the dollar broke down, which led to a rapid devaluation and losses exceeding $40 billion. This triggered contagion effects across the broader crypto market, exposing the fragility of decentralized financial systems and the absence of consistent regulatory oversight.
Beyond algorithmic failures, fiat-backed stablecoins present challenges linked to centralisation and limited transparency. They depend on private companies to hold and manage their reserves, yet these firms are not always transparent about what backs their coins. In fact, those reserves are kept within the traditional banking system, which means that any issue such as bank failure or frozen accounts can quickly put the stablecoin’s value at risk. On the other hand, crypto-backed stablecoins rely on excess collateral in volatile digital assets to maintain their value. This characteristic makes them particularly vulnerable to sharp price swings, which can eventually lead to forced liquidations and undermine confidence during market downturns.
Your new currency
Let's say you work for Luxembourg finetech but your problem is you live abroad and don't have a luxembourgish bank account, now it's finally pay day but compared to your colleagues living in Luxembourg you will have to wait a few days for the money to be transferred and let's hope its not Friday otherwise you would have to wait for a few more days. Good news with stablecoins you can get your salary like your luxembourgish friends in a few seconds.
And for your savings, stablecoins can be a real plus, let's take our previous example again, with you living abroad, say that you put your money in a traditional bank but since the country you're living in is unstable or has high inflation your savings no longer have the same value but if you held dollar or euro pegged stablecoins you get to protect your savings from losing value.
Luxembourg as a hub
With the emergence of stablecoins in Europe, the question arises about the role Luxembourg will play. First, when thinking about clarity and advanced regulatory frameworks, we can put Luxembourg in the list. In 2023, Blockchain III granted legal validity to digital securities and integrated the Distributed Ledger Technology (DLT), a decentralised digital system for recording transactions across a network without a central authority. At the beginning of this year, national law implemented MiCA at the national level, which classified stablecoins as electronic tokens (EMTs) or asset-referenced tokens (ARTs).
These laws enhanced Luxembourg blockchain adoption, allowing banks and issuers to operate on blockchain rails with legal clarity. Now, Luxembourg has a multi-layered legal framework supporting stablecoin banking infrastructure and blockchain in Luxembourg banking in a way few other countries can match.
As mentioned earlier, Luxembourg, by implementing MiCA, gives issuers who received authorisation to operate across the EU the ability to do so, as it is a member state of the EU.
Multilingual workforce, strong legal and advisory firms and well-established investor-service infrastructure, as well as financial structures like banks, fintechs or fund service providers who can support the tokenisation, stablecoin rails, custody and payments.
The combination of the country's multilingual workforce, diverse finance landscape and strong legal framework make Luxembourg a potential hub.
The next generation of money users
For young people, money already feels digital. From splitting dinner bills with apps to trading a few euros of crypto between classes, finance happens on a screen, not at a counter. Stablecoins fit perfectly into that mindset. They offer the flexibility and speed that Gen Z expects, instant, borderless, and available 24 hours a day.
What makes them appealing isn’t speculation or quick profit, but practicality. Many young users see stablecoins less as an investment and more as a tool: an easier way to move money between friends, platforms, or even countries. For students studying abroad, freelancers working online, or early investors trying out decentralised finance, stablecoins are becoming the simplest entry point into the world of blockchain.
This generation doesn’t separate between “traditional” and “digital” money; they just want something that works. And if that something happens to be faster, cheaper, and global, then it’s no surprise that stablecoins are quietly becoming one of the currencies of choice for a new generation.
A stable future for digital finance
Stablecoins started as a small fix for crypto’s biggest problem — volatility — but they’re slowly growing into something much larger. Today, they’re proving that money can move faster, safer, and smarter than ever before.
What once felt like a tech experiment is now becoming part of everyday finance. Banks see opportunity, regulators see structure, and young people see freedom. In the end, stablecoins might not just stabilise crypto, but change the way we all think about money itself
Written by Hugo Pinart, Eva Brakonier, Yann Grutzmacher and Marie-Catherine Motingea
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