Trade finance, the cash flow that supports businesses carrying out global trade, has long been seen as a ripe area for digital ledger-based upgrades. That’s now coming to fruition as the sector currently undergoes a stablecoin-driven transformation, according to euro-pegged token issuer Qivalis.
The steady seismic impact stablecoins have had on cross-border payments is well documented. But specifically the trade finance use case is being fundamentally altered, according to Jan-Oliver Sell, the CEO of Qivalis, which has onboarded 37 European banks in the past year.
Conversations with players across the ecosystem show that trade finance has become a focus in regions like Asia, LatAm and Africa, Sell said. In addition, he said dedicated trade finance funds that provide financial instruments and also buy commodities are basically seeing a shift, where their whole supply chain in operating stablecoins, increasingly without needing to off-ramp to fiat.
“A supplier in East Africa is trading with someone in Kazakhstan and everything is done using stablecoins and they don’t even off-ramp,” Sell said in an interview. “It means collateral moves so much faster and really the whole business model changes because you can start rotating collateral in minutes rather than days.”
Qivalis, the independent euro-pegged stablecoin builder with a growing number of banks as shareholders in the project, has also been undergoing a transformation. Sell notes that one year ago he was the only employee; now Qivalis has grown to about 40 staffers and is close to securing an Electronic Money Institution (EMI) license in the Netherlands. The aim is to go live with a regulated euro stablecoin by the end of this year.
In the past, business blockchain firms like R3 and Hyperledger were working on streamlining the paper-based side of transactions, instruments like letters of credit, for instance. But they didn’t have the cash leg and payment side onchain, Sell pointed out.
“Now there are stablecoins with liquidity, so you’ve got the payment side as well, which was the piece that was missing. So, it’s really interesting to hear from people who are at the coal face about how much it’s changing their business,” he said.
The stablecoin market is dominated by USD-pegged tokens, particularly the ones issued by the two stablecoin giants, Tether and Circle. But in the end, Europeans are not going to live in dollars, Sell said. That might be fine for some places like Africa and South America, where the local currency is volatile, but not for the EU.