Perhaps because they avoid the volatility seen elsewhere, stablecoins like Tether aren’t necessarily seen as radical or transformative in the same way that cryptocurrencies like Bitcoin are.

When it comes to crypto assets, headliners like Ethereum take much of the limelight. However, a stablecoin could have a greater and longer-lasting impact on the financial sector.

Amundi Asset Management strategist Tristan Perrier noted that stablecoins represent only about 6 percent of the total cryptocurrency market capitalization, but represent a much larger share in terms of transaction volume.

“Most cryptocurrency transactions involve a stablecoin on the one hand, with Tether, the largest stablecoin, also being the most traded cryptocurrency (ahead of Bitcoin),” he said.

Unlike mainstream cryptocurrencies, the value of stablecoins like Tether is not left entirely to market forces. Instead, the token is pegged to the price of fiat currencies and real-world assets like the US dollar.

Speculators usually don’t buy stablecoins to hold. They do it to use it as an intermediary between traditional and crypto financial markets.

By buying a stablecoin like Tether and then exchanging it for other cryptocurrencies through an exchange, investors can reduce churn, lower transaction costs and transact faster.

“Until now, the primary role of stablecoins has been to facilitate cryptocurrency trading, allowing market participants to stabilize the value of their investments in US dollars without having to move funds outside of the cryptocurrency ecosystem,” explained Mr. Perrier.

However, the long-term trajectory of stablecoins is likely to be more transformative than that of speculative assets like Bitcoin.

“If used for other purposes, stablecoins can offer many practical advantages over bank deposits,” noted Mr Perrier.

He said that stablecoins have an advantage when it comes to accessibility and speed.

Thanks to the quasi-instant settlement, he said, this could make them particularly well-suited for new fintech innovations in the coming years.

“Thus, stablecoins, more than other volatile cryptocurrencies, can be seen, for better or worse, as the most inevitable competitors to conventional money,” he suggested.

Of course, with this new paradigm in personal finance comes new risks and disruptions.

“As competitors to bank deposits, stablecoins could in theory have an adverse effect on banks’ capacity to distribute credit,” Mr Perrier said.

While it is easy to think of circumstances in which stablecoins could act as magnets to destabilize the movement of money during a crisis, he noted that the failure of a major stablecoin could generate significant financial shocks.

“In most cases, authorities are much more willing to regulate stablecoins than to ban them, as they cannot ignore the fact that despite the risks, stablecoins offer many practical advantages and can support financial innovation, generally seen as promising in terms of income, development of new skills and jobs,” he said.

In the future, Mr. Perrier expects that stablecoins will continue to grow and find new applications, both as an asset class and as a means of payment.

“Given the complexity of public authorities’ assessment of the balance between the many threats and opportunities presented by stablecoins, it is unlikely that their current development will be brought to a sudden halt any time soon,” he said.