GM! Unlike regular reports, we are cutting straight to the chase on this body of work that would include a ton of charts, numbers and a future outlook on the foreign exchange market and how if married well with decentralized ledgers would open up a new paradigm of digital payments infrastructure for massive adoption and scale. Let’s dive in.

TL;DR on FX & Stablecoins

• The foreign exchange (FX) market is the largest and most liquid financial market in the world, with an average daily trading volume exceeding $7 trillion.

• Major Pairs: The most traded currency pairs (e.g., EUR/USD, USD/JPY) involve the U.S. dollar, reflecting its role as a global reserve currency.

• Unlike stock markets, FX trading doesn’t occur on a centralized exchange but through a global network of banks, brokers, and electronic platforms.

• >$20Tn moved via USD backed stablecoins

• USDT and USDC have achieved product-market fit, surpassing large payment networks

Onchain Foreign Exchange (FX) - What it is & NOT

• Foreign exchange (FX) refers to the process of exchanging one currency for another.

• Onchain FX refers to the use of blockchain technology to facilitate foreign exchange transactions, where currencies are represented as different digital tokens or local fiat backed stablecoins on decentralized networks (ie USDC<>GYEN is an onchain FX tx)

Where the Market is today

• We put together an overview of where the foreign exchange market is onchain today and how this data can signal an opportunity for massive growth

• Map

  • Issuers: Leading issuers like Circle, Tether, Zarp, Etherfuse, Statisx, and GMO are driving the issuance of stablecoins in major currencies, including USD, EUR, ZAR, MXN, SGD, and JPY. These stablecoins provide seamless, real-time currency access, opening up global markets and enabling new use cases.

  • Card Networks: Visa is at the forefront of enabling access to the FX market through its robust payment infrastructure. By integrating stablecoins, Visa is bridging traditional financial networks with blockchain-based liquidity and settlements.

  • Wallet Infrastructure: Companies like Dfns are powering the application layer of onchain FX through cutting-edge MPC (Multi-Party Computation) wallet technology. This infrastructure ensures secure, scalable, and user-friendly access to multicurrency stablecoins.

  • Payment Applications: Beans App is emerging as a "global FX Venmo," leveraging stablecoins across multiple currencies to facilitate real-time payments on the Stellar network, making cross-border transactions as simple as sending a text.

  • Stablecoin Infrastructure: LINK is building real-time FX APIs and stablecoin payment infrastructure to serve global businesses. By leveraging multicurrency stablecoins, LINK is simplifying international payments and trade.

  • Realtime Pricing Oracles:Protocols like Chainlink, DIA, and Pyth provide real-time pricing for fiat-backed stablecoins onchain. These oracles ensure currency pools mirror accurate market rates, fostering trust and efficiency in onchain FX markets.

  • Data Analytics Platforms: Artemis and Dune Analytics deliver onchain data and insights, showcasing the growth, adoption, and liquidity of fiat-backed stablecoins across blockchain ecosystems.

  • VCs: Castle Island Ventures, Alliance DAO, BoostVC and more to mention but a few are leading outlier early stage investors into the next Crypto PMF’s in the space, supporting builders in creating the foundation that would power the next trillions onchain.

  • Settlement Layers: Blockchain networks like Stellar, Base, and Solana act as 24/7 settlement layers, enabling fast and secure swaps of fiat-backed stablecoins globally. These networks are critical to providing the infrastructure for continuous FX activity without traditional banking hours.

  • FX-Focused Decentralized Exchanges (DEXs): Platforms like WAVY, DFX, Xave, and Stabulls are pioneering FX liquidity protocols across chains. These DEXs form the foundation for a decentralized FX market, supporting seamless and scalable currency swaps.

  • Wallet Providers: Wallets like Lobstr and Coinbase Wallet are driving adoption by integrating local stablecoins, offering quicker on/off-ramps to crypto assets

Checkout our Interactive Map of Global fiat-backed stablecoins issued region by region here:

A Dive into the data onchain

We put together a robust onchain foreign exchange dashboard on Dune across chains and pools to bring light to USD and Non-USD Stablecoins onchain. The full dashboard can be found here:

Onchain FX Total Value Locked across pools in various chains

• The data here represents locked in liquidity in Decentralized pools/DEXs between Non-USD fiat backed stablecoins and USD Stablecoins as at 01-01-2024.

• Euro Coin (EURC) issued by Circle is the largest non-USD stablecoin by volumes locked in onchain liquidity pools. (followed by Stasis EURS, StraitsX XSGD)

Find the full interactive version on our Dune dashboard

Networks by FX Pool Dominance (paired with USDC/USDT/PYUSD)

• The Base Network holds the largest volume of FX liquidity locked onchain (followed by Ethereum, Solana)

• We put together a full interactive view on our Dune dashboard:

USD Stablecoin of choice across FX Pairs onchain

• USDC holds the largest share as the USD stablecoin of choice paired between non-USD Stablecoins for liquidity and swap volumes

Fiat backed Stablecoin Marketcap

• USD Stablecoins hold the marketshare of global stablecoin marketcap sizes

• BRZ, the Brazilian Real stablecoin issued by Transfero is the largest non-USD stabelcoin by marketcap (followed by EUR,SGD,JPY,IDR and TRY stables dominating the market)

FX Volumes (Swaps) by Pairs across Networks

Onchain FX/Swap Volumes (All time) growth YoY

• Ethereum held the largest FX Swap volumes in 2022 and 2023 with a combined $1.24bn (Tether $EURT Leads volumes here with $514.44mn)

• Base holds the current largest FX Swap volumes for 2024 with a total $1.23bn (Circle $EURC leads in Volumes here with $1.41Bn)

Stablecoins by Issuance across Networks

Conclusion

Non-USD fiat-backed stablecoins provide a powerful mechanism to scale USD stablecoins globally. By addressing local currency needs, enhancing cross-currency liquidity, and providing on-ramps for users in diverse markets, these stablecoins act as the foundational layers of a global, decentralized FX market. Together, they offer unparalleled potential to revolutionize international finance, bridging local economies with global liquidity networks.

LINK has built the only end-to-end compliant infrastructure layer for real-time, onchain FX payments, powered by multicurrency fiat backed stablecoins for global businesses. Our platform aims to capture a share of the $24 trillion global payments market and bring $805 billion (of the $6Tn) of FX liquidity onchain. To date, there’s no solution that provides real-time FX payments on-chain across borders 24/7 at a low cost and speed using various fiat-backed stablecoins.

• We’ve built the Liquidity engines with WAVY, the only cross-chain OTC DEX for FX to power large scale and drive FX Volumes onchain

• Built the only realtime FX payments API sitting on top stablecoins and issuers globally for instant last mile settlements

• Have a depended connection with global issuers and bodies (ie Stablecoin Standard)

If you’re a stablecoin issuer, market maker, banking infra provider or just looking to power your last mile FX Needs, please reach out to us today.