Community-based research into the feasibility, advantages, and challenges of onboarding USDT and USDC natively onto the Cardano blockchain.
15 January 2025
Introduction
On behalf of Intersect, Appold, an independent blockchain technology and advisory company, has undertaken preliminary stakeholder research into the feasibility, advantages, and challenges of onboarding stablecoins USDT (Tether) and USDC (USD Coin) natively onto the Cardano blockchain. This research, conducted in conjunction with the Cardano DApp community, explores potential benefits, risks and technical considerations associated with integrating these stablecoins into the Cardano ecosystem.
Through engagement with the Cardano community, this research aims to provide an understanding of perceptions towards the impact of USDT and USDC integration on Cardano in the four following areas:
Feasibility Assessment: Evaluate the technical compatibility and feasibility of integrating USDT and USDC onto Cardano, considering blockchain interoperability and innovative contract capabilities.
Advantages and Use Cases: Identify the potential benefits of USDT and USDC on Cardano and explore use cases that could enhance the blockchain's utility.
Risk Analysis: Conduct a comprehensive risk assessment, examining potential challenges, regulatory considerations, and impact on the Cardano network's stability and security.
Community Impact: Assess the potential impact on the Cardano community, considering user adoption, engagement, and overall ecosystem growth.
Methodology
To undertake this research, Appold was invited to join a community-run Stablecoins Working Group, comprised of several significant application builders in the Cardano ecosystem, including IOG, Cardano Foundation, EMURGO, Atrium Labs, FluidToken, Waffle Capital, Minswap and Liqwid. We are very grateful to them for supporting the research and production of this report.
Initially, the Working Group met regularly to identify further Cardano companies prominent within the Cardano blockchain ecosystem who would be able to offer insights into the four research areas. A list of the most relevant and influential Cardano-based companies was drawn up, and feedback was then sought from the Working Group on the selected companies, who also assisted with specific introductions to companies not known to Appold. Engagements were had with 38 companies, and their insights form the basis of this research. We are grateful to all the developers and companies that contributed.
To standardise information gathering from the selected companies across the four research areas, Appold devised a research questionnaire, which was then amended and reviewed by the Working Group for reasonableness and relevance.
Appold determined that the most effective way to procure the research would be to conduct interviews with the target companies, which would help maintain consistency and relevance across the questions. Once completed, the interviews were recorded and transcribed into the survey, and the findings were aggregated in this report.
The Interviewees
Interviewee background information
Company age
Interviewees were asked how long their company has been operational within the Cardano ecosystem. The answers ranged from less than one year to being a founding member of the Cardano blockchain network.
Company categorisation
Current stablecoin usage
Non-Cardano chain usage
When asked if they operate on chains other than Cardano, exactly half of the companies said they do.
Of these other chains, the most used were Arbitrum, Ethereum, BASE, Polygon and TRON, with some usage on Polkadot, Algorand, Avalanche, TON, Optimism, Hedera, Bitcoin, Xai and Solana.
When prompted to explain why these chains were used, respondents typically cited cheaper fees, easier on-off-ramping, the need to hold widely used stablecoins for treasury and payment purposes, and trust.
The impact of introducing stablecoins to other blockchains
When stablecoins have been introduced to other blockchains, respondents almost unanimously answered that this tends to have a positive or neutral impact in the long term. Beyond short-term trust or userbase ideology issues, which are generally resolved over time, or specific examples such as problems faced by USDC users on TRON, respondents tended to claim that stablecoins had positive impacts.
Potential advantages to the use of native large stablecoins on company operations
During the interview, respondents were asked if introducing leading stablecoins onto Cardano would positively impact their company.
Increased liquidity - 91% agree
Transaction volatility – 88% agree
Enhanced user experience – 84 % agree
Easier integration with financial systems – 84% agree
Attraction of new users – 81% agree
Increased trust and stability – 65% agree
Some interviewees clearly felt that USDC would be more effective than USDT in increasing trust and stability. This is because some respondents identified USDC as more ‘corporate’ and trusted by those already established within the sector.
One interviewee noted that introducing established large stablecoins such as USDC and USDT could negatively impact the community by creating a perceived bias in favour of the big players over community-backed native stablecoin projects.
How would introducing established Stablecoins impact various services operating in the Cardano ecosystem?
Payments and remittances
There is a general agreement between interviewees that payments and remittance services currently operating on Cardano would benefit from the introduction of established stablecoins. This is because users of these services would like to be paid in stablecoins, and the only way to do this on Cardano currently is to use a lower-volume native stablecoin, a wrapped/bridged stablecoin, or transfer stablecoins on a separate chain; all of these options are not ideal and may put users off from engaging with these services.
Several interviewees noted that while introducing established stablecoins to Cardano would remove one barrier to entry for potential users, there are obvious downsides to using Cardano compared to other chains, which may limit any pull factors generated by this decision. For example, Cardano has higher fees and slower transaction speeds than TRON or Polygon. For those not already heavily interacting with the Cardano ecosystem, simply having the option to interact with payments and remittance services on Cardano is unlikely to bring new customers, while alternatives remain an option.
For those who are serious about interacting with Web3 but have limited experience, Cardano, once established stablecoins have been introduced, could be seen as the best option due to other Cardano features, such as its transaction security and trust. For these users, as well as institutions, speed and transaction fees may not be the most important factor, making Cardano a good option.
Lending and borrowing
There was almost unanimous agreement that the introduction of large, established stablecoins would help lending and borrowing apps on Cardano. The main reason outlined for this is trust; this includes trust in the price stability of stablecoins over ADA, which is more volatile, trust in the available liquidity, and trust in the lending and borrowing protocols that use stablecoins as a preferred asset.
One respondent also claimed that the introduction of stablecoins would benefit those who hold large amounts of ADA but would prefer to receive payouts in stablecoins.
Decentralised Exchanges
There was broad consensus that the liquidity and greater interoperability that would occur with the introduction of USDC or USDT would benefit DEXs. This would allow for more trading pairs, reduce slippage, and bring more potential users to Cardano DEXs.
Tokenised assets
There was broad agreement that platforms facilitating tokenisation assets would benefit from the introduction of large stablecoins, primarily from a user perspective. As real-world assets are priced in fiat, being able to price these assets in fiat on platforms would make it easier to attract new users. Using a stablecoin would also remove the need for regular price changes reflective of ADA volatility.
Current tokenisation asset platforms do not use Cardano-native stablecoins as the liquidity is too low. One respondent made clear his vision that from a user perspective, tokenisation asset platforms should be able to operate on any chain without impacting the ability to do business. The respondent stated:
Cross-border transactions
Respondents were split on whether they believed the introduction of large stablecoins would have a positive or neutral impact on apps facilitating cross-border transactions. This is primarily due to the fact that Cardano-native stablecoins lack liquidity and trust and the fees saved from sending assets across chains.
Risk analysis
Regulatory concerns
Respondents had a range of views as to whether there would be regulatory concerns with implementing USDC or USDT. This was partly due to the interpretative nature of this risk.
From a governance and regulation perspective, respondents tended to agree that Cardano has minimal risk as these regulations apply to the coin issuers (Circle, Tether, etc) rather than Cardano.
From a Cardano framework perspective, some interviewees highlighted Circle’s requirements for clawback and wallet-freezing capabilities. This is not currently possible using Cardano’s infrastructure, and adding this capability would require significant changes to Cardano’s infrastructure. Some saw this as a regulatory concern and others as a technical concern. Several interviewees also highlighted that the decision to grant these capabilities would likely see a severe backlash from some community members.
One interviewee highlighted how introducing large stablecoins such as USDC and USDT adds a risk that if large asset holders move onto the chain quickly, this is an inherent risk to Proof of Stake blockchains. In the event of a fork in the chain, large holders of these assets could have vast power to dictate which fork is validated.
Some interviewees also highlighted that Circle and Tether are centralised organisations, which, to some members of the Cardano community, is at odds with the community's foundations.
One interviewee highlighted that end-user jurisdictional regulations must be considered, but this is unlikely to be a major concern. Another noted that regional laws could limit the ability to onboard some users, which could, in turn, limit the impact this would have.
Technical concerns
In general, respondents agreed that there were either no technical concerns or that some limited concerns exist, but they are no greater than when any other asset is added to Cardano and that Cardano has more than enough expertise to mitigate and combat these technical concerns.
One respondent raised concerns that if USDC or USDT are brought onto Cardano, there will be a rush to convert large holdings from ADA to one of these stablecoins. This could impact the price of ADA, impacting all aspects of the chain and the wider ecosystem.
Impact on network stability
Respondents were split on whether Cardano would naturally scale to the required demand should there be an increase in traffic following the introduction of USDC or if this could have a material impact on network stability. In all cases, respondents made clear that Cardano should embrace new users and increased transaction flow. If this does end up causing network instability, this is a poor reflection on the chain, and users would rightly criticise the chain for not having the capability to handle increased traffic.
Several respondents made clear that this is not necessarily a concern and should instead be viewed as a challenge that the chain must overcome to prove that it is a serious competitor to other blockchains.
User adoption challenges
While a handful of respondents stated concerns that introducing USDC or USDT could make user adoption more difficult, the vast majority of respondents either claimed it would have no impact or would ease user adoption challenges.
While respondents claimed it would have no impact, many quickly stated that this was a market issue. While there are currently some established players, the stablecoin market is still in the early stages, and the market will decide which stablecoin comes out on top; there is no guarantee that USDC or USDT, as the two current largest players, will be the overall winner once there are more alternatives and full market forces at play. Currently, USDT and USDC are well-established and recognisable assets likely to add clarity when several options already exist.
Where respondents claimed this would have no impact, responses generally referred to the fact that there are already so many assets available that adding a couple more simply cannot have a significant effect.
Competition with other blockchains
Responses to this question generally followed one of three lines of reasoning and were split between them:
Following the introduction of USDC or USDT, Cardano will become a competitor to other chains, and this is a challenge that must, and can, be met.
Cardano is already a challenger to other chains, and adding USDC or USDT will strengthen Cardano’s position.
Cardano is not a competitor to other chains because it has unique features. Even following the introduction of USDC or USDT, this will not make Cardano a direct competitor.
The most significant concerns identified
Community Impact
General community sentiment
Interviewees were asked if they believed the introduction of large stablecoins would positively or negatively impact the Cardano community. While many interviewees recognised that the community is not 100% supportive of the introduction of large stablecoins, there was almost sentiment that the move would have a more positive than negative impact if done properly and liquidity comes to the chain. Many of the interviewees refer to a vocal minority who will try to stop this move, even if the vast majority are in favour.
Of the three interviewees who were unclear if this would have a positive or negative impact, two claimed that it is simply too hard to determine the current levels of users and developers who want to see this happen. One claimed that USDC would be positive while USDT would be negative.
Impact on user engagement and adoption
Interviewees were generally in agreement that the introduction of USDC or USDT would increase user engagement and adoption. Some of the reasons cited for this include increased liquidity on-chain, the psychological victory of onboarding large liquidity assets, the ability to build better applications, and better interoperability with other chains.
Impact on the overall growth of the Cardano ecosystem
Interviewees were unanimous in believing that introducing large stablecoins would positively impact the overall growth of the Cardano ecosystem. However, they were split on whether the impact would be significant or limited. Several interviewees made clear they do not see this as a silver bullet and that it will only be effective if other measures are also taken.
Impact on business operations
Impact of large stablecoins on business financial operations
84% of interviewees believe introducing large stablecoins would improve their business financial operations.
Five businesses interviewed stated this would have no impact. This is because either all payments are made in fiat or non-USDC/USDT, or stablecoins are not accepted at enough traditional institutions for this to have a major impact.
Impact on Treasury Management
The vast majority of interviewees agreed that the fundamental structures of treasuries would likely be unaffected, as the vast majority already convert treasury funds to stablecoins, but this tends to occur off-Cardano. However, if treasury management efficiency is improved via lower fees, as there is no need to interact with a centralised exchange and move funds off-chain, then treasury funds will be more likely to be kept on-chain.
This would also allow some companies to diversify their treasury funds further.
Transaction efficiency
Businesses that pay bills, including salaries, in stablecoins tended to agree that introducing large stablecoins onto Cardano would improve transaction efficiency, reducing the need for expensive transactions via centralised exchanges.
Several interviewees cited the speed of sending transactions as a significant positive factor in sending stablecoins for payments on Cardano.
Pilot program
Interviewees were asked if they would be willing to participate in a pilot program to trail the introduction of large stablecoins on Cardano. Of the companies interviewed, 27 agreed to participate in a pilot program. Of those that did not want to take part, this was generally because they were ‘users’ of the platform rather than developers and so would not bring a benefit to taking part in the pilot.
Additional Comments
One interviewee highlighted the opportunity for better staking services if USDC or USDT were introduced to Cardano. This is because Cardano staking yields are comparatively high, but ADA is too volatile.
Another interviewee stated that while large fiat-backed stablecoins are necessary, some focus must be given to open-source algorithmic stablecoins, which serve a distinctly different purpose within the ecosystem.
Several interviewees highlighted that one of the biggest challenges to this problem is the culture of the Cardano community, including perceived politics at the Cardano Foundation. For this to succeed, there must be a change of messaging to bring about more community cohesion.
Conclusion of research
Amongst the companies interviewed, there is strong support for introducing large stablecoins onto Cardano.
There was no unanimous agreement on all the points raised, including risks and advantages, and companies offered a wide range of thoughts on why this project should go ahead. However, the sentiment was clearly in favour of introducing these assets.
There is general agreement that while USDC is a better candidate for adoption than USDT, introducing both coins would be preferable to just one.
There was also general agreement that while introducing these assets does present challenges, these challenges can and must be overcome.
Additional research
The research included meetings with Circle and Tether. Circle explained that they are in discussions with the Cardano Foundation and that negotiations are ongoing. Tether explained that they are open to further discussions but have some reservations that will need to be dealt with. The details cannot be made public.
Also, Appold had meetings with other companies that operate on competing chains and had recently implemented USTD and USDC. The general consensus was that this was a positive introduction to their applications, but it took some time to become positive. There were technical challenges to support them, and the project to implement them wasn’t communicated well. Also, there was a lack of liquidity at the start. These are all lessons to be learned if the Cardano companies decide to go ahead with an implementation.
Potential Next Steps
This research showed some of the positive benefits and challenges that must be carefully mitigated. Projects can be developed to track these challenges and ensure the benefits are delivered as soon as possible. The Cardano companies are willing to support this implementation; some will assist with the technical implementation.
At present, the Cardano Foundation is in discussions with Circle. Another company in the ecosystem could start the conversations with Tether. It is recommended that resources who understand the challenges run these projects.
Also, new stablecoins that are being launched and existing competitors to USDT and USDC could be options to bring to Cardano and attract them with specific use cases.
Appendix A: The stablecoin ecosystem on other blockchain networks
The following section contextualises this paper’s core research by examining the broader adoption of USDT and USDC across blockchain networks and its core use cases and impacts on other chains.
As of 31.12.24, USDT had a market capitalisation of 137bn USD (https://www.coingecko.com/en/coins/tether), and USDC had a market capitalisation of 44bn (https://www.coingecko.com/en/coins/usdc).
In December 2024, stablecoin transfer volume—the total value of stablecoin transactions processed on a blockchain network and an indicative metric of market demand and liquidity—showed that across 12 chains, stablecoin transfer volume stood at $5.1tn, dominated by Solana ($2.3tn), Base ($895.4bn), Ethereum ($846.9bn), and Tron ($616.7bn).
Stablecoin transfer volumes by blockchain. Source: Artemis
Open-source research indicates that USDT and USDC have found utility across chains in the following use cases. The extent to which these stablecoins are used and the traction they have gained on various chains is predominantly determined by the characteristics of the chains themselves.
Payments and Remittances
Decentralised Finance (DeFi)
Hedging and Trading
New user trust-building
Gaming and Micropayments
Charity and Aid Distribution
Cross-border transactions
Cross-chain transactions
Store of value
[1] https://www.sciencedirect.com/science/article/abs/pii/S0261560622001991
[2] https://blockworks.co/news/visa-usdc-solana-stablecoin-expansion
[5] https://www.coindesk.com/consensus-magazine/2024/02/21/why-circles-usdc-is-dumping-tron
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