Stablecoins have emerged as one of the most consequential innovations in digital finance. Designed to bridge the volatility of cryptocurrencies with the stability of fiat currencies, they now underpin everything from decentralized finance (DeFi) ecosystems to remittance networks and institutional payment rails. With a global market capitalization exceeding $160 billion, stablecoins are reshaping how value is stored, transferred, and settled across borders.
Yet with scale comes risk. For issuers, exchanges, and integrators building on stablecoin infrastructure, the challenge is no longer whether stablecoins will matter in payments, but how to manage the operational and cyber exposures that come with their adoption.
Stablecoins in DeFi: Liquidity and Utility
Within DeFi, stablecoins serve as the foundation for lending, trading, and yield strategies. They provide a stable unit of account in an otherwise volatile ecosystem, enabling liquidity pools, collateralized lending, and automated market makers to function at scale. Without stablecoins like USDC, USDT, or DAI, DeFi’s $50+ billion in total value locked (TVL) would look far more precarious.
For protocols, however, reliance on stablecoins introduces concentration risk. A depeg or regulatory action against a major issuer can ripple across the DeFi ecosystem, destabilizing multiple layers of financial activity.
Remittances and Financial Inclusion
Stablecoins are also making waves in the remittance sector, where high fees and settlement delays have long constrained access. By enabling near-instant cross-border transfers at a fraction of traditional costs, stablecoins present a compelling alternative to money transfer operators.
In emerging markets, they can serve as a hedge against local currency instability, giving individuals access to dollar-backed instruments without needing a bank account. Yet for operators facilitating these flows, cybersecurity and anti-money laundering (AML) compliance remain critical hurdles. Fraudulent transfers, phishing attacks, and on-ramp/off-ramp vulnerabilities pose ongoing threats to both firms and end-users.
Cross-Border Settlement and Institutional Adoption
For institutions, stablecoins offer efficiency gains in cross-border settlement. Instead of waiting days for SWIFT transfers, corporates and financial institutions can settle transactions in seconds with on-chain stablecoins. JPMorgan’s JPM Coin and PayPal’s PYUSD highlight how traditional players are testing stablecoins for enterprise-grade settlement.
Still, the reliance on custodians, validators, and smart contract infrastructure opens new operational exposures. System downtime, wallet mismanagement, or cyberattacks targeting settlement platforms can undermine trust and trigger cascading losses across counterparties.
The Risk Management Imperative
As stablecoins evolve from niche tools to mainstream financial infrastructure, risk management becomes mission-critical. The exposures span three dimensions:
Cyber Risk: Hot wallets, smart contracts, and integrations with payment APIs are prime targets for hackers. Breaches can lead to theft, loss of reserves, and reputational collapse.
Operational Risk: System outages, flawed redemption processes, or errors in reserve management can destabilize issuers and disrupt markets.
Governance Risk: Poor transparency, inadequate audits, or weak board oversight can invite regulatory action and erode user trust.
Continuum’s Perspective
At Continuum, we support stablecoin issuers, exchanges, and institutional integrators with insurance solutions designed for the unique risks of digital assets, including:
Cyber Insurance – Protection against hacks, theft of digital assets, system breaches, and smart contract exploitation.
Technology Professional Indemnity (Tech PI) – Coverage for claims arising from technology service failures, coding errors, or integration issues.
Directors & Officers (D&O) Insurance – Safeguards executives against lawsuits tied to governance, reserve disclosures, or regulatory actions.
Crime Insurance – Protection against employee fraud, insider theft, or third-party crime targeting funds or reserves.
Regulatory & Legal Expenses Coverage – Support for costs incurred from investigations, enforcement actions, or legal disputes.
As the future of payments tilts toward stablecoins, the winners will not only be those who scale fastest, but those who secure trust by embedding robust risk management into their core operations.
Ready to explore how insurance can safeguard your stablecoin or payments strategy?
Connect with Continuum to learn how our tailored risk solutions protect issuers, exchanges, and institutional integrators from cyber and operational exposures. Contact us today.
