Stellar (XLM) Explained: How Stellar Works in the United States
Learn what Stellar (XLM) is, how it works, its legal status in the United States, use cases, benefits, risks, taxes, and future outlook.
Table of Contents
Introduction
Stellar (XLM) is a blockchain network designed to make fast, low-cost cross-border payments accessible to everyone. Unlike many blockchain platforms that focus on complex applications, Stellar’s core mission is financial inclusion—connecting banks, payment providers, businesses, and individuals through a simple and efficient global payment network.
In the United States, Stellar is widely recognized for its role in international remittances, stablecoin payments, and fintech innovation, making it an important blockchain project in the US financial ecosystem.
This article explains what Stellar (XLM) is, how it works, its legal status in the United States, real-world use cases, advantages, risks, and future outlook in clear, easy-to-understand language.
What Is Stellar (XLM)?
Stellar is an open-source blockchain network designed for:
- Cross-border payments
- Digital asset issuance
- Low-cost money transfers
- Financial inclusion
XLM (Lumens) is the native cryptocurrency of the Stellar network and is used to:
- Pay transaction fees
- Prevent network spam
- Act as a bridge asset between currencies
Stellar enables users to move value globally in seconds and at very low cost.
Who Created Stellar?
Stellar was launched in 2014 by Jed McCaleb, one of the co-founders of Ripple, along with Joyce Kim.
The network is supported by the Stellar Development Foundation (SDF), a non-profit organization headquartered in the United States. The SDF focuses on:
- Network development
- Partnerships
- Regulatory engagement
- Ecosystem growth
Stellar’s strong US roots contribute to its credibility and adoption.
How Does Stellar Work?
Stellar operates using a unique consensus mechanism called the Stellar Consensus Protocol (SCP).
Key Features of Stellar:
- Fast Transactions:
Payments typically settle in 3–5 seconds. - Low Fees:
Transaction fees are extremely low (fractions of a cent). - No Mining:
Stellar does not rely on Proof of Work or mining. - Decentralized Consensus:
Nodes reach agreement through trusted quorum slices.
This design makes Stellar efficient, scalable, and environmentally friendly.
Why Stellar Is Important in the United States
Stellar plays a key role in the US crypto and fintech landscape because:
- It is developed and supported by a US-based non-profit
- It focuses on compliant financial infrastructure
- It supports stablecoins and digital dollars
- It integrates well with US fintech companies
- It aligns with regulatory and inclusion goals
Stellar is often viewed as a bridge between traditional finance and blockchain technology.
Stellar Use Cases in the United States
1. Cross-Border Payments & Remittances
US payment companies use Stellar to:
- Send international payments quickly
- Reduce remittance costs
- Eliminate intermediary banks
This is especially valuable for US businesses with global operations.
2. Stablecoins and Digital Dollars
Stellar supports multiple stablecoins, including:
- US dollar-backed tokens
- Regulated digital assets
These stablecoins are used for:
- Payments
- Payroll
- B2B settlements
3. Financial Inclusion
Stellar focuses on:
- Serving underbanked populations
- Supporting mobile payments
- Enabling low-cost financial access
This aligns with social and economic initiatives in the US.
4. Fintech and Enterprise Blockchain
US fintech firms use Stellar for:
- Payment rails
- Token issuance
- Compliance-friendly blockchain solutions
Is Stellar (XLM) Legal in the United States?
Yes. Stellar (XLM) is legal to own, hold, and trade in the United States.
Key points:
- XLM is supported on US-compliant exchanges
- Ownership of XLM is not illegal
- Regulation focuses on exchanges and services
- Users must comply with KYC and AML requirements
Stellar’s non-profit structure and payment-focused use cases support regulatory acceptance.
Stellar and US Regulation
In the US, crypto oversight involves:
- SEC (Securities and Exchange Commission)
- CFTC (Commodity Futures Trading Commission)
- US Treasury and FinCEN
Stellar is generally viewed as payment infrastructure rather than a speculative asset, which may support long-term regulatory clarity.
Stellar vs Ripple (XRP) – US Perspective
| Feature | Stellar (XLM) | Ripple (XRP) |
|---|---|---|
| Focus | Individuals & inclusion | Banks & institutions |
| Governance | Non-profit foundation | Private company |
| Transaction Cost | Very low | Very low |
| Speed | Fast | Fast |
| US Regulatory Image | Generally positive | Historically contested |
Both aim to improve payments, but Stellar emphasizes open access and inclusion.
Advantages of Stellar (XLM)
- Extremely low transaction fees
- Fast settlement times
- Energy-efficient consensus
- Strong US-based foundation
- Ideal for payments and remittances
- Supports stablecoins and tokenization
Risks and Challenges of Stellar
- Limited smart contract functionality
- Competition from other payment blockchains
- Lower visibility compared to BTC or ETH
- Market volatility
- Dependence on fintech adoption
Stellar is best evaluated as a payments and infrastructure network, not a general-purpose smart contract platform.
Stellar (XLM) and Taxes in the United States
XLM transactions are subject to US tax laws.
Taxable events include:
- Selling XLM for USD
- Trading XLM for other cryptocurrencies
- Using XLM for payments
- Receiving XLM as income or rewards
Holding XLM alone is generally not taxable, but accurate IRS reporting is required.
Future of Stellar in the United States
Stellar’s future in the US looks promising due to:
- Growth in cross-border payments
- Expansion of stablecoins
- Increased fintech adoption
- Focus on compliance and transparency
- Demand for fast, low-cost payment rails
Stellar is well-positioned to support the next generation of digital financial infrastructure in the United States.
Is Stellar Safe to Use in the US?
Stellar is widely regarded as secure, but users should:
- Use reputable US-compliant exchanges
- Store XLM in secure wallets
- Understand tax obligations
- Diversify crypto holdings
Security best practices remain essential.
Conclusion
Stellar (XLM) is a purpose-built blockchain network focused on fast, affordable, and inclusive global payments. In the United States, Stellar stands out as a trusted financial infrastructure platform supporting remittances, stablecoins, and fintech innovation.
As digital payments and blockchain adoption continue to grow, Stellar is likely to play a meaningful role in shaping the future of cross-border finance in the US.