You can’t miss the stablecoin vibe. While Bitcoin and the rest of the crypto market is in the doldrums after falling from record highs in October, everyone is talking about issuing tokens whose value is fixed, tied to a real-world asset. Especially the dollar.
Not just the dollar, of course. Just this week, AllUnity, a German joint venture between DWS, Galaxy and Flow Trader, issued a Swiss franc-based token (CHFAU) and SBI Holdings and Startale Group introduced a yen version (JPYSC). Earlier this month, Agant said it was working on a sterling stablecoin, and Hong Kong said it planned to start distributing stablecoin licenses in March.
Then there is the revelation that Meta (META), led by Mark Zuckerberg, is looking to add stablecoin-based payment capabilities early in the second half. The company unsuccessfully attempted to introduce the Libra stablecoin, renamed Diem in 2019, in the face of stiff opposition from lawmakers and regulators.
But Meta’s proposed return to stablecoin-based payments later this year pales in comparison to Libra/Diem, according to Libra co-creator Christian Catalini, who is now a professor at MIT and founder of the MIT Cryptonomics Lab.
What’s different now, Catalini says, is that stablecoins are moving into the background, offered by multiple providers, and becoming part of the payments infrastructure. The once-publicized activities of issuing and orchestrating stablecoins, or coordinating payments across different blockchains and converting between tokens and fiat for payment purposes, are becoming a commodity, he said.
“Not only Meta, but also Google, Apple, all of them will use multiple providers, as is the case when they make payments,” Catalini said in an interview with CoinDesk. “So I would expect the market to be a commodity in the future, rather than a branded stablecoin. In a sense, this is a sign that the market has matured.”
This sentiment was also expressed by Meta’s VP of Communications, Andy Stone, who said the decision to reinstate stablecoin payments was simply to “enable people and businesses to make payments on our platforms using their preferred method.”
Billions of users
The real competitive advantage of stablecoins, the gap that keeps competitors at bay, now lies in distribution, Catalini said. Whoever has the direct relationship with the end user will capture the most value. And Meta has billions of users across Facebook, WhatsApp and Instagram, nearly 3.6 billion according to its latest earnings report.
The focus on contacts and reach is a marked shift from accumulating value by delivering stablecoins to a wallet, or moving from fiat to crypto and then back to fiat – the so-called stablecoin sandwich required for regular payment transactions.
This shift has started to happen recently, with news that companies are moving away from acquiring stablecoin orchestration companies.
This is also good news for incumbents such as card networks, fintechs, neobanks and some wallet companies, who have an advantage because they actually own the touchpoint with the end user, Catalini pointed out. Stablecoin payments threaten to undercut lucrative payment networks from interchange fees as Visa and Mastercard claim, but the card networks have a significant distribution advantage.
“If [the card networks] can commodify the rails and commodify the assets, they will be able to defend their business,” Catalini said. “Commoditization of assets is inevitable – there will be many stablecoins and many banks will want theirs – so the rails is where things will get interesting.
Also in the fray is Stripe, Meta’s longtime payments partner, whose CEO Patrick Collison joined Meta’s board a year ago and is a potential vendor that Meta could recruit for its stablecoin project.
The payments giant’s aggressive crypto power plays should not be underestimated: Stripe last year bought stablecoin specialist Bridge for $1.1 billion and built its own blockchain called Tempo.
Catalini, however, wonders whether other companies will flock to a competitor’s blockchain, even if it is purportedly a public network.
“If you’re another large payment service provider, would you want to rely on Stripe’s Tempo? Probably not,” Catalini said. “It comes down to the key challenge of making these networks truly open and neutral, which is the whole point of crypto. But of course it’s difficult to achieve from a practical point of view, unless you’re building on top of something already established like Ethereum, Bitcoin or Solana.”
