Stablecoin Part 33 & 1/3

Obviously, this presents some interchange disruption potential where cards could be displaced.

Hey, GonzoBankers. Tony DeSanctis back with stablecoin/GENIUS Act part 33 1/3. Naked Gun reference. Hopefully, you’ll get that. If not, young people, Google it.

A lot going on in the space. Looks like the GENIUS Act is going into effect, and a lot of activity has been happening here over the last couple of weeks as a result of that.

So we’ve got Shopify and Stripe announcing a partnership to create a stablecoin solution for e-commerce. We’ve got JPMorgan not doing a stablecoin, but doing something called a deposit token, which we can talk about at some point in the future.

We’ve got Fiserv launching their stablecoin that not only is going to be supported and connect into Coinbase’s infrastructure, but also into PayPal’s existing stablecoin. And then there’s Amazon and Walmart and others looking at stablecoin as a payment vehicle.

The key to all of these, I think, is going to be scale and interoperability. The same way we talk about P2P with Zelle or mobile wallets with Apple, it’s going to take large-scale adoption of whatever the stablecoin solution is going to be.

What JPMorgan and Fiserv have both done, I think, which is going to be critical, is integrating into the existing infrastructure of USDC. Shopify has also done this with Stripe. So having the existing infrastructure be interoperable is going to be one of the big keys to this.

There are two sides of this coin for us as financial institutions. Obviously, this presents some interchange disruption potential where cards could be displaced.

The other side is whether or not we want to adopt stablecoin solutions and whether one of these sort of aggregate consortium solutions is going to be viable for us.

I think on the interchange disruption side, it’s got a little bit of a longer tail. The fraud questions, the chargeback rights, all the things that cards do today that Zelle never did, or hasn’t quite mastered, that Cash App and Venmo haven’t really nailed, all those things are going to be challenges even in the stablecoin space.

So I’m definitely watching that, and that has disruption potential, but it’s probably got a longer tail.

The stablecoin adoption question, I think, is more interesting long term because I do think it is a more efficient transaction process, and I think it presents some disruption potential.

We talked about some of the challenges between real-time payments and FedNow and the fact that those aren’t interoperable. I think whatever solution is going to work has to work across platforms. So integration with existing platforms like USDC and PayPal are going to be key to the stablecoin solutions of the future.

Let me know in the comments what you’re doing and how you’re thinking about your stablecoin strategy moving forward.