You can’t have missed the stablecoin sentiment. While bitcoin and the rest of the crypto market is at a standstill after falling from record highs in October, everyone else is talking about issuing tokens whose value is fixed, tied to a real-world asset. Mostly the dollar.
Not just the dollar, of course. This week alone, 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 is working on a pound stablecoin, and Hong Kong said it plans to start issuing stablecoin licenses in March.
Then there’s the revelation that Mark Zuckerberg-led Meta ( META ) is looking to add stablecoin-based payment options early in the second half of the year. The company tried and failed to introduce the Libra stablecoin, renamed Diem in 2019, in the face of fierce opposition from lawmakers and regulators.
But Meta’s proposed return to stablecoin-based payments later this year cannot be compared to Libra/Diem, according to Libra co-creator Christian Catalini, who is now a professor at MIT and the founder of the MIT Cryptoeconomics Lab.
What’s different now, Catalini says, is that stablecoins are fading into the background, being offered by multiple providers and becoming part of the payment infrastructure. The once-hyped businesses of stablecoin issuance and orchestration, or coordinating payments across different blockchains and converting between token and fiat for payment purposes, are becoming a commodity, he said.
“Not only Meta, but also Google, Apple, everyone will use multiple providers, as is the case when they make payouts,” Catalini said in an interview with CoinDesk. “So I would expect the market in the future to be commoditized rather than a branded stablecoin. In a way, it’s a sign that the market has matured.”
This sentiment was also echoed by Meta’s director of communications, Andy Stone, who said the move to bring back stablecoin payments was simply “about enabling people and businesses to make payments on our platforms using their preferred method.”
Billions of users
The real competitive advantage in stablecoins, the moat that keeps competitors at bay, now lies in distribution, Catalini said. Whoever owns 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 their latest earnings report.
The focus on contacts and reach is a marked change 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 change has started to play out recently, with news of companies moving away from acquiring stablecoin orchestration companies.
It’s also good news for incumbents like the card networks, fintechs, neobanks and some wallet companies that have an advantage because they actually own the touch point with the end user, Catalini pointed out. Stablecoin payments threaten to cut into the lucrative interchange fees payment networks such as Visa and Mastercard claim, but the card networks have a significant advantage when it comes to distribution.
“If [the card networks] can commoditize the rails and commoditize the assets, they will be able to defend their business,” Catalini said. “The commoditization of the assets is inevitable – there will be many stablecoins and many banks will have their own – so the rails are where things get interesting.”
Also in the fray is Stripe, Meta’s long-time payments partner, whose CEO Patrick Collison joined Meta’s board a year ago and is a potential supplier that Meta can recruit for its stablecoin project.
The payments giant’s aggressive crypto power play is not to be underestimated: Stripe bought stablecoin specialist Bridge for $1.1 billion last year and has been building its own blockchain called Tempo.
Still, Catalini questioned whether other firms will flock to a competitor’s blockchain, even if it is supposedly a public network.
“If you’re another big payment service provider, are you going to build on Stripe’s Tempo? Probably not,” Catalini said. “It goes back to the main challenge of making these networks truly open and neutral, which is the whole point of crypto. But of course that’s hard to deliver from a practical perspective unless you’re building on something that’s already established like Ethereum, Bitcoin or Solana.”
