Understanding the Growth of Stablecoins

Every fintech is rushing to add crypto. But most are making the same 3 mistakes... I've analyzed how PayPal, Stripe, Visa, and Mastercard approached crypto integration. What I found was surprising The biggest players succeeded by avoiding the obvious moves. Here are the 3 biggest mistakes most companies make: 1// Starting with trading features PayPal learned this lesson the hard way. While crypto trading seems like an obvious entry point, it's already heavily commoditized with shrinking margins. The regulatory burden is massive, and we're seeing the fallout. Just look at Affirm - they've already shut down their entire trading program after realizing the economics don't work. 2// Ignoring stablecoins Most companies overlook stablecoins in favor of mainstream crypto, but the data tells a different story. Stablecoin market cap has grown 300% year over year, with transaction volume hitting $20T in 2024. This is why we're seeing Visa build their entire VTAP platform around stablecoins and PayPal launch their own PYUSD. The unit economics simply make more sense than crypto trading. 3// Building everything in-house The race to market is too critical for building from scratch. Stripe recognized this when they acquired Bridge for $1.1B. Visa partnered with BBVA to launch VTAP. PayPal leveraged their existing payment rails instead of rebuilding. Mastercard joined forces with Paxos. The pattern is clear: speed to market matters more than perfect technology. Here's what the winners are doing instead: They're focusing on foundational infrastructure - solving real payment processing challenges, improving cross-border settlement, and building institutional services. Rather than reinventing the wheel, they're using existing rails where possible and partnering strategically for missing capabilities. Most importantly, they're starting with stablecoins. The regulatory path is clearer, the use cases are immediate, and the margins are sustainable. This approach is driving faster adoption across the board. The reality is that the companies winning in crypto are solving real payment problems. Want to see my detailed breakdown of how each major fintech player is approaching crypto? Drop a "+" in the comments and I'll share the analysis.

Rain's $24.5M raise signals stablecoins' transition from speculation to real-world financial infrastructure. After securing $6M in 2022 and successfully weathering the brutal bear market, Rain has emerged as the backbone for stablecoin-powered cards globally. Their 15x growth in just 12 months across 100+ countries proves what many have long predicted: stablecoin infrastructure is the future of finance. Rain's Visa Principal Membership is transformative—allowing them to issue cards globally with settlement across Base, Polygon, Optimism, Avalanche, Arbitrum, ZKsync, and Solana without traditional banking dependencies. I love the way Norwest put it in their recent post "Rain takes what we call the “mullet approach” to financial innovation: traditional payment up front and sophisticated digital asset infrastructure (AKA the party!) in the back." Major players are already building on their rails: - Nuvei is using Rain to enable digital asset payments at 100M+ merchants worldwide - Arculus has integrated Rain's infrastructure with their cold storage solutions - Avalanche chose Rain for their flagship card program Their recent partnership with Avalanche to launch a Visa card enabling payments with AVAX tokens and stablecoins is just the beginning. This likely marks the first of many ecosystem-branded cards, with L1 and L2 blockchains recognizing the power of offering their users a way to interact with the onchain financial products they love, while being able to use those funds where it matters most. Besides that, what this really signals: The future of onchain banking is here. People and businesses no longer need to off-ramp their funds to use them. This removes one of the biggest barriers to onchain adoption—the friction between holding assets and actually using them. This is just phase one. With the foundation for stablecoin-funded cards now established, the next innovations will include enhanced reward programs, onchain credit systems, and true self-custody solutions tied directly to wallets. The implications are enormous: superior yield while maintaining liquidity, simplified business operations for crypto-native companies, and a massive increase in stablecoin utility. Norwest, CompoSecure, Goldcrest Capital, Latitude Capital, Galaxy, Coinbase Ventures, and Lightspeed aren't just betting on Rain—they're betting on the future where the line between traditional finance and onchain assets disappears completely.

Stripe founders (Patrick and John) were on the All-In Podcast a few days ago. This is the first time they have publicly shared their thoughts on "how they view stablecoins." TLDR: Stablecoins are primarily useful in emerging markets and are not a threat to the Visa/Mastercard duopoly in developed countries. Their take: Stablecoins are finally happening, and they're REALLY useful. Stripe processes >$1 trillion annually - about 1% of global GDP. And they just shared why stablecoins are the future of payments: Here's how they view it: 1/ Bitcoin has been around since 2008, but it wasn't great for payments - slow transactions, high fees, price volatility made it impractical. Stablecoins solve these problems by maintaining a steady dollar value. They're now becoming a real payments solution. 2/ Where stablecoins shine right now: CROSS-BORDER. When you need to pay contractors in the Philippines or manage treasury across borders, traditional banking is expensive and slow. Stablecoins make global money movement instant and affordable. 3/ Real-world adoption is happening: • SpaceX uses stablecoins for treasury management • Major companies offering dollar-based services globally • Stripe acquired Bridge to become the "Stripe of stablecoins" This isn't crypto speculation - it's practical infrastructure. 4/ The most fascinating use case? Helping people in countries with unstable currencies: "Consumers in Nigeria have seen their currency devalue 3-4X in just a couple years. Stablecoins let them store dollars for stability." 5/ Think of this as the evolution of the euro-dollar system that helped companies store dollars (with $1M minimums). Now anyone in Ecuador can have a $1 US dollar balance - financial inclusion that was simply impossible before. 6/ This isn't replacing Visa/Mastercard domestically (yet). Those systems work well enough in developed markets, but stablecoins are proving revolutionary for international money movement and underbanked regions. 7/ Prediction: Every business will eventually need a stablecoin strategy, just like they needed an internet strategy in the 90s and a mobile strategy in the 2010s. This changes how value moves across borders and economies. The future of money is being built now.

It’s Genuis! How we think about money is in the process of changing. If you are in the business of managing money, managing your own money or OPM, this is an important development worthy of discussion. The GENIUS Act, passed by Senate last week by 2/3, establishes the first federal framework for stablecoins. GENUIS requires issuers to maintain 1:1 reserve in highly liquid assets (short-term Treasuries/U.S. dollars) with monthly disclosures and annual audits. GENUIS establishes a licensing system for issuers to become regulated under federal oversight (Fed, OCC) and includes anti-money laundering safeguards, consumer protection measures, and legal standing that establishes the right for stablecoin holders to maintain priority claims on reserves in the event of bankruptcy. Unlike the traditional banking system, U.S. stablecoins must maintain 1:1 backing of highly liquid assets (short-term UST bills). Stablecoins provide substantial structural demand force for UST significant upcoming maturities. There are over $6.6 trillion in bank deposits that the U.S. Treasury has warned could migrate to stablecoins. Last week when the Senate passed the bill, JPMorgan announced that Coinbase Institutional will be supporting their creation of JPM stablecoin, built on Coinbase’s Ethereum-based L2 (Base), a bank-backed deposit token that targets U.S. institutional clients. Others will follow JP Morgan’s lead. Treasury Secretary Scott Bessent is focused on $25 trillion UST that must be refinanced over the next 3 years. While the stablecoin market has grown from $5B at the start of 2020 to >$255B today, what may be more impressive is stablecoin annual transaction volume is greater than $28T - more than Visa and Mastercard. The $6 trillion math: - $6+ trillion U.S. consumer spending on credit cards is ripe for disruption. Imagine $6 trillion processed via credit cards were transacted on blockchain rails using stablecoins fully backed by short-term UST, eliminating the 3% transaction fee that CC companies charge (more money in the hands of consumer, more demand for UST). - $6+ trillion is the baseline for size of U.S. money markets, while both stablecoin and money markets are both backed by UST, the frictional administrative/fee cost structure of administering a stablecoin is less friction than money market funds; stablecoin is more liquid (same day/same minute). - $6+ trillion reside within bank deposits which is only 1/10 backed by UST vs ~100% UST collateralization for stablecoins. Bank deposits payout 50bp for same-day deposit accounts or 3.5% for money market accounts (next day) vs. stablecoin which can earn the full rate of UST which is closer to 4% today (higher return). It is best to be prepared for this development, its early days, but it’s in the process of happening.

A new era for stablecoins. The passage of the GENIUS Act marks a watershed moment for the stablecoin industry. This regulatory breakthrough is expected to unlock unprecedented growth, with funding to stablecoin companies projected to rise to $12.3B in 2025 – more than 10x 2024's $1B in funding. The GENIUS Act represents more than just regulatory oversight; it legitimizes and industrializes stablecoins as critical financial infrastructure. This foundational shift from regulatory ambiguity to structured oversight is triggering a new wave of adoption across traditional finance, e-commerce, and cross-border payments. Success in the post-GENIUS Act era will be determined by three key factors: 1) Regulatory Compliance Capabilities - Companies that can quickly meet the Act's stringent requirements will gain first-mover advantages 2) Traditional Finance Partnerships - Integration with established financial institutions becomes essential for scale and legitimacy 3) Infrastructure Scale - Robust custody, settlement, and operational capabilities will separate winners from losers The door is now open for banks, fintechs, and retailers to launch their own stablecoins or integrate them into existing systems and the transformation is already underway. Major payment companies including Mastercard, Visa, and Stripe have begun integrating stablecoin capabilities. Industry giants like Amazon and Walmart are reportedly moving toward stablecoin-style offerings as payment networks prepare for disruption. Nearly all of the major banks and financial services firms have publicly disclosed their digital assets initiatives with stablecoins at the core. The GENIUS Act doesn't just regulate stablecoins; it positions them as the backbone of the next phase of financial digitization. Companies positioned at the intersection of traditional finance and compliant stablecoin infrastructure stand to capture the largest share of this rapidly transforming market. The stablecoin industry is now set to become to essential financial infrastructure. Which companies are positioned to win in the stablecoin era? Explore the full CB Insights' stablecoin market map: https://lnkd.in/guk7HuPz

I am often asked by friends who are not as familiar with Crypto what the “real” applications are - here is my typical answer! 🖖 In Developed Markets - Gambling / Speculation In countries like the US and the UK, Crypto has found product market-fit in speculation/gambling because: 1. Most token prices are very volatile going up and down very quickly 2. This creates news headlines and FOMO, so people think they can get rich quick. Obviously, this often goes wrong, just like gambling in a casino. Inevitably, people look down on gambling but humans are drawn to it and have been for a long time. As far back as 1916, $268m was wagered on the outcome of the US Presidential Election [1]. Whether it is ethical or not is a different question. 👉 In Developing Markets - Holding US Dollars In markets like Turkey and Argentina, Stablecoins (i.e. tokens that can be redeemed for a fixed amount of fiat currency like $1) are increasingly owned. Consumers want to hold US dollars to ensure the value of their savings don’t get eroded - by inflation or government policy. Stablecoins combined with blockchain settlement help them tackle two problems: 1. Local currency inflation: In 2023, inflation in Argentina and Turkey was 211% and >60% respectively [2]. The value of consumers’ local currency savings fall quickly so they want to own USD, which has much lower inflation. 2. Capital restrictions: In these countries, governments have confiscated assets and put restrictions on sending money abroad and how much foreign currency you can own. If assets are stored in self-custody blockchain wallets, a government can’t freeze your account like they can in a bank or exchange. In Turkey, I’ve seen 80 year olds on the street wearing Binance hats - holding stablecoins is not niche. It is common practice to buy USDT and store it on Binance or in a self-custody wallet. This market is already sizeable and growing fast [3]: 1. In 2022, >$11 trillion in stablecoin transactions were settled, dwarfing PayPal volumes ($1.4 tn) and comparable with Visa ($11.6 tn). 2. Supply of stablecoins has grown from $3bn five years ago to >$120bn in mid-2023. 3. >2/3 of stablecoins are held in self-custody wallets i.e. outside exchanges like Binance. 4. There are 25 million blockchain addresses holding stablecoins and 5 million sending stablecoins each week. As this market grows, we’re seeing business opportunities in areas like remittances. If you’ve seen other Crypto use cases in action now - I’d love to hear from you! [1] Historical Presidential Betting Markets - $165m in 2002 dollars converted to 2022 dollars: https://lnkd.in/gaGnh397 [2] 2023 Inflation in Argentina: https://lnkd.in/gNBdKvJF [3] Brevan Howard - The Relentless Rise of Stablecoins: https://lnkd.in/gSdAivei

Crypto hasn’t hit product-market-fit? Think again Stablecoins quietly became the Trojan horse for institutional onchain adoption. Yesterday, the US Senate passed a law to advance stablecoins and “US crypto domination”. Just in the past month: → Stripe now offers stablecoin accounts in 100+ countries → Mastercard and MoonPay just launched stablecoin cards for 150M stores → Coinbase x402 enables pay-per-API with stablecoins And only this year: • Ripple launched RLUSD • Ripple acquired Hidden Road for $1.25B to distribute its RLUSD to wall street • Circle acquires Hashnote • Standard Chartered issued its own stablecoin • MoonPay acquired Helio and Iron • Circle introduced Circle Payment Network • Dubai introduces stablecoins • Stripe acquired Bridge for over $1B The numbers are staggering: 🟢 $220B+ in circulation (up 60% YTD) 🔁 $700B+ moved monthly This isn’t crypto hype. If you’re running ops, treasury, or payments infra, you can now use stablecoins – faster and cheaper. For the US, stablecoins are turning into a geopolitical weapon to export the dollar. And consumers can now pay with stablecoins, everywhere. The financial stack is being rebuilt. Quietly. Globally. With stablecoins. Want the full report? 👉 Subscribe to get it: www.fiftyone.xyz Brad Garlinghouse Reserve Paxos Tether.io Jeremy Allaire

The Stablecoin TTL (Time To Live) is the best KPI for stablecoins: 1️⃣ Average time between the stablecoin minting and redemption of a dollar. 2️⃣ Number of hops across accounts between the stablecoin minting and redemption of a dollar. Stablecoins get more valuable as dollars remain in the stablecoin form. What happens when we hit escape velocity, meaning dollars in the stablecoin form being spendable in enough places for people & businesses not to convert them back to fiat, is something that the financial system is not ready for yet: • lower transaction fees • lower ledgering, reconciliation, compliance, finops, fraud costs • better financial data • less walled gardens There are many tools or incentives that we can put in place to increase this stablecoin TTL: - Financial rewards - Discounts - No transaction fees - Credits, loans, and BNPL models All of the following is likely to happen as the average stablecoin TTL increases: • Dollars will naturally accumulate into reserve cash deposit accounts & money market accounts at the first-moving banks & asset managers to partner with stablecoin issuers. • Fiat dollars will become much more stagnant, making them easier to be lended (second layer of fractional reserve banking forming). • Cross-issuer settlement is going to be an incredibly valuable business, and might likely be owned by issuers themselves. • As dollar redemptions decrease, compliance risks on banks decreases resulting in an acceleration of stablecoin adoption. • Increased spendability of stablecoins increases network velocity for first-moving companies with large distribution. • Ledgering, reconciliation, compliance, fraud risks & costs all decrease tremendously. The future of dollars is tokenized, with an increasing TTL. Banks, payment companies, and asset managers should all plan the next 2 years accordingly.

I’ve been closely tracking how stablecoins will change payments since I worked on Project Hamilton at the Federal Reserve Bank of Boston. Stablecoin adoption always seemed a few years away, but they have finally arrived. Stablecoins are an onchain store of value and a medium of exchange, but for most users they are an onchain dollar, redeemable for a dollar. Stablecoins have found product market fit – they're a nearly free, nearly instant, infinitely flexible payments platform. There are over $160B stablecoins issued & stablecoins were used for 2x the volume of the Visa network! ($8.5T v $3.9T in Q2 '24). More than 60M wallets sent stablecoins that same quarter. By looking at 10 years of stablecoin history and 250 years of US banking history, specifically the evolution of money & bank deposits - we can peak into the future of stablecoin adoption Fiat-backed stablecoins like USDC or USDT mimic old National Bank Notes -- a bearer note redeemable for a stable asset like a bond or specie. Asset-backed stablecoins (stablecoins created by lending protocols) extend the onchain money supply -- similar to how the traditional money supply is extended by bank lending. There is also a new category of dollar token that we call a Strategy-backed Synthetic Dollar (SBSDs). SBSDs are a dollar share in an onchain hedge fund -- useful for investors, but less safe than a stablecoin or money in a bank deposit. There's a reason why regulators prevent bank deposits from being invested in hedge fund strategies -- to keep the money safe. But this analysis only takes us so far: Stablecoins are the cheapest way to send a dollar. Stablecoins can reset the market structure in the payments industry, creating opportunities for incumbents and for startups to build on a new platform of frictionless and cost-free payments! Read more here: https://lnkd.in/eSQNHyir -- None of the above should be taken as investment advice or an advertisement for investment services; see a16z.com/disclosures for further information.

Over the last few months, we worked with Castle Island Ventures and Brevan Howard Digital to support new original research focused on stablecoin preferences and trends in emerging markets. This included a survey via YouGov of 2,500 active crypto users across five emerging markets (India, Indonesia, Nigeria, Turkey and Brazil). Check out the paper and some of our key findings below https://lnkd.in/gyMtnFty 1. Stablecoins are increasingly being used for purposes beyond crypto trading, such as cross-border remittances and payroll. 2. 47% of survey participants primarily use stablecoins to access dollars, while 43% use them for better currency conversion rates. 3. Nearly 70% of respondents have converted local currency to a stablecoin, and almost 40% have used stablecoins for cross-border payments. 4. Usage for non-crypto activities is highest among 18–24-year-olds, with 34% of them converting local fiat to stablecoins on a weekly basis. 5. 57% of respondents reported an increase in stablecoin usage over the past year, with 72% expecting their usage to increase in the future.