Joe Lau, Co-Founder Alchemy
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Like virtually all consumers, you’ve got Mastercard and VIsa in your wallet. Between your bank-issued debit card and your credit cards, you have at least two to three of those logos in your pocket at all times. They're familiar old friends. And that’s why Mastercard and Visa aren’t afraid of stablecoins.
The credit card issuers have a comprehensive layer of trust and credit in their payment rails that has been built up over decades. Stablecoins may excel at settlement but they lack the consumer protections and credit features that users have come to rely on and expect - and that has made Mastercard and Visa indispensable. The real reason Visa and Mastercard can remain dominant isn’t about speed or cost, but trust and familiarity.
Credit cards offer the credit that consumers rely on, but they also offer fraud protection, chargebacks, dispute resolution - all services that give consumers confidence. They also offer rewards, like cash back and air miles, that many have come to expect, and demand.
Stablecoin issuers ignore all that at their peril.
Are stablecoins the future?
Stablecoins have many benefits, with programmability and 24/7 instant settlement chief among them. But, until they can replicate the risk and trust infrastructure underpinning traditional card networks, they’re not going to win over the vast majority of consumers any time soon.
Stablecoins are called the future of payments for a reason, but Mastercard and Visa are already tying them into their existing networks. They offer networks that are global, instant and virtually free, but there’s no reason Mastercard and Visa can’t build beneath-the-hood payments rails using stablecoins while continuing to offer chargebacks and fraud protection, and continuing to charge merchants a 2% to 3.5% transaction fee. Those merchants begrudgingly accept the charge because people expect to pay that way and will go elsewhere if they can’t.
Until stablecoins can replicate that ‘trust layer’ - including the type of trust known as credit - they won’t have the genuine consumer appeal of Mastercard and Visa.
And therein lies the crux of why stablecoins are still at a systemic disadvantage.
Stablecoins are the future!
It is possible to build these trust layers on top of immutable blockchain infrastructure without compromising the integrity of the base layer.
Programmable smart contracts can enable protections while DeFi protocols already have dispute resolution and insurance pools. The key is to build a foundation of trust in an open and immutable ecosystem. The traditional finance networks build trust via intermediaries. Blockchain must build it through transparent and programmable rules that operate on top of an immutable ledger.
Acceptance at the merchant level is another key to success. It’s not hard to get that by substantially reducing or eliminating transaction fees. That would give merchants a huge reason to not just accept stablecoins but to actively favor them.
The new Coinbase Payments platform lets merchants accept USDC with ease. At launch it partnered with Shopify, which integrated the service into Shopify Payments, giving USDC access to millions of merchants and customers in 175 countries.
At the same time, USDC-issuer Circle has made its token attractive to institutional users by taking a highly regulated and transparent approach, with frequent, regular attestations and clear banking relationships.
Where stablecoins are winning
Companies like PayPal, Stripe and Meta are already integrating stablecoins into their payment systems. Every major payment processor will follow suit, and banks will issue their own stablecoins. Interoperability will be a must. In the future, traditional rails will be enhanced by blockchain’s efficiency and new use cases.
Stablecoins are already winning in cross-border payments, and in consumer payments in emerging and inflation-stricken markets. If I want to send a payment to Mexico over the weekend, it’s impossible without resorting to high-fee alternatives like Western Union because the banks are closed. With stablecoins that payment can be made from anywhere to anywhere in 30 seconds and at a minimal cost.
In the domestic retail market, we’ll see hybrid models that combine consumer protection with instant settlement.
Stablecoins also enable totally new payment models like AI agents making transactions independently on users’ behalf.
The trillion-dollar opportunity
The trillion-dollar opportunity in the rise of stablecoins is not just creating faster and more efficient payment rails. It’s in creating the missing middleware, the infrastructure for risk, credit, and trust.
These are the parts of the rails that the consumer does get to see, so in the long term they matter just as much as the core faster and cheaper parts of stablecoin payment rails if stablecoins want to take on the existing middleware, notably Mastercard and Visa.
Someone has to build that missing link. Until they do, stablecoins will remain a niche tool, meaning tried, trusted and expensive TradFi credit card giants will continue to dominate payments.
