Stablecoins are mainstream

The worry is that a dramatic increase in stablecoins backed by US Treasuries will cause deposit flight at banks and create narrow banking. The reality is more complex. Narrow banking is already here. UNW is the largest mortgage originator, BNPL is challenging credit cards, and private credit is winning vs banks. 

Bankers worry this will spark a deposit exodus and usher in “narrow banking.” I think that causes them to miss the opportunity, and misunderstands where the real erosion already happened.

Here's the news, the data, the fears, and the reality of stablecoins

• The news: Visa, Bridge and Stripe launch global card issuing with stablecoins
• The data: Estimates of 1.6trn to $2trn in stablecoin supply by 2030.
• The fear: Stablecoin legislation will lead to deposit flight from banks.
• The reality: Stablecoins are an inevitability, one that can grow revenue for banks that lean in
• The playbook: Your stablecoin strategy when regulation lands

For a primer on stablecoins I recommend my “what’s your stablecoin strategy” piece

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The news: Stablecoins make payments truly global

Stablecoins are mainstream.

Visa's global issuing product got equal billing with its agentic payments launch in its recent product drop. Through Bridge, developers can now programmatically issue stablecoin-linked Visa cards in multiple countries with a single API integration.

Today, Bridge enables card issuing in six Latin American countries: Argentina, Colombia, Ecuador, Mexico, Peru, and Chile. A stablecoin wallet can now issue cards in at least these six countries, with more coming soon.

Compare this with history. Each country traditionally demands:

• Separate legal entity structure and banking relationships
• Compliance processes tailored to local regulations
• Currency management systems and settlement accounts
• Regional payment network certifications
• Customer support teams that understand local payment behaviors

This solves multiple problems for Stripe. Their issuing product wasn't global, and their LATAM presence wasn't strong. Fixed. 

For Visa, it hints at how cards begin to decouple from traditional bank accounts and enable something much more global.

That wasn't the only stablecoin news this week:

• Mastercard launched a "seamless ecosystem" where consumers can spend and merchants can receive stablecoins with Nuvei and OKX. 
• Ripple is reported to have offered ~$5bn for stablecoin issuer Circle

The news capitalizes on momentum for stablecoins as the dollar for non-US citizens. It signals sustained corporate momentum from companies with revenue targets and products to sell.

The Data: stablecoins are for payments now

Stablecoin supply has decoupled from speculative crypto use cases:

• Current supply: ~$260 billion
• Annual payment volume: ~$15.6 trillion
• Projected growth: 7-10x over next 5 years

To put this in perspective, current stablecoin supply roughly equals a regional bank's balance sheet, and the transaction volume represents just 3 days of SWIFT volume ($5.3 trillion per day).

Fast-forward 3-5 years, Citi and Standard Chartered project massive growth. At that scale, stablecoins would sit somewhere between Citibank and Santander Group by asset size. If payment volume scaled proportionally to ~$140 trillion, that would represent about 8% of SWIFT's annual volume.

If that happens, and it's all backed by US Treasuries? That will have consequences.

The fear: Deposit flight leads to bank runs.

Europe certainly worries it will happen

Small regional banks are more vulnerable to bank runs and deposit flight because they lack the larger asset base to “soak up” the potential losses. These banks play a crucial role in middle America's economic ecosystem, specializing in relationship-based lending that larger institutions typically avoid. 

The worry is a rational one. If the market, consumers, and businesses face a choice between holding stablecoins or bank deposits. If stablecoins are:

• Widely accepted as a payments mechanism, 
• Easy to store like a bank deposit
• Risk-free like treasuries (better than FDIC up to $250k)
• Potentially offering higher yield

What do you need a bank for?

If this were the shape of the market, this would be disastrous for smaller and regional banks. 

This is likely an intentional strategy

In a recent report the US Treasury estimated that stablecoin issuers could be buyers of $900bn of T Bills if market trends continue. With a potential 6.6 trillion of banking deposits at risk of flight to stablecoins (although the authors note that it is unlikely if stablecoins are, by definition, unable to give yield as the GENIUS act describes).  It just so happens that right now, the US is looking for more buyers of T Bills! 

The reality: Narrow banking happened, stablecoins extend that.

Consider that: 

• Non bank lenders account for > 50% of mortgage lending
• The largest mortgage originator is United Wholesale Mortgage (not a bank)
• BNPL is now competing with credit cards for consumer finance

You can see it in deposits: 

• Apps like Cash App, Venmo and Chime are becoming consumers default day to day spending cards 
• Money Market Funds offer higher yields than most banks
• All of this is being rebundled by companies like Robinhood

Today, Fidelity offers a brokerage account that lets you invest in money market funds and has a debit card attached. The competition from stablecoins isn’t new, its another brick in a wall of the gradual erosion of bank dominance.

Stablecoins are complicated:

Things we call stablecoins could be

• 1:1 backed by US Treasuries (USDT, USDC)
• Backed by bank deposits (EURCV at SocGen)
• Backed by commodities / crypto (DAI)
• Backed by some complex hedging (like USDe’s delta neutral hedge)
• They may or may not offer yield

The GENIUS Act would define stablecoins as being backed by treasuries, deposits, or cash equivalents and not offering yield. This means USDT, USDC, etc., would be “stablecoins,” and their primary use case is payments. 

This means anything yield-bearing is either a bank deposit or an investment product (like a money market fund). 

That distinction makes life much clearer. 

And it prepares us for the next phase, where stablecoins are the plumbing for every other kind of economic transaction and financial product. 

What happens now

I have three lenses on what happens now

1. There’s a marketshare land grab pre and post-legislation passing in the US
2. The passing of legislation unlocks a wall of institutional interest and capital
3. The US Dollar remains dominant as the stablecoin currency of choice but local liquidity emerges

The market share land-grab is being led by Tether and Circle as the current market leaders (with ~63% and 24% market share, respectively). 

• Tether is the choice for offshore, APAC, and the global south to the global south trade. 
• Circle is building partnerships with payments companies, banks and institutions and sharing its economics to do so.

There are burgeoning competitors with far less market share, like USDG (supported by companies like Robinhood), and countless others waiting in the wings. I wonder if this market share land grab will play out like ETFs. We had crypto natives and traditional institutions launch Bitcoin ETFs, and today, the market leader is unquestionably BlackRock. 

Or will Circle and Tether’s market share and distribution strategy win out?

Legislation will brings banks into issuing and using stablecoins. This in turn unlocks much greater liquidity, and many more institutional use cases. We’ve already heard the CEO of Bank of America explicitly say they would be in the stablecoin market “if regulation allowed.” It looks like we’ll get that bill in the summer.

The dollar is 386x larger than any other currency pair in stablecoin markets. That will have to rebalance because it’s simply too expensive to do FX from stablecoins to local fiat in some markets to make the economics work. But let’s say the dollar goes from 99.7% market share to 80% over the next 5 years, that’s still dominant by any measure.

Viewed through this lens, you can see why a stablecoin-based capital market would benefit US dollar hegemony. The dollar became too “over politicized” for its own good in the FATF regime and since the 2022 sanctions as Izzy explains below.

Trumpian policies seem designed to liberate the dollar so that it can serve that neutralising price discovery role in international markets again. Most likely via stablecoins. This may lead to bifurcation of the exchange rate system depending on whether you are in the western free trade club or not.

Viewed this way, stablecoins seem very likely to have support for the foreseeable future and the backing to be a very real competitor to SWIFT. 

What’s your stablecoin strategy?

Stablecoins are rebuilding financial market structure.

From payments, FX, capital markets, deposits and eventually lending, everything can and will be impacted. It won’t happen overnight. But the volume growth is real.

Over the next 5 years the banks that lean into stablecoins will win market share. Those who don’t will have to buy back in, many years later.

The good news? There are at least 8 ways banks can make money from stablecoins.

1. Providing banking services: Like holding operating accounts or holding cash
2. Provide custody: For reserve assets held against stablecoins (e.g. treasuries)
3. Brokerage: the treasuries that reserve stablecoins
4. Reserve management: Repo and reverse  facilities for the treasuries
5. Generate income from the cash buffer: (the little bit left offer when mint / burn) by using it as a funding source for lending
6. Generate payments income (fees): When moving fiat against stablecoins
7. Foreign Exchange (FX): Revenue shares with or direct buy/sell of FX vs stablecoins
8. Issue your own stablecoin: This is unlikely pre GENIUS bill but looks likely soon

Readers with a long memory will, of course, remember the last big banking innovation wave, Banking as a Service, and how, under a Republican administration, things were largely left alone. They’ll also remember that administrations change, and regulators can come back with teeth years later.

So clearly, the goal here isn’t to rush headfirst into stablecoins. Quite the opposite. If you view this as a sustainable and growing trend, you’re far better to come correct. Think through the risks. 

Finance has always been an F1 race not a drag race. It’s about who has the best brakes, acceleration and can last the distance without spinning out.

Stablecoins have reached escape velocity. 

They’re going to remake financial services.

The only question is will you be a part of that future?

ST.

4 Fintech Companies 💸

1. Open FX - The FX Marketplace

Open FX allows mid sized businesses to access institutional grade pricing for FX, reducing costs by up to 90%. It routes a payment via banks, OTC desks and brokerages to deliver fast settlement, and it optimizes holdings in various banks and currencies.

🧠 Cross-border payments are becoming a killer app in payments, and fintech, especially since the rise of stablecoins. A new generation of PSPs, Neobanks and money remittance businesses need correspondent banking. Building that can be time-consuming and expensive. If you're suddenly moving a lot more money across borders, a 90% fee reduction sounds ideal.

2. Portia labs - The AI Agent SDK

Portia helps developers build agents that are more predictable, easier to control and authenticated. It helps agents build a plan, run that plan and build in pause stops of human feedback when needed.

🧠 The first wave of Agentic AI was "hostile integration" - where an Agent might operate a website or internal company software as a human would. This opens up obvious security issues, and a best practice is emerging to ensure agents are contained, easy to steer and have strong authentication. Like an Auth0 for agents, but with much more direct tooling. This is especially helpful in regulated industries where accountability matters. Being able to ensure a human signed off on a specific decision can be the difference between a fine and no fine.

3. Cloud Capital - The cloud spend dashboard

Cloud capital gives full visibility into cloud spend to eliminate surprises and help generate savings when services are under utilized. Buyers can "commit" to cloud spend with the highest accuracy and map costs against priorities.

🧠 This is the kind of thing every company of a certain size ends up building bespoke tooling for. Having another office of the CFO tool for just this makes a ton of sense.

4. Sprive - The mortgage overpayment app

Sprive helps users overpay their mortgage while they do every day spending activity by earning cash rewards at merchants. It also calculates auto savings available based on your spending habits. It motivates users with an "expected mortgage freedom date" and visibility into the "overpayment allowance"

🧠 UK banks often allow customers to over pay up to a certain limit annually. Baking this into every day shopping is a nice twist to make the long term goal more closely aligned with every day activity.

Things to know 👀

1. Visa announces Agentic Payments (Intelligent Commerce)

Visa announced its Agentic Payments capabilities partnership with Open AI, Microsoft, Anthropic, and Ramp to provide a simple way for AI Agents to access Visa services. Visa's agent APIs will include Agent Tokenization and transaction controls to give users and developers ways to manage agent permissions. Post transaction the APIs also handle AI Agent dispute resolution and fraud.

🧠 Tokenization makes everything possible. With the right network tokens, agents can do anything a user with a card could, like make a payment or create a chargeback. More importantly, the issuers, merchants, and processors on the network could also see transactions initiated by agents and manage them accordingly (e.g., for fraud risk)

🧠 They're not card networks anymore; they're token networks. Mastercard announced their agent tokenization capabilities a day or so before Visa (albeit with fewer partnerships

🧠 Will AI Agent Commerce be bigger than e-commerce? In time, yes. But that's a misleading question because most agent commerce will be e-commerce. But if AI Agents can manage your company inventory, buy your groceries, and just do all the things, why wouldn't they?

Good Reads 📚

1. A Network Model of Money

We tend to discuss payment rails, credit risk or the effects of transfering value on end users but we never think about money as a network. If we thought about it that way, how would we design it? Centralized money has a major benefit. Singleness. Liquidity flows freely. Compare this with stablecoins today where fragmentation is already an issue.

🧠 As stablecoins go mainstream we need to solve network fragmentation. Favoring a handful of large, centralized issuers is useful in the short term it also recreates the system we have today, albeit with some narrorower "banks."

🧠 Luca points at something I've been wrestling with. Central banks have moved from trying to compete with stablecoins (CBDCs), to regulating them. They're politically convineint short-term because they're net buyers of treasuries, but longer term we must ask; what do we want them to be?

🧠 This will be the most enjoyable thing you read this week. I promise you. Luca is an artist. "Money is part of a broader information system, compressing complex economic reality into a communicable signal that can travel through society's networks with minimal friction."

That's all, folks. 👋

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(1) All content and views expressed here are the authors' personal opinions and do not reflect the views of any of their employers or employees.

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(3) Any companies mentioned are top of mind and used for illustrative purposes only.

(4) A team of researchers has not rigorously fact-checked this. Please don't take it as gospel—strong opinions weakly held

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