What is Stablecoin?
Stablecoin is a type of cryptocurrency that is designed to maintain a stable value relative to a specified asset or pool of assets. For example, a US dollar pegged stablecoin is backed by US dollar cash reserves or cash equivalent assets, such as Treasury Bills, and its value is pegged 1:1 to the US dollar.
How Can Stablecoin Payments Benefit Merchants?
Forms of payment currently in use can take days to settle and generate significant fees for merchants. Merchant trade groups, led by the Merchants Payments Coalition, lobbied for the passage of the GENIUS Act asserting that a regulatory framework for stablecoin would enable the creation of alternative payment types, increase competition and reduce merchant expenses.
According to the Wall Street Journal, major retailers and ecommerce merchants including Amazon, Walmart, and Expedia have been exploring how to issue or use stablecoin to avoid credit card processing fees and achieve faster settlement of payments.
Would Customers Accept the Use of Stablecoin for Payments?
If a merchant wants to switch from credit card to stablecoin payments, the customer would need to be convinced to hold sufficient stablecoin to fund its purchases. This will likely be challenging given skepticism still exists about the security of stablecoin. Furthermore, cardholders value the benefits that credit cards offer, including the ability to use the same card at numerous merchants, the option to finance purchases over time, the convenience of making one payment a month, fraud protection, dispute management, and rewards programs. Therefore, retailers will likely need to create incentives for consumers to abandon their credit cards and use stablecoin for payments.
How Are Visa and Mastercard Adapting?
Visa and Mastercard have been innovating to enable digital asset transactions globally. For example, Mastercard enables partners to offer crypto cards that allow customers to use their digital assets for everyday transactions and it has a live peer-to-peer crypto payments pilot underway. Visa also enables partners to offer crypto cards and has been expanding its cryptocurrency related services since 2021. Following the passage of the GENIUS Act, Visa announced that it will expand its stablecoin settlement capabilities by adding support for three digital tokens and two blockchain networks. It now supports PayPal's PYUSD, Paxos-issued USDG and Circle's EURC tokens.
The integration allows users to send and receive stablecoin payments through supported blockchain networks, and they can also convert their balances to currency. Both Visa and Mastercard also offer merchants ways to be paid in stablecoin.
Verisave will continue to monitor developments in this dynamic payments space and will provide periodic updates.
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