The Rise of Stablechains: Circle and Visa’s Battle for Payment Supremacy

Author: Steven Ehrlich Source: unchainedcrypto Translation: Shan Ouba, Golden Finance

The emergence of stablecoins stems from the inability of cryptocurrencies, particularly Bitcoin, to maintain price stability. For years, they have been considered the "lifeblood" of major public blockchains, keeping them running.

But now, stablecoins have gained regulatory backing from Washington, while public blockchains do not. Moreover, they no longer seem content to be mere adjuncts to blockchains still searching for product-market fit.

The stablecoin blockchain is coming. Why should the two giants be nervous?

With the passage of the GENIUS Act, stablecoins are poised for a new surge in popularity—and major issuers are now aiming to run their own Layer 1 public chains, rather than simply relying on others. If they succeed, someone will be eliminated. While stablecoins weren't envisioned around the time of Bitcoin's creation, they've proven to be a godsend for the industry. It quickly became clear that Bitcoin, along with other assets like Ethereum, Solana, and XRP, couldn't replace the dollar—their prices were too volatile. Stablecoins became the perfect solution. They operate on public blockchains while maintaining price parity with their underlying asset (usually the US dollar). Their market capitalization has swelled from less than $1 million in 2017 to $271 billion today, spanning multiple public chains (primarily Ethereum and Tron), and becoming core liquidity engines for spot trading, DeFi markets, and payments. Currently, the two largest stablecoins are Tether (USDT) and USD Coin (USDC), with market capitalizations of $164.85 billion and $65.22 billion, respectively. However, these issuers appear no longer content to simply ride on the rails of other public chains. They aspire to become the true engine driving blockchain payments. The team behind Tether has invested in several stablecoin-focused blockchains (Plasma and Stable), and payments giant Stripe appears to be developing its own blockchain. On Tuesday, Circle Financial (CRCL), the primary issuer of USDC, announced Project Arc—a proprietary Layer 1 public blockchain purpose-built for payments. Stablecoins are on the verge of a boom, fueled by the passage of the GENIUS Act in July 2025. Currently, the total stablecoin supply stands at $271 billion, representing only approximately 1.2% of the $22.02 trillion M2 money supply. U.S. Treasury Secretary Scott Bessent has stated that if the relevant infrastructure is developed, the market capitalization of stablecoins could reach $3.7 trillion by the end of the decade. Circle CEO Jeremy Allaire bluntly pointed out that the current blockchain system is far from sufficient to support the needs of a modern payment system: "We are at a critical turning point where stablecoins are widely accepted by the mainstream financial system, and companies are competing to build on this infrastructure. But so far, there is no blockchain infrastructure that can meet the most stringent needs of large financial institutions and enterprises." However, if Arc is to be widely accepted by the mainstream financial system, it is still a long way to go. For Ethereum, or other similar blockchains, to succeed, they must seize market share from existing players. Next, we'll examine where the opportunities lie and who might bear the brunt of them.

Shortcomings of Current Public Chains

Ethereum

Regardless of which major public chain you choose, you'll find room for improvement in stablecoins and payment applications.

Ethereum is the second-largest blockchain after Bitcoin, with a market capitalization of $563.7 billion, but it remains too slow and expensive for large-scale payments. According to data from Token Terminal, the average Ethereum transaction fee currently is $1.05. At first glance, this seems comparable to bank card fees, but it's important to note that throughput is limited; the Ethereum network can only process approximately 20 transactions per second. During peak periods, transaction fees can fluctuate wildly. The payment method is unfriendly; all transaction fees must be paid in ETH, requiring users to hold an additional ETH reserve, whose price is inherently highly volatile. In the first half of 2021, average transaction fees approached $20 per transaction, reaching over $50 in May. This volatility is unacceptable for high-frequency, low-value payment transactions. This doesn't mean Ethereum has no use in payments. Rather, it will likely focus on high-value, low-frequency payments. As Zach Pandl, head of research at Grayscale Investments, said in an interview in February of this year: "Ethereum remains the leading chain in terms of total value locked and economic security, making it a natural platform for institutional finance." Ethereum's problems have long been known, which is why many industry analysts are turning their attention to second-layer (L2) networks like Base, hoping they can combine the speed and low costs of card networks with the economic security of Ethereum. Coinbase and Circle are close partners and are working to promote the use of USDC on Base. On Base, transaction fees are typically just a few cents. However, many Layer 2 networks, including Base, remain in an experimental phase. While the network has seen rapid growth in developer and market interest, its high degree of centralization remains a concern, as Coinbase is currently the sole operator of a collator. In Layer 2 networks, collators function similarly to Layer 1 validators or miners. This vulnerability was clearly exposed in early August when Base was down for 33 minutes due to a collator failure. If multiple collators had been available, the network might have been able to continue operating normally even if major miners or stakers went offline, similar to how Bitcoin or Ethereum do. Finally, we have to mention Tron, the $36.2 billion blockchain founded by Chinese entrepreneur Justin Sun. While Ethereum has received more attention in the Western world, Tron dominates the USDT custodial system, hosting $81.89 billion in USDT.

Tron has long been known as a "low-cost public chain", which is particularly important for users in emerging markets. As Chris Maurice, CEO of African crypto exchange YellowCard, said in my March Forbes profile of Justin Sun: “You have to understand that these countries are among the most cost-sensitive markets in the world. In some places, people might spend eight hours to save a few dollars. So the difference between $50 and a few cents is huge.” But Tron is actually not as cheap as people think. Its average transaction fee is $1.70, even higher than Ethereum. More importantly, Tron charges fees dozens of times higher for transactions involving USDT than for transferring its native token, TRX. The average fee for sending TRX is approximately $0.39, while the average fee for sending USDT is as high as $4.83. Perhaps for this reason, Maurice believes that "stable chains" like Arc could become potential competitors to Tron: "I think these players have ample capital to advance their chains and infrastructure, and their goal is to control the payment rails, not just issue tokens. This is a very smart strategy, and they have the resources to succeed, which makes them a huge threat to Tron." Visa, the Blue and White Whale Given the limitations of existing public chains in payments, emerging stable chains are almost bound to compete for market share—even though they may remain "cordial" in public. An industry analyst who requested anonymity pointed out: "These new public chains are undoubtedly competing with existing L1s." But their real target is existing traditional giants, such as bank card networks. Circle CFO Jeremy Fox-Geen said on Tuesday's earnings call: "Visa processes over $10 trillion annually across both consumer-to-merchant and business-to-business payment rails." The analyst added that if Circle could capture 10% of Visa's transaction volume, the market opportunity would be enormous. He also mentioned that JPMorgan Chase also moves and settles "over $10 trillion" daily. Circle appears to be pursuing a dual strategy of collaboration and competition. On the one hand, the company allows customers to use USDC for settlement. According to a company report, as of April 30, 2025, Circle had settled $225 million in USDC transactions. However, this figure represents a tiny fraction of Visa's overall size. The impact on Circle's revenue is also limited, as its revenue structure relies heavily on reserve income. In the second quarter, Circle generated $634 million in reserve income from USDC collateral (invested in cash-like instruments), while only $24 million came from subscriptions and services (including fees from processing USDC transactions and cross-chain transfers). Going forward, Circle hopes to achieve a balance between these two revenue streams. This may become increasingly critical as President Trump plans to replace Federal Reserve Chairman Jerome Powell in the future, potentially pushing for a 300 basis point cut in the federal funds rate. Circle's reserve yield was 4.1% in the second quarter, a model that could be impacted if interest rates fall. Therefore, Circle's obvious decision is to bet on Arc, a base-layer blockchain purpose-built for payments. Allaire stated: "Financial institutions and regulators expect deterministic settlement finality, which Arc will deliver through Circle's vetted professional validators and novel consensus mechanism. Arc will also offer configurable privacy controls, including optional confidential transfers, which are critical for real-world commercial and financial applications while also supporting regulatory compliance." Most importantly, users on Arc do not need to use volatile L1 tokens to pay transaction fees.