Stablecoins are an opportunity to reboot a closed, centralized global financial system

Stripe completed its acquisition of stablecoin platform Bridge in February — its largest acquisition to date, following its reopening of crypto payments to U.S. merchants. More broadly, the acquisition marks the first explicit acknowledgment by the payments industry that stablecoins are poised to move further into the mainstream, following years of steady growth. Stablecoin transactions are expected to reach $15.6 trillion in 2024, already on par with Visa’s volume.

So, what is a stablecoin? Stablecoins are crypto assets pegged to a fiat currency, usually the U.S. dollar. The most common stablecoins are “fiat-reserved stablecoins” — such as USDC (or “Dollar Coin”) issued by Circle, which is backed 1:1 by short-term U.S. Treasuries and bank deposits.

Over the past year, stablecoin adoption has grown significantly among consumers, especially in countries with volatile currencies (such as Nigeria or Argentina), countries with high remittance routing costs (such as Colombia), and countries with low international credit card usage (such as Pakistan). Stablecoins allow users to store assets in U.S. dollars, make fast and low-cost global remittances, and spend on international websites that accept stablecoins (even if local cards are not accepted).

Stablecoins are also beneficial to businesses, from small merchants to large companies. Stripe CEO Patrick Collison called it a "room-temperature superconductor in the financial services sector" on X (formerly Twitter), and further pointed out that "thanks to stablecoins, businesses around the world will enjoy significant speed improvements, expanded coverage, and cost optimization in the coming years." Bridge itself is also a developer-centric payment company (similar to Stripe) - developers can use an API to easily convert between any two US dollar formats and operate with stablecoins. Bridge provides three core services, as described by the company:

• Coordination function: Developers can transfer, store and receive stablecoins with a few lines of code. Bridge will take care of all compliance requirements and shield the underlying technical complexity;

• Stablecoin issuance: Developers can issue their own stablecoins in minutes. Bridge will invest its reserve funds in U.S. Treasuries and share the profits with developers;

• Fund transfer: Developers can transfer funds globally and provide U.S. dollar and euro accounts for individuals and businesses.

Bridge's current use cases include: Starlink uses Bridge to repatriate funds from sales in Argentina; Nigerian users use stablecoins to pay for YouTube Premium or ChatGPT; and small businesses in the United States accept stablecoin payments from global customers.

Stripe's acquisition of Bridge is in line with its mission to "increase the GDP of the Internet." Specifically, stablecoins bring two advantages to Stripe: first, stablecoins can reduce costs, reduce transaction failures, and increase conversion rates in certain cross-border payment channels, especially in countries with weak payment infrastructure (Stripe has fewer partners); second, stablecoins provide merchants with a low-cost alternative payment method other than credit cards. In 2024, Stripe achieved a 38% growth, with a total payment volume of more than $1.4 trillion; this acquisition is expected to further promote its global growth with the help of stablecoins.

From the perspective of the entire fintech industry, the current large-scale application of stablecoins still faces three major obstacles: the first is that the regulatory framework of various countries is still unclear, although it is improving rapidly; the second is the poor user experience, especially in traditional banks and payment channels that have not yet been popularized; the third is the trust threshold, and some companies and users are still waiting and watching. But Chris Dixon, partner of a16z, believes that stablecoins are an opportunity to restart the current closed, centralized and fragmented global financial system. He calls stablecoins "the WhatsApp moment of money" and believes that it is the first technology that can truly realize "money is as open, instant and borderless as email."

In addition to applications such as cross-border payments, stablecoins can also build a new generation of financial infrastructure to help AI agents break through the current financial system designed with people at the core. For example, when an AI agent wants to pay for you, whose card or wallet should it use? Who authorizes it? How is risk attribution determined? If an AI wants to pay another AI, how should it do so? Stablecoins can solve these problems because they are based on blockchain and are programmable - developers can set budget rules, automatically trigger conditional payments, and even implement micropayments. Stripe has proposed a solution through its agent toolkit, allowing AI agents to create disposable virtual cards for e-commerce transactions. Currently, the toolkit is used by Perplexity to realize its automated shopping experience. The integration of stablecoins will be a further expansion and enhancement of this toolkit.