From Paul Veradittakit
By Ryan Barney and Mason Nystrom
Stablecoins are a trillion dollar opportunity.
That is not hyperbole.
While crypto is often thought of for its volatility, tokens, and liquidity-profile, the other side of the crypto barbell that more silently carries the banner for crypto adoption is stablecoins. For folks that are new here, these are cryptodollars that are pegged 1:1 with their underlying fiat using either algorithms (less popular) or reserves (more popular) to maintain the peg.
Stablecoins have gone from 3% of blockchain transactions in 2020 to now consistently representing over 50% of blockchain transactions. Stablecoins are crypto’s killer value proposition and unlike a lot of crypto are non-speculative in nature.
In a short period of time, stablecoins have showcased their ability to be one of the transformative innovations within crypto. And 2024 has been a breakout moment for stablecoins, transacting over ~$5 trillion in adjusted volume, over $1 billion transactions, across nearly 200 million accounts.
Stablecoins witnessed impressive growth during crypto’s last bull cycle, but this time around, stablecoins are being used beyond the DeFi ecosystem. Over the past few years, stablecoins have demonstrated the core value proposition – seamless cross-border payments, initially through access to U.S. dollars. Correspondingly, the geographies that see the greatest stablecoin growth are in emerging market corridors where access to dollars is in high demand.
Stablecoins offer a 10x value proposition to the traditional payment rails across both B2C payments (e.g. remittances) as well as in B2B cross-border transactions.
Cryptocurrencies have long promised a solution for the trillion dollar cross-border payment market. In 2024 there will be ~$40 trillion cross-border B2B payments made via traditional payment rails (excluding wholesale B2B payments) (Juniper Research). Within the consumer payment market, global remittances account for hundreds of billions in annual revenues. And now, stablecoins offer the means by which to make global, cross-border remittance payments on crypto rails a reality.
Amidst this more rapid adoption of stablecoins among both B2C and B2B payments, the supply of stablecoins onchain and transaction volume are reaching all-time highs.
The Trifecta: Better. Faster. Cheaper.
There’s an old adage in business – It’s rare that a product comes along and is able to offer something that is better, faster, and cheaper. Oftentimes, the product can be two of those things, but not all three. Stablecoins offer a better, faster, and cheaper way to move money around the world.
Stablecoins offer a 10x value proposition to traditional dollars for both businesses and consumers.
Better: Stablecoins offer a more accessible product, one that’s available 24/7, 365 days a year. They can be transmitted globally, across borders with ease and offer a programmability that makes stablecoins a superior product to fiat.
Faster: Stablecoins are unquestionably faster, settling instantly versus T-minus 2 or T-minus 1 days to settle.
Graphic from BVNK report
Cheaper: Stablecoins are cheaper to issue, transfer, and maintain than fiat. In 2023, Stripe facilitated over $1 trillion in payments volume with a fee structure that starts at 2.9% with an added 30 cent charge for domestic card-based transactions. On high throughput blockchains like Solana or Ethereum L2’s like Base, average stablecoin payments cost less than a cent.
The Emerging Stablecoin Stack
Although the stablecoin stack is ever-evolving, there are emerging layers:
- Merchant Layer – Applications and interfaces that originate retail or business transactions
- Stablecoin Orchestration - Providers that offer last mile on and off ramp, virtual accounts, cross-border stablecoin transfers, or stablecoin to fiat conversion
- FX and Liquidity - Providers that offer cross-border stablecoin interchange to other USD-pegged stablecoins, fiat, or regional stablecoins.
- Stablecoin Issuance - Companies or protocols that offer white-label stablecoins or first-party stablecoins with differentiated features
Similar to how crypto exchanges emerged in every corner of the world to cater to local participants, we anticipate a variety of crypto crossborder applications and processors to emerge as they cater to specific stablecoin corridors.
Just like in traditional finance and payments, building moats at each part of the stack is important to expand business opportunities beyond the initial value proposition. We have given some thought to which moats are defensible and can expand through time for each layer:
- Merchant Layer – Moats are made by owning a user’s or business’s stablecoin flow. This presents the opportunity to upsell other services, sell that users flow, and own the customer experience end to end. The Robinhood of stabledollars will emerge following a similar playbook.
- Stablecoin Orchestration - Licenses! Who will have the most reliable, global coverage at the cheapest rates. Will it be developer friendly? Look at the Stripe x Bridge acquisition to where and how moats form here.
- FX and Liquidity - Liquidity begets liquidity, flows beget value accrual. Any player that can source proprietary liquidity and price it effectively will outperform newer entrants without it. This is why some large exchanges service most of the stable flows in certain major corridors today. We also believe that a transition from OTC style FX to exchange style FX to onchain style FX will facilitate faster payment and transactions at this layer.
- Stablecoin Issuance - Issuance will commoditize over time and lead towards the inevitable launch of dozens of large brand stablecoins (e.g. PYUSD). As other layers of the stack grow (i.e., Merchant, Orchestration, and Liquidity) we expect these to be well positioned to launch their own stablecoins whether to capture yield, build their branded stablecoin, or build proprietary stablecoin liquidity and flows.
These layers merge over time as the layers of the stack get bundled. The merchant layer is in the best position to aggregate other layers of the stack to provide additional value to end users, increase margins, and create additional revenue streams. They will have the power to choose which FX to do themselves, which on/offramp rails to own or rent, and which issuers to use.
Moreover, we anticipate that stablecoin issuance will become increasingly common for large fintechs and ecommerce providers that facilitate significant flows. The next generation of neobanks and fintechs will be defined by stablecoins. As recently as this month we have heard interest in large card networks like Visa, banks like JPM, and asset managers like Blackrock to explore stablecoin projects of their own.
Looking Ahead: The Next Decade of Digital Dollars
The tokenization of dollars is still in its infancy.
Even as stablecoin MAUs reach ATHs, we believe adoption will continue as hundreds of millions of people interact with stablecoins over the next decade.
Importantly, stablecoin users continue to rise even amidst the volatility of exchanges volume. From bull to bear, stablecoins prevail and expand their digital reach.
As crypto rebuilds the financial system from the ground up, stablecoins exist in parallel, integrating into the traditional financial payments network.
While large players like Stripe, Visa, and Paypal have all entered the stablecoin market, we see abundant opportunity for new stablecoin focused protocols and companies.
Some ideas we’ve been excited about:
- Stablecoin Neobank – The advent of mobile enabled Neobanks to accrue significant value. Crypto Neobanks will not only provide best in class payment rails, but they’ll enable the next generation of consumer financial apps that aggregate payments, trading, yield, lending, and other core financial services.
- Onchain FX – while today most stablecoins are USD-pegged, we expect more currencies to come onchain, enabling an onchain FX layer to develop. More immediately, with the abundance of USD-pegged yield bearing stablecoins offering varying yields and value propositions, we anticipate a need for a FX layer for these initial USD-pegged stablecoins.
- Telegram payment rails – Telegram offers a native wallet for payments, but we also see a unique opportunity to leverage new interfaces like TG mini-apps to build a new payment layer on top of Telegram.
- Remittances on Crypto Rails – Remitly. Wise. Intermex. Ria. MoneyGram. Western Union. All remittance companies, each with hundreds of millions to billions in annual revenues. Remittance companies take fixed fees which are meaningful on low dollar amounts (e.g. $6 on a $60 dollar transaction) or high fees 30-100bps per transaction. Stablecoins reduce the cost to send money globally and make the process seamless. Money. “The remittance margin is the stablecoin opportunity.” - Jeff “Stables” Besos
- Global Venmo – Building P2P rails to bring Venmo like capabilities onto a global scale. Remittance is typically a one sided flow, this would be serving the social commerce use case in a more two sided flow.
- Stablecoin powered treasury management and operations – As the fintech landscape expanded from payments with PayPal, it created multi-billion dollar opportunities across wealth management, personal finance, payroll, business spend and expense management, Neobanks, financial accounting and reporting, lending/mortgages, among others. Similarly, stablecoins offer an opportunity to rebuild many of these tedious processes with better rails, powered by stablecoins. In the near term, treasury management and operations deal with complex operations which makes the value proposition for stablecoins ripe for disruption.
Closing Thoughts
Stablecoins represent a trillion dollar opportunity. We’re looking to back the founders and visionaries who see what stablecoin can be, unburned by what the financial system has been.
If you are a founder building stablecoins, a current operator at a traditional fintech or payments company interested in working with stablecoins, or anyone with views on the space – please don’t hesitate to reach out to [email protected] and [email protected].
In addition, Pantera is looking to host stablecoin focused events in SF and New York over the next year. Spots are limited but if you are interested please sign up here.
- Paul Veradittakit
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