January 2025: A Very Stable Future - real world applications for stablecoins

A Very Stable Conference is only 6 weeks away, and we're discovering more enterprise use cases for stablecoins every day.

Stablecoins are the crypto primitive that have the greatest product market fit with non-crypto users. This is because around the world, the structural demand for US dollars is probably 10x - 100x the available supply (by “structural” here I mean that if you don’t live in America, it is absurdly hard to consistently access dollars unless you’re rich. Most financial institutions simply did not offer a product for it). As stablecoin adoption has expanded over the last half decade I’ve grown increasingly curious about how more traditional (non crypto, and in many cases non-financial) institutions could solve problems using stablecoins. While I’m insanely interested in learning more about this topic, I have found stablecoin-related conversations are often too centered around crypto use cases, or too high level and removed from practical considerations faced by potential customers, especially at the enterprise/institution level.

To patch this gap, I’m organizing a one day-conference on stablecoins with my good friend Aaron Frank where practitioners from the stablecoin world will meet finance professionals across the CFO Suite, Corporate Treasury, Payments and the Correspondent Banking universe. The invite-only event will take place in San Francisco on Wednesday February 12, 2025. Confirmed speakers include:

• Jeremy Allaire, founder & CEO at Circle

• Jackie Reses, founder & CEO at Lead Bank

• Neetika Bansal, Business Lead for Money as a Service at Stripe

• Zach Abrams, founder & CEO at Bridge

• Cuy Sheffield, Head of Crypto at Visa

• Ronak Daya, Head of Product at Paxos

• Sigal Mandelker, Partner at Ribbit & previously Undersecretary for Terrorism & Financial Intelligence at the US Treasury

With more to come. If you’d like to attend please sign up here. And in particular, if you run a financial payments or treasury function at a non-financial company, I’d love to hear from you.

If you believe that the long term adoption of stablecoins (and crypto in general) will come from existing crypto users, this is not for you. I believe that dramatic adoption of stablecoins will come from large enterprises and financial institutions a) moving their existing fiat workloads (work flows? Money flows? Not exactly sure what to call this) onto stablecoin infrastructure and b) unlocking marginal use cases that were simply not possible in fiat-space. If you buy this fiat > stable thesis, then this conference is for you. Today, there are heads of payments, finance, and treasury at very large non financial companies, who don’t yet realize that they can use stablecoins to achieve their business objectives better, faster and cheaper. We created this conference to enable these leaders to meet folks building the stablecoin products for them.

– 

I’ve written here and here about the myriad problems that stablecoins can help solve. And their ability to flatten time-to-money for transactions around the world is really exciting. At the conference we’ll explore several institutional and enterprise use cases that move trillions of dollars worth of value each year, and that could benefit from stablecoins along a cost, speed, operational or experience axis. How to reap these benefits is precisely what we'll discuss at the conference. Examples of these use cases are below: 

People around the world can now save in dollars

For decades, wealthy elites in poor countries have held excess savings in reserve currencies (GBP for much of the last 200 years, USD and EUR more recently) as “stable” stores of value. frequently the strategy was to hold a mix of liquid (securities) and hard assets (eg real estate in downtown London). With stablecoins anyone (and in particular, folks on the low end of the economic spectrum) in any of these countries can now save in a “stable” currency, with relatively low fees and transaction costs, regardless of their wealth level. 

This is pretty transformational: in most countries you need to transact in the local currency,  but it previously wasnt possible to save in non-local currency at any scale. Now it is.

• Consumer products enabling this: AirTM, Dolar, Chipper Cash, Parallax, Sling Money, Littio, Belo.

• SMB products enabling this: Dakota, Brale

• Infrastructure enablers: Brale, Bridge, BVNK, Hifi[3], and Portal[2,3] 

I’m sure there are others - if you’re building one of these I’d love to learn more.

Launch Globally on Day 1

The last 2 generations of digital wallets (like Paypal in gen1, and Cash App and Venmo in gen2) launched as US-first products before stablecoin infrastructure existed. While Paypal figured out how to go global over the last 20 years through a combination of acquisitions and integrating with local infrastructure around the world, Venmo and Cash App have remained constrained to the US (with very small footprints outside). With stablecoin infrastructure, money products can launch globally on day 1 with USD balances (held in an stablecoin instrument like USDC) available to all users, and instant money movement in and out of the US. 

By providing USD balances to KYC-ed consumers around the world, digital wallets like Cash App and Venmo might have been able to reach global scale without having to invest in local stored balance infrastructure in each country. That being said, most markets now have local p2p and digital wallet champions so the novelty ship has sailed. What has insane demand and hasn’t been totally captured yet? The ability to save in US-backed stablecoins, from a company with a material, trusted brand. [1]

I think the current best example of this globally is what the team at Sling money is doing, but I’m sure there are others. At an infrastructure level, providers like Bridge and BVNK are enabling this. 

Correspondent banking & Global Treasury on stables

In general terms, correspondent banking can be defined as “an arrangement under which one bank (correspondent) holds deposits owned by other banks (respondents) and provides payment and other services to those respondent banks”. A simplified model for correspondent banking looks like this:

• Bank A in Indonesia holds deposits at Bank B in the US

• When a customer of Bank A wants to pay a recipient in the US (or move money between it’s internal accounts), Bank A instructs Bank B to initiate the payment to the recipient’s account and routing number (this might happen via wire or ACH deposit)

• Later, Bank A “tops up” their “account” at Bank B.

Stablecoins can be a modern, fast alternative to correspondent banking. A simplified model for a stablecoin alternative might look like

• Bank A in Indonesia holds USDC somewhere (eg at Circle, or in a self-custodied wallet)

• When a customer of Bank A wants to pay a recipient in the US, Bank A onramps to USDC, then uses a service like Bridge to initiate the payment to an endpoint of the recipients choice (account +  routing number, card, or wallet address of the recipient’s choice)

• [No third step]

Relative to traditional correspondent banking, this can happen in minutes, be initiated 24/7/365 and is self reconciling (as it’s on-chain). This is simultaneously a better end-customer experience for both the sender and the recipient (so Bank A’s customer can initiate the payment at any time and ensure the recipient receives it in real time), and likely cheaper from a transaction cost and net working capital perspective. Going one step further:

• Bank A in Indonesia holds Rupiahs

• When a customer of Bank A wants to pay a recipient in the US, Bank A mints a stablecoin of their own, then uses a service like Bridge to initiate the payment to an endpoint of the recipients choice (account +  routing number, card, wallet address)

• [No third step]

Similar to the second simplified model, with Bank A maintaining control and continuing to earn yield on the payment amount if the recipient accepts the payment in a wallet address. This modern alternative is possible and available today.  

For the largest companies in the world, who bank with the major multinational banks, and do significant volume, they will often have a function internally that actually trades FX and interfaces with the FX desks at their banks. They get fairly tight FX spreads and don’t really have problems with liquidity. Smaller companies and SMBs, however, who have lower volume and/or transact less frequently, often pay a tax - either in speed to trade or wider spreads/commissions, as they will often use tools built more for consumers (like Moneygram or Viamericas) or more recently services like Wise. Even then, all these customers (large and small) don’t have access to 24/7/365 crossborder money movement. Most don’t even realize the working capital impact it could have to not have your money trapped overseas for 2/7th of the year. Outside of rates, transaction costs, and speed, stablecoins also make money movement available literally more of the time. My favorite recent example of this is SpaceX utilizing stablecoins to move from Argentine Pesos to USD, using Bridge: https://x.com/AutismCapital/status/1870291626230460846

The second part of the innovation here is that correspondent banking is still very much a relationship business. Moving to a stable coin based infrastructure enables even small banks around the world to directly themselves or enable their customers to remit payment around the world without having to form a relationship with a bank in the destination country. Correspondent banking for a large entity like Citibank is very much solved. For smaller banks doing longtail of currency pairs, it is absolutely not. Some companies working on this are Sphere and Connect.

Low cost, instant payments worldwide

Many countries now have instant payment rails with reasonable adoption(e.g. Pix in Brazil, UPI in India, Fednow/RTP in the US). However, moving money around the world, even between these places, is rarely instantaneous. 

Stablecoins makes these rails interoperable. If you’re a crossborder payment service, you can now provide your customers real time payments across remittance corridors (and likely more coming soon) by chaining a local instant payment rail with stablecoins in-between:

1. PIX > USDC > UPI 

2. UPI > USDC > Fednow

3. RTP > USDC > PIX >

Here’s how this might work:

Essentially there’s an opportunity to build a new global instant payment network for enterprise use cases that looks like chaining local instant rails and adding new ones as they come online.  

If you’re a multinational operating in these markets, the combination of correspondent banking infrastructure built on stablecoin infrastructure and low cost instant rails around the world mean that you can repatriate funds much more meaningfully and quickly than was historically possible, and in many cases without a bank intermediary. 

This kind of rhymes with what the team at Connect is doing, but havent seen much about it (despite how large I think this can be). If this is you, I’d love to learn about your approach.

Payouts

Many companies are being built around the opportunity to compliantly pay workers around the world. These include traditional payroll providers like ADP and startups like Gusto and Remote.com.[2] This feels fairly solved (as in I’ve seen many companies offering this service), but I anticipate that employers around the world will need their tools to appropriately handle cases like deductions, tax reporting to local authorities and more. 

Barriers to Enterprise & Institutional Adoption

If you believe in a future where large corporations and institutions around the world utilize stablecoins for payments, treasury, and foreign exchange, many things still need to be built to enable that future.

A large enterprise can now quite easily experiment with stablecoins. However, moving a core activity onto stables at scale in an automated way requires reconciling to the enterprise's systems of record with good exception handling. Otherwise, whatever savings on transaction cost, speed, or net working capital can easily be subsumed by expensive human bandwidth needing to handle exceptions. Some of the areas that are top of mind and example questions that are solved reasonably well today in meatspace)

• Accounting: how do onchain transactions get into Netsuite (or pick your ERP of choice), rolled up into monthly/quarterly close, and ultimately into financial statements

• Reconciliation: how are financial activities tied to operational ones?

• Payments: how do suppliers/vendors specify payment instruments? How are exceptions handled (eg what happens when you send a large sum to the wrong address? In the card and ACH world, a lot of an enterprises assumptions about how to handle exceptions are based on the ability to dispute transactions. What happens when these transactions are onchain and truly irreversible? what happens if someone fat fingers an address and a large sum goes into the ether?) How are they investigated + resolved?

• Foreign Exchange & Liquidity: how deep are the orderbooks in the currency pairs that matter to the firm? (the shallower they are, the more expensive they are to transact in). I’ve seen at least one case where an early adopter enterprise wanted to move $3m from Argentine pesos to USD via USDT and it took several days to work through the order. This amount is trivial from a fiat FX perspective and without fixing it, it’s just gonna take a while for enterprise adoption to take off.

If you’re building solutions to any of these barriers, I’d love to meet and learn about how you’re going after it. I anticipate that the largest companies will start adopting stablecoins very gradually, and that the steady state will mix fiat and stablecoin-based transactions, with companies making decisions based on the best mix of price, speed, liquidity, and operational ease. If this is true, will existing tools extend functionality to treat stables as another currency type or instrument? Or will brand new tools get built from scratch around stablecoin/ hybrid infrastructures? 

What tooling doesn’t yet exist?

Everything described above already exists and is already happening at a small scale. I believe they’ll only grow in volume. For that to happen; for financial institutions, enterprises and consumers to trust stablecoin infrastructure with ever larger sums of money, new tools need to be built. This is for everything from:

• Know-Your-Customer programs: what's the default mechanism that financial institutions trust to ensure that the end-holder of a wallet is not on the OFAC SDN list? The USBC approach (new permissioned L2 + privacy preserving identity verification) feels like what will eventually need to happen, but there are probably other approaches out there

• Exception Management: Fraud, risk and risk operations in a world where payments no longer flow only on weekdays, and more. Even the regulatory playbooks around these innovations probably need to change. 

• Reg E (and Reg E equivalents): local payment schemes often have well defined, regulatorily driven consumer protections. Stablecoins do not yet (and the odds are these won’t spontaneously develop through market forces). 

• Currency visibility & controls: monetary authorities have a set of tools that (mostly) assumes fund flows and foreign exchange are in fiat. Central banks and treasury departments will need tools that distinguish between local currency being used to buy $FARTCOIN vs being used to buy USDC, at a minimum to understand actual exchange flows, but probably also for anti money laundering etc.

These kinds of tools are mission critical for enterprise adoption and making regulators comfortable, and represent one of the most fertile areas to explore. Similarly to above, if you’re solving these problems, would love to chat.

One more policy + regulatory thing I’m pretty interested in learning about (I genuinely have no idea who is knowledgeable about this so if you are, please reach out) is what it means geopolitically to make USD available to people around the world.

• If you’re Australia, are you worried that your citizens will start saving in USD (via USDC?). Are you worried about what that does to Australian Dollars? (or any country’s local currency?)

• If US consumers and SMBs start saving in stables as a way to earn more interest on balances, does that drain deposit capital that would otherwise be available for maturity transformation in the US banking system? How does the US weigh the costs of this effect vs. the benefit of more demand for US Treasurys (and the concomitant lower borrowing costs for the US/reserve status (have written about this before but I think this effect is only going to be more pronounced)

• Blockchains make transactions far more traceable, so if you’re the US Government, do you support the movement of USD onchain because it enriches financial crime forensics?

• How does the US weigh the net impact of higher demand for dollars increasing the strength of the dollar in general, vs the negative impact on US exporters?

• Who's doing SAR filings on USDC accounts (or the equivalent)? Streaming payments via stablecoins (think of several microtransactions per second) would almost certainly break/defeat most bank’s monitoring infrastructure

• How much non us citizen/retail usd demand is true long term savings vs everyday spend and what’s the implication for duration/maturity transformation

• If you’re a medium sized corporate in Indonesia (or any country with meaningful demand for usd) and you could manage your treasury in usd, would you do 0%, 20% or 80%?

• If a stablecoin emerges that exists entirely within the US regulatory perimeter and essentially looks like checking account capital from a bank‘s perspective then over the long run is it reasonable to assume it will have a similar duration profile as checking accounts for US citizens? Or would we still consider it “hot” money (or super low duration)?

• What’s the net impact of stables on US funding/treasurys? Are they just mega amplified demand for TBills (or the front end of the yield curve in general)?

These are all written from a US centric perspective, but for every country with the same dynamics (it won’t be the US forever) the same questions apply. More broadly, A Very Stable Conference will be an opportunity to explore these topics and more. You’ll get to learn from a mix of practitioners already building these tools, early adopters who are using them, and scaled enterprises as well financial institutions who will eventually become adopters of stablecoins. Again, if you’d like to attend please sign up here. 

Thanks to Jim Esposito, Zack Rosen, Kerry Kellogg, Cuy Sheffield, Nico Chinot, Brandon Carl, Temi Omojola, and Aaron Frank for reading in advance.

[1] This makes me question why Venmo hasn’t launched with PYUSD yet. 

[2] In full disclosure I’m an investor in Bridge, Portal, Lead Bank, and Remote.com

[3] I think the programmable wallet + bank account instrument infrastructure differs slightly from the other infrastructure enablers as it enables an end user/customer to define behavior that works for them on a continuous basis (eg every time I get USDC at this wallet please convert it into dollars automatically)