Stablecoins offer cheap and fast cross-border payments, but their ease of use has prevented them from becoming mainstream until now. Visa’s Cuy Sheffield said it is no longer always clear to users when stablecoins are being used for payments. He mentioned the so-called “stablecoin sandwich,” where someone makes a traditional payment and a payment service provider sends a stablecoin to the destination. The stablecoin is then converted into local currency with the last mile sent through local real-time payment systems.
“If you were using stablecoins a year ago, it was very blatant,” Sheffield said during a panel discussion at DC Fintech Week. “You knew you were using a stablecoin. Typically you had to look for a cryptocurrency wallet and figure out a way to manage your private keys. We’re starting to see both wallets have a front-end interface that looks like another fiat wallet, so they’re using stablecoins on the back end.”
PayPal’s José Fernández da Ponte pointed out that in today’s cross-border payments, most bank customers don’t know much about correspondent banking or Swift. Stablecoins evolve in a similar way.
Sheffield said that for non-cryptocurrency users, the concept of having to make a payment in dollars and then pay for gas using the blockchain’s native token makes no sense, adding that users are not required to engage with cryptocurrencies. He emphasized that this means that it must be done. Some new payment apps are starting to abstract away these gas prices.
As we move into the mainstream, we need to protect consumers.
Stablecoin risks and consumer protection
Mr Sheffield raised the need for standards to reduce consumer risk. If tokens do not comply with the standards, they should not be allowed to be called stablecoins. “If you can compare two products sold to consumers as stablecoins, they can be completely different. Does it have fiat assets behind it? If so, where are its reserves stored? What kind of audits and certifications are done? So if you’re being offered a stablecoin, it’s very difficult for consumers to have to go inside and do their due diligence. I think it’s a great environment,” Sheffield said.
Anna Yuan, who previously worked at Solana and is currently the founder of Perena, said that the crypto world is currently focused on stablecoins as narrow bank-style tokens, and on the other hand, for assets such as cryptocurrencies and trade finance. We believe that we are distinguishing between asset reference tokens that are fixed in currencies that have reserves. . “These should not be considered for everyday average consumer use cases. These are for the crypto fraternity,” she said. This will include multi-billion dollar coins such as DAI and Ethena.
The stablecoin sandwich and the current regulatory landscape come with risks. Currently, many stablecoin holders are choosing to store their stablecoins, especially in emerging markets. To abstract away blockchain gas costs, most apps assume the role of an administrator. Users also don’t know which stablecoins they own, and not all stablecoins are the same. Many of these app providers are unlicensed.
“That means your assets are no longer yours, and why would you use one when you can use a trusted institution like PayPal to store your assets?” she says. I did. She worries that a bad experience “could seriously damage people’s perception of the stablecoin sandwich in the long run.” Yuan also stressed the importance of not abolishing self-custody for those who wish to do so.
banks and stablecoins
Meanwhile, Sheffield said Visa is spending a lot of time considering what role banks will play. Until now, stablecoins were not issued by banks, but now many major banks are participating. He mentioned Societe Generale Forge and its EURCV stablecoin. Additionally, Visa recently announced that it will support BBVA’s exploration of stablecoins.
We recently published a report on tokenized deposits and bank stablecoins. The report outlines over 70 projects, of which over 20 are related to stablecoins.
