This Week in Stablecoins: Crypto That Never Touches the Customer

Stablecoins have been around for five years, yet their purpose remains unclear. However, the technology is increasingly being integrated into payment systems without consumers or recipients needing to act like crypto users. Payroll, merchant acquiring, card networks, creator payouts, and corporate treasuries are just some of the areas where stablecoins are being incorporated into transactions, without customers having to interact with the underlying blockchain.

Regulators in the U.S. are now developing a framework that could treat stablecoin issuers more like regulated financial institutions. This shift in focus means that infrastructure providers are now tackling the challenge of letting customers fund transactions with digital assets while enabling merchants to receive the traditional currency and settlement experience they expect.

The report from PYMNTS Intelligence and Paymentology, titled "From Asset to Everyday Money: Making Digital Currencies Spendable," reveals that, while consumer interest in using cryptocurrencies and stablecoins for purchases is growing, trust issues and inconsistent payment experiences are still holding them back.

Industry efforts are being directed towards addressing these issues from a different angle. For instance, Rain's CEO, Farooq Malik, reported that over 100,000 merchants receive payments involving stablecoins, without the merchants even realizing that stablecoins are part of the transaction. Rain facilitates these stablecoin-funded payments through Visa's network, allowing merchants to experience a conventional payment environment, even when digital dollars are involved upstream in the payment chain.

Similarly, Kraken's newly launched U.S. Krak Card operates on the same principle from the consumer's perspective. Users can hold and spend over 600 currencies and assets at checkout, with the complexity of converting the asset into a usable form for merchants happening behind the transaction. Payment networks are now more interested in whether embracing a stablecoin liquidity layer can enhance funding, conversion, cross-border settlement, or treasury operations, rather than just whether consumers will choose "stablecoin" in addition to credit and debit cards.

By building controls around stablecoins, the industry is making them behave more like traditional enterprise payment instruments and less like raw cryptocurrencies. This approach aims to resolve the operational challenges that previously hindered the widespread use of stablecoins at scale. For instance, blockchain transactions often suffer from issues like sending money to the wrong address or network, making reversal impossible.

Mesh's verification layer, which supports verification across more than 300 wallets and exchanges, helps address such problems before payment execution, making stablecoins behave more like conventional payment instruments.

The same principles are also driving the interest of major players like X, which is reportedly considering stablecoin payouts for creators and influencers. Cross-border creator payments involve multiple currencies, fragmented banking access, and numerous small recipients, making stablecoins an attractive solution. Card networks have already adapted to these conditions by providing infrastructure for existing commerce environments.

However, managing acceptance, identity, compliance, fraud, currency conversion, liquidity, dispute processes, and connections to billions of existing accounts and merchant endpoints remains a crucial aspect of working with stablecoins. Established payment networks, like card networks, are well-positioned to handle these tasks. Even seemingly minor developments, such as Kroger expanding the availability of Fold's bitcoin gift card, further illustrate how familiar retail wrappers can make digital assets more accessible to consumers without requiring them to navigate conventional onboarding processes.

Despite industry advancements, most middle-market companies remain cautious about digital assets, with only 13% using stablecoins and 5% employing other cryptocurrencies. As stablecoin infrastructure continues to evolve, it is becoming increasingly relevant to established payment networks like Visa and Mastercard.