The Stablecoin Wars: The Thread

Stablecoins were graduating from the playpen of crypto traders and DeFi “degens” to the main stage of mainstream payments. That fight is now on—albeit mostly off-camera—as a new wave of challengers readies its lines against incumbents Tether and Circle.

With flawless execution, a determined stablecoin CEO could still pull off the Herculean feat of turning a plain dollar-jar into something unmistakably special…

Short of that breakthrough, though, the industry faces a long slog of competition and fragmentation that could squeeze margins until they’re as thin—and as invisible—as your household electricity bill.

The history of electricity provides a warning. In the 1880s, Edison’s direct-current glow from Pearl Street Station turned upscale Manhattan homes into status symbols, while Westinghouse’s alternating current mounted a fierce challenge in the “War of the Currents.”

By the 1920s, AC’s scalability and standardized grids had prevailed, stripping electrons of their branding—utilities now competed on price, not panache. Once the meter started ticking, nobody cared who spun the turbines, only who did it cheapest.

When it’s time to wrap dollar liabilities, banks and other heavyweight financial institutions will get the crisp ribbon; everyone else is left with scotch tape and yesterday’s newspaper.

The logic is simple: the closer you are to the central-bank vault, the lower your cost of minting digital dollars. Stablecoins remain the one part of crypto still tethered to the very TradFi institutions purists dismiss.

Yes, software still eats the world, and a savvy issuer could scale fast enough. But a well-armed phalanx of fintechs & banks has a survival-level interest in stopping that. The real question, then, isn’t whether software will eat the world, but whose software gets to do that.

Whether stablecoins become distinct franchises or sink into commodity status will be decided by the strategies forged right now. To see why execution matters so much—and why commoditization remains the default—start with first principles and follow the money.

At a high level, a stablecoin issuer has just two revenue levers. One is skimming the stock—retaining a slice of the yield from the reserve assets backing each coin. The other is taxing the flow—charging fees whenever the coins move. Both levers come with their own headaches.

Strip away the jargon and stablecoins really do just two things: move money (medium of exchange) and hold money (store of value). In practice the two functions blur but treating them as separate buckets makes the market’s trajectory much clearer.

Because there’s no single, always-on rail that links national instant-payment systems, payments-orchestration startups have improvised a real-time bridge: convert local fiat into a stablecoin, send the coin over a blockchain, then swap back to fiat on the other side.

The double conversion looks clunky on paper, yet the money arrives instantly and settlement is final—so that’s the route some businesses now use for cross-border B2B payments, with a smaller but growing share in remittances too.

Based on conversations with the payments teams actually running these “sandwich” corridors—and after stripping out crypto-native noise like high-frequency bots and other gymnastics—I estimate that roughly $10 billion to $30 billion a month already moves through this channel.

The “stablecoin sandwich”—and its off-shoots in merchant checkout, gig-economy payouts, and more—is only the opening act. It’s classic infrastructure inversion: the clumsy stage where a new technology has to coexist with the old one.

As businesses and consumers get comfortable, they’ll stop ducking in and out and start keeping balances in stablecoins. That’s when the second big job of stablecoins—the store-of-value role—steps into the spotlight.

Stablecoins already function as onchain dollar vaults for people who lack easy access to greenbacks—a big reason Tether has exploded across Latin America, Africa, and parts of Asia, especially where hyperinflation burns through local money.

But on the store-of-value front, stablecoins are about to face stiff competition from a growing stack of tokenized assets—onchain U.S. Treasuries, money-market funds, and whatever else Wall Street can wrap in code.

Standalone issuers must race to carve out real share in everyday payments—fast—if they hope to keep their strategic edge. Fail to embed their coins in mainstream use cases, and the rest of the ecosystem will happily flatten them into just another commodity.

Leading crypto exchanges and neobanks aren’t about to let one issuer park a tank on their front lawn. Coinbase just gave PayPal’s PYUSD marquee placement—right beside, but never above, its house favorite USDC.

Robinhood and Kraken have meanwhile enlisted in Paxos’s Global Dollar Network (USDG), tossing yet another dollar-pegged contender into the arena. And industry watchers fully expect Revolut and Stripe to unveil coins of their own…

…a smart defensive move before the modular stablecoin stack lets rivals skate straight into their core business.

For card networks the stakes are even higher—losing control of settlement simply isn’t an option.

Circle, for its part, just introduced the Circle Payments Network (CPN)—an ambitious bid to build a full-stack rail that could one day rival the card networks themselves.

If it blinks, nimble orchestration startups—Bridge (now tucked inside Stripe) and BVNK—will happily slot themselves between wallets and merchants and choose the winning coin for every flow.

Banks will experiment with every shiny new rail, but their true goal is to keep their own tokenized dollars front-and-center—or, failing that, to claim a slice of the yield on the fiat reserves that stablecoin issuers have to park in their vaults.

Large digital platforms won’t sit on the sidelines either. With distribution that spans billions of users, they can press issuers for better economics and fold stablecoins into their flows—all while turning payments into just another feature of a much larger ecosystem.

Step back, and the outlines of the endgame come into focus. Only banks, fintechs, startups, and platform giants agile enough to execute this open-payments play—fast and flawlessly—will win.

Unless today’s issuers can break into mainstream payments and finance faster than the incumbents can mint their own coins, stablecoins will be relegated to background plumbing—fast, dependable, and about as thrilling as the wire behind your drywall.

In that world, the spoils won’t go to whoever mints the slickest dollar clone, but to whoever owns the outlets— the wallets, apps, and merchant relationships—through which those dollars ultimately flow.

The stablecoin wars end when no one notices the coins anymore—only the outlets. And many of those outlets, inconveniently, are already spoken for.

Full article on @ForbesCrypto: forbes.com

Originally published as a thread on X.