š³ Visa sees the ‘stablecoin sandwich’ as path to stablecoins going mainstream š³
Visa is paving the way for stablecoins to go mainstream! š³ While stablecoins have been praised for their fast and cheap cross-border payments, usability issues have held them backāuntil now. Visaās Cuy Sheffield introduced the concept of a āstablecoin
āIf you used a stablecoin a year ago, it was very explicit,ā said Mr Sheffield, during a DC Fintech Week panel. āYou knew you were using a stablecoin. You usually had to seek out a crypto wallet, you had to figure out how to manage your private key. Weāre starting to see both major fintechs, existing wallets like PayPal and others put frontend interfaces on it that just look like another fiat wallet. And so they use stablecoins on the backend.ā
PayPalās Jose Fernandez da Ponte noted that with cross border payments today, most bank customers donāt know much about correspondent banking or Swift. Stablecoins will evolve in a similar manner.
Mr Sheffield highlighted that for non-crypto users, the concept of making a payment in dollars then having to pay gas fees using the blockchainās native token doesnāt make sense, and means the user has to get involved in crypto. Some of the new payment apps are starting to abstract away these gas fees.
With a move into mainstream, thereās a need for consumer protection.
Stablecoin risks and consumer protection
Mr Sheffield raised the need for standards to reduce consumer risk. Where tokens donāt comply with the standards, they shouldnāt be allowed to be called stablecoins. āIf you can compare two products that are marketed to consumers as stablecoins, they could be entirely different around: is there a fiat asset behind it? If so, where are those reserves held? What audits or attestations are done? So I think itās a really challenging environment for consumers if youāre being offered a stablecoin to have to go under the hood and do due diligence,ā said Mr Sheffield.
Anna Yuan, formerly with Solana and now the founder of Perena, believes the crypto world now distinguishes between stablecoins as narrow banking-style tokens, versus asset referenced tokens that peg to a currency with reserves in assets such as crypto, trade finance or something else. āThose should not be considered for daily average consumer use cases. Those are for the crypto bros,ā she said. That would include mutli billion dollar coins such as the DAI and Ethena.
Stablecoin sandwiches and the current regulatory status carry risks. Today, many stablecoin holders are choosing to custody their own stablecoins, particularly in emerging markets. To abstract away blockchain gas costs, most apps take on the role of custodian. The users also donāt know which stablecoins they own and not all stablecoins are equal. Many of these app providers are not licensed.
āThat means your assets are no longer yours. And why would you use that when you could use a trusted entity like PayPal to custody your assets,ā she said. Sheās concerned that bad experiences ācould really hurt peopleās perceptions of stablecoin sandwiches in the long run.ā Ms Yuan also emphasized that itās important not to do away with self custody for those that want it.
Banks and stablecoins
Meanwhile, Mr Sheffield said Visa spends a lot of time exploring what role banks are going to play. Until now stablecoins were not issued by banks, but a number of large banks are now getting involved. He referred to Societe Generale Forge and its EURCV stablecoin. Plus, Visa recently announced its helping BBVA explore stablecoins.
https://www.ledgerinsights.com/visa-sees-the-stablecoin-sandwich-as-path-to-stablecoins-going-mainstream/