Mastercard: 90% of Stablecoin Transactions Remain in Crypto Ecosystem

The Chief Product Officer of Mastercard has highlighted the challenges faced by stablecoins in transitioning from the cryptocurrency realm to everyday payment systems. Despite the growing popularity of stablecoins, the official noted that a significant portion, approximately 90%, of their transaction volume remains confined within the cryptocurrency ecosystem. This indicates that stablecoins are still far from being widely accepted as a practical tool for daily transactions.

The primary obstacle lies in the integration of stablecoins into existing payment infrastructures. The official emphasized that the path to mainstream adoption is fraught with difficulties, including regulatory hurdles and technological barriers. These challenges must be addressed before stablecoins can become a viable option for everyday payments.

Mastercard is positioning itself as a bridge between digital assets and the traditional financial system. The company aims to provide the necessary infrastructure for the scalable application of stablecoins by offering global merchant acceptance, security assurances, and compliance. This strategy has been in the works for several years, with Mastercard and Visa having initiated stablecoin-related plans as early as 2021. Recently, Mastercard collaborated with Paxos Trust Company to facilitate the minting and redemption of the USDG stablecoin. Additionally, Mastercard supports other stablecoins such as FIUSD by Fiserv, PYUSD by PayPal, and USDC by Circle, demonstrating its commitment to becoming a key player in the stablecoin infrastructure.

The official pointed out that the current use of stablecoins is predominantly within the cryptocurrency trading sphere, where investors use these dollar-pegged tokens to buy and sell digital assets. While companies like Shopify and Coinbase have taken steps to promote the use of stablecoins for everyday consumer payments, the official believes that low consumer acceptance and additional operational friction in online checkout processes pose significant barriers that are difficult to overcome in the short term.

The official stated that stablecoins lack a clear value proposition in routine personal-to-merchant payments, essentially functioning like prepaid cards that can only be used at specific merchants. Stablecoins were initially promoted as a way to bypass card networks and their associated fees, but these networks are now repositioning themselves as partners by integrating stablecoins into their systems to enhance their utility.

The Chief Commercial Payment Officer of Mastercard noted that the conversion between stablecoins and fiat currencies (on-ramping and off-ramping) is a necessary step due to the current direct usability of fiat currencies. The cost of stablecoins is just one part of the overall cost of end-to-end usage, which also includes expenses related to on-ramping, off-ramping, foreign exchange, compliance, and settlement.

As legislation related to stablecoins progresses in the United States, discussions around their role in the financial ecosystem have intensified. The impending regulatory guidelines are attracting new players to the digital asset space and prompting financial institutions to consider their position within this evolving industry. Concerns about funds being held as stablecoin balances rather than bank deposits have elevated the priority of this issue.

The official mentioned that financial institutions worldwide are grappling with questions about how to navigate this landscape, including whether to issue stablecoins or deposit tokens and how to align their products with market needs. Many issuers are exploring this area to ensure they retain their deposits.

Beyond financial institutions, governments and central banks around the world are also considering how to foster innovation within their domestic ecosystems to prevent economic dollarization. The official predicted that over time, a variety of solutions will emerge to address these challenges.