Stablecoins Target Retail Profits as Swipe Fees Face Disruption

Circle Internet Group Inc. and Tether Inc. have issued a combined $12 billion in stablecoins, signaling a growing interest in digital assets for payment and financial services. The issuance of these stablecoins, pegged to the U.S. dollar, reflects an increasing adoption of blockchain-based solutions for fast and low-cost transactions. These tokens offer a viable alternative to traditional credit card payments, which in the United States remain burdened by high swipe fees. Retailers and airlines are exploring the use of stablecoins to cut down these transaction costs, with the potential to fund loyalty programs and boost profit margins. For instance, major retailers like Amazon and Walmart are reportedly assessing the feasibility of creating their own stablecoins to streamline operations and reduce dependency on traditional payment processors.

The regulatory landscape for stablecoins is evolving as policymakers and financial institutions navigate the balance between innovation and oversight. The passage of the Guiding and Establishing National Innovation for U.S. Stablecoins (Genius) act in July 2025 has provided a regulatory framework aimed at legitimizing stablecoins while ensuring they do not undermine traditional financial systems. Under this act, interest payments to stablecoin holders are prohibited to preserve the attractiveness of deposit accounts and money market funds. This move has been supported by industry groups such as the Bank Policy Institute and the American Bankers Association, which have warned against potential loopholes that could allow stablecoin issuers to offer rewards to holders. Despite these regulatory constraints, stablecoin issuers such as Tether and Circle continue to find ways to monetize their assets, including Treasury bills, which yield higher returns than traditional swipe fees for large retailers.

The competitive dynamics between traditional financial institutions and stablecoin-based payment systems are intensifying. American Express Co., for example, has downplayed the threat posed by stablecoins to its revenue from swipe fees, citing the advantages of traditional payment rails such as fraud protection and dispute resolution. However, critics argue that these benefits are funded by the same high fees that some retailers and politicians have long sought to reduce. Stablecoins, with their lower transaction costs, could disrupt the current economic model by enabling retailers to capture more of the transaction value themselves. This is particularly relevant in an environment where swipe fees typically range between 1.5% to 3%, while yields on short-term Treasury bills have reached over 4%. The potential for stablecoins to provide an alternative to traditional payment methods is further underscored by the ambitions of Circle’s CEO, Jeremy Allaire, to build a payments network for stablecoins that directly challenges established players like Visa, Mastercard, and American Express.

The development of blockchain-based payment systems is also gaining traction among traditional banks. Institutions such as JPMorgan Chase & Co. and Bank of America Corp. are exploring blockchain solutions to maintain relevance in an evolving market. These efforts may include partnerships with retailers and airlines, similar to existing arrangements for branded credit cards. However, the success of such initiatives will depend on factors such as yield volatility and the ability to provide extended credit options, which remain a key feature of traditional credit cards. Additionally, the broader implications of stablecoins extend beyond retail transactions. Senator Richard Durbin has been a long-standing advocate for reducing credit card fees, drawing on past successes in the debit card sector and regulatory reforms in Europe. The frictional costs embedded in card payments represent a significant profit source for U.S. banks, but the emergence of stablecoins could shift this balance by offering more transparent and cost-effective payment solutions.

Despite the potential, several challenges remain. For non-financial companies, the Genius act currently prohibits the direct issuance of stablecoins, requiring partnerships with licensed financial entities like Circle or Tether. Moreover, the returns on assets backing stablecoins, such as Treasury bills, are subject to change, which could affect the sustainability of reward programs if yields decline. Finally, the regulatory environment will remain a critical factor in determining the future trajectory of stablecoins. As the market evolves, the interplay between innovation, regulation, and market demand will shape whether stablecoins can achieve widespread adoption as a mainstream payment method.

Source: [1] Stablecoins Are Coming for Your Rewards Points (https://www.bloomberg.com/opinion/articles/2025-09-02/tether-usdc-stablecoins-are-coming-for-your-rewards-points) [2] Tether Provides Update on Transition Plan for Legacy Blockchains (https://tether.io/news/tether-provides-update-on-transition-plan-for-legacy-blockchains/) [3] Better Stablecoin Buy: Tether (USDT) vs. USD Coin (USDC) (https://www.fool.com/investing/2025/09/03/better-stablecoin-buy-tether-usdt-vs-usd-coin-usdc/)