Last week the stablecoin world played whack-a-mole with headlines. PayPal and Coinbase tightened their collaboration around PYUSD—surprising, given Coinbase’s long, profitable ride with Circle’s USDC, which earned the exchange almost as much revenue as Circle itself in 2024. Tether bolstered its U.S. credentials by teaming with SoftBank to bankroll Twenty One Capital, a $3.6 billion bitcoin-buying SPAC led by Brandon Lutnick—son of Commerce Secretary Howard Lutnick. Stripe’s Patrick Collison teased a stablecoin product his team has been wanting to build for years, while Circle, preparing for its IPO, outlined a payment network meant to elbow past SWIFT—and potentially Visa and Mastercard. Not to be outdone, Visa and Mastercard lobbed their own stablecoin trial balloons right back.

Back in 2024, Professor Jane Wu of UCLA and I warned that a fight was coming: 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. Once Capitol Hill finally lifts the curtain with legislation, expect the background hum to crank up to full concert volume.

No player is likely to sprint away with dominant market share—unless it moves at break-neck speed and executes a razor-sharp playbook. The last serious bid for mass adoption came in 2021, when Libra was hours from a pilot launch before the Federal Reserve Board pulled the plug. Different regulatory environment, but the lesson holds: the forces that killed Libra may keep today’s market from ever coalescing around a single giant.

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 to stablecoin issuers. 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 love to deride. Existing issuers will scramble for bank charters—or at least tight bank partnerships—while a wave of new contenders crowds the field and squeezes margins.

Yes, software still eats the world, and a savvy issuer could scale fast enough to turn “Pay with x” into a household phrase. But a well-armed phalanx of fintechs and legacy banks has a survival-level interest in stopping exactly that. The real question, then, isn’t whether software will eat the world, but whose software gets the seat at the table. Libra might have grabbed market share on the back of Meta’s four billion users and the two-dozen heavyweight partners it corralled—enough to make incumbents break a sweat. But its distributed governance and shared-incentive model cut both ways: democratic enough to win more support, slow enough to miss the moment.

Overall, bootstrapping a new payment network without giving real ownership to wallets, merchants, and other stakeholders is brutally hard—just ask Visa, which only scaled after spinning BankAmericard into a member-owned cooperative so thousands of banks had skin in the game.

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. How do issuers make money today, and what happens to those revenues once the market reaches equilibrium?

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.

First, even if rates remain lofty, any juicy reserve yield won’t sit in the issuer’s pocket for long. The scramble for market share will force issuers to recycle most of it into user incentives. PayPal has already dangled a 3.7 percent reward on PYUSD balances, and rivals won’t leave that challenge unanswered.

Economists like to picture the market at equilibrium first and then reason backward. Run that thought experiment here and one fact jumps out: neither institutions nor consumers will voluntarily leave yield on the table. Early crypto users accepted a few hundred basis points siphoned off by issuers because DeFi returns were stratospheric and alternatives were scarce. But fintech is rewiring that bargain—moving idle cash into interest-bearing havens is now a tap away. The old bottleneck of routing everything through a zero-interest checking account is being dismantled, app by app, across the globe.

Moreover, a dip in interest rates can gut a stablecoin issuer’s economics—especially if it’s dragging around hefty fixed costs or a bloated payroll. Tether’s lean model is instructive: once you’ve fought the uphill battle to secure coveted distribution channels and deep liquidity—a moat few can cross—the remaining hurdles to running a stablecoin are surprisingly low.

Second, earning on the flow of coins is no picnic either. Extracting a fee from every hop is technically tricky—we wrestled with that while designing Libra. Our modeling showed that, at scale and under competitive pressure, even an issuer that controls both the asset and the network would be forced to push transaction fees toward zero and make money on higher-margin add-ons instead. Most of those add-ons didn’t exist then and still don’t for everyday users; they’ll emerge only when stablecoins function as the operating system for programmable finance rather than as basic payment plumbing. And because payments—domestic and cross-border alike—are being commoditized even faster than stablecoins themselves, issuers need to climb the value stack or watch their margins evaporate.

An issuer could, of course, launch a stablecoin network that starts wide-open—minting (entry) remains free—then slowly crank up redemption fees on cashing out (the exit), and make interoperability awkward unless it sits in the middle. That bait-and-switch cuts against crypto’s purpose—true decentralization—the very platform strategy ethos Chris Dixon crystallized in 2018. In that scenario, crypto will have taken the scenic route only to recreate a bigger, more centralized middleman. Or, as Lampedusa wrote in The Leopard, “If we want things to stay as they are, things will have to change.”

I’m still optimistic. Once you’ve zipped money across a genuinely open network—cleared in seconds, no gatekeepers—it’s hard to accept anything less, whatever shape today’s market takes. So, if the stablecoin market doesn’t regress into a digital oligopoly, what will it look like? Back to first principles: the shape of the landscape follows from the two core jobs stablecoins perform.

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—most real-world uses fall somewhere between payment rail and savings vehicle—but treating them as separate buckets makes the market’s trajectory much clearer.

The medium-of-exchange use case with the most real-world momentum is the “stablecoin sandwich.” Picture it this way: inside any given country, lightning-fast rails—PIX in Brazil, UPI in India, SPEI in Mexico—have conditioned people to expect money to move 24/7. But the moment a payment crosses a border, that speed vanishes. Some dreamers still imagine the BIS knitting these national rails into a grand “Finternet,” but asking Basel to ship working software across borders is like mailing glaciers by express: slow, pricey, and mostly water by the time it arrives. In the meantime, stablecoins slip neatly between those domestic slices, giving everyone the always-on settlement they’ve come to expect.

So payments-orchestration start-ups have stepped in with a real-time workaround: flip local fiat into a stablecoin, shoot it across a blockchain, and cash out in local currency at the other end. The double conversion may look clunky on paper, yet the funds arrive instantly and settlement is final—making it the go-to route for some cross-border B2B payments, with a growing slice of the remittance market following suit.

Because there’s no single, always-on rail that links those national instant-payment systems, payments-orchestration start-ups 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, onchain arbitrage, and other blockchain gymnastics—I estimate that roughly $10 billion to $30 billion a month already moves through this channel.

This flow is pure high-velocity: users jump into a stablecoin at one end and exit just as quickly at the other. The deeper a stablecoin’s liquidity pool, the clearer its edge—larger volumes clear without hiccups and each transfer loses fewer basis points along the way.

The economics of the “sandwich” will evolve as the market matures. Savvy issuers could use local entities to mint and burn stablecoins on each side of a corridor, recreating onchain the balance-sheet sleight of hand that Wise already performs by updating its internal ledgers. Wise, in fact, could flip its business APIs into a suite of domestic stablecoins to enter the fray. The same play is open to globally licensed crypto exchanges and to banks with an international footprint—though only banks, sitting closest to the central-bank metal, can execute it at materially lower cost.

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. Forthcoming U.S. legislation should expand the roster of institutions and everyday consumers willing to park balances in stablecoins, while clarifying the legal safeguards that protect everyone. Right now, U.S. stablecoins operate under a patchwork regime that can’t support real scale, but Congress is ready to stitch up the gaps.

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. The big custodians, investment banks, and asset managers are already dipping their toes; as volumes scale, they’ll wade in fully, expanding the menu for holding value and for high-grade institutional global settlement.

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. Mastercard just unveiled an end-to-end stablecoin framework that lets wallets, acquirers and merchants settle directly onchain, while Visa is slated to reveal more about its stablecoin play tomorrow. 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, fold stablecoins into their existing checkout flows, and shave costs to improve margins—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 plug into a web of interoperable assets and rails, staking their claim to an efficient, streamlined slice of the value chain.

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.