Crypto Meets Cards: A New Era for Payments?

If you’re like me, you’ve probably come across “stablecoins” while scrolling headlines on your iPhone news stream or caught a quick mention during a CNBC segment while flipping channels. So, what exactly are stablecoins and why are they all over the place? They are digital tokens designed to always equal a fixed amount of real money like one U.S. dollar are making headlines again. Last week, the U.S. Senate passed a major bill that could regulate how stablecoins are issued and used. The crypto world responded quickly: shares of Circle, the company behind the popular USDC stablecoin, surged following both the bill's passage and news about its plans to go public. Meanwhile, Visa and Mastercard stocks slumped, raising the question if stablecoins actually disrupt the way we pay?

It’s tempting to think they might. Stablecoins are fast, digital, and can move over public blockchains without banks. In theory, they could make payments cheaper and more direct, especially in places where people want to use U.S. dollars but don’t have access to U.S. bank accounts. But the reality is more complex. Cards still dominate consumer payments in the U.S. because of their massive reach. Almost everyone has one, and almost every business accepts them. They also offer things stablecoins currently don’t, like fraud protection, dispute resolution, and reward points.

That’s not to say the card networks are standing still. Visa and Mastercard are already adapting by allowing stablecoin payments through their existing systems. For example, some cards now let users spend stablecoins like USDC, while merchants receive regular dollars just as they normally would. No extra setup is needed. Some large companies are even thinking about launching their own coins, which could let them build their own rewards programs, much like Starbucks does with its preloaded app accounts.

Stablecoins do have the potential to offer rewards eventually, since they earn interest from the money backing them. But today, that income mostly goes to the coin issuers, not the consumers or merchants. If merchants want a cut of that value, they’d have to negotiate new deals, something only the biggest players might have the leverage to do.

And then there’s credit. Stablecoins can be used to spend money you already have, but for borrowing, like buying now and paying later, you still need a lender and a card network. Even Coinbase is launching a rewards credit card through American Express, showing that traditional systems still matter.

So, will stablecoins kill Visa and Mastercard? Not likely. While they’re growing fast, especially abroad, their path into most people’s wallets in the U.S. is likely to come through the card networks and not around them.