a16z Crypto Founder: Stablecoins, the "WhatsApp Moment" in the Currency Space

Original Author: Chris Dixon, Founding Partner at a16z Crypto

Original Compilation: Luffy, Foresight News

The internet has made information free and global, but why are transfers still so difficult and expensive?

The early internet promised a future where anyone could publish, build, or transact without permission. Protocols like email and the World Wide Web were open and neutral, sparking an explosion of creativity, innovation, and entrepreneurship. But along the way, we veered off course.

Today, the global financial system resembles a patchwork of corporate networks: centralized, closed, and predatory. Behind every transaction lies a complex chain of intermediaries akin to a Rube Goldberg machine: sales, payment processors, acquiring banks, issuing banks, local banks, correspondent banks, forex traders, card networks, and so on, each taking a cut, which adds delays and imposes various rules. These networks impose unnecessary taxes on businesses, stifling innovation and creating high-friction bottlenecks in what should be neutral channels.

Stablecoins, cryptocurrencies pegged to stable assets like the US dollar, represent a way out, a reset, a means to bring the internet's original vision into the realm of currency.

Disruptive Opportunities Brought by Stablecoins

The current payment system was not built for the internet but for a world filled with intermediaries. Even today, international remittance fees can reach up to 10% (as of September 2024, the average fee for a $200 remittance is 6.62%). These are not just frictions; they are effectively a regressive tax on some of the world's poorest workers. The system we inherited is slow, opaque, and exclusionary, leaving billions without adequate service or completely outside the global financial system.

For many businesses, traditional payment methods are extremely inefficient. Stablecoins have the potential to significantly improve this situation. Business-to-business (B2B) payments from Mexico to Vietnam can take 3 to 7 days to settle, with costs ranging from $14 to $150 per $1,000 transaction, passing through as many as five intermediaries, each taking a cut. Stablecoins can bypass traditional systems like the SWIFT network and associated clearing and settlement processes, making such transactions almost free and instantaneous.

This is not just theoretical; it is already happening. Companies like SpaceX are using stablecoins to manage corporate funds (including repatriating funds from countries with volatile local currencies like Argentina and Nigeria). Other companies, such as ScaleAI, are using stablecoins to pay global employees faster and cheaper. Meanwhile, in the business-to-consumer (B2C) space, Stripe is the first widely used service provider offering cryptocurrency payments, charging a 1.5% fee at checkout, only half of what traditional payment processors charge. This could significantly improve profit margins for certain businesses: as noted by Sam Broner of a16z Crypto, for low-margin businesses like grocery stores, a 1.5% reduction in fees could potentially double net profits. Moreover, in a blockchain-based competitive market, I expect transaction fees to decrease even further.

Unlike the isolated old financial system, stablecoins are global. They operate on blockchains: an open, programmable network where anyone can build applications without negotiating with dozens of cross-border banks, simply by connecting to the network. People are already recognizing these advantages. In 2024, stablecoins transferred $15.6 trillion in value, comparable to Visa's transaction volume. Although this figure primarily represents capital flows (rather than retail payments), its scale indicates that we are on the brink of a transformation in financial infrastructure that no longer relies on piecing together a 20th-century system.

Instead, we can build entirely new, truly internet-native entities, or what Stripe calls "the room-temperature superconductor of financial services," where the achievement is not lossless energy transfer but lossless value transfer.

The "WhatsApp Moment" in Currency

Stablecoins give us our first real opportunity to make currency do what email did for communication: open, instant, and borderless.

Think about the evolution of texting. Before apps like WhatsApp, sending a text across borders could cost 30 cents. Even then, whether the text would be successfully delivered was a matter of luck. Then came internet-native instant messaging services: instant, global, free. The stage that payments are currently in is akin to texting in 2008: divided by borders, burdened by intermediaries, and artificially gated.

Stablecoins offer a new alternative. Rather than piecing together clunky, expensive, and outdated systems, stablecoins flow seamlessly across a global blockchain. These systems are programmable and composable. Stablecoins are already significantly reducing remittance costs: sending $200 from the US to Colombia using traditional methods costs $12.13, while using stablecoins costs only $0.01. The fees for converting stablecoins to local currency range from 5% to 0%, and prices continue to drop due to market competition.

Just as WhatsApp disrupted expensive international phone services, blockchain payments and stablecoins are changing the way global funds are transferred.

Regulation: From Bottleneck to Breakthrough

It is easy to view regulation as an obstacle, but wise legislation is actually key to unlocking new possibilities.

Establishing clear rules for stablecoins and the crypto market could ultimately take these technologies out of the experimental phase and into widespread use. For years, decentralized finance (DeFi) has been trapped in a self-sufficient crypto internal loop. Not because the tools are useless, but because regulators have made it extremely difficult for them to integrate into the traditional financial system.

This situation is changing. Policymakers are now actively drafting rules to recognize and regulate stablecoins, balancing the need to maintain US competitiveness, protect consumers, and allow innovation to flourish. Thoughtful regulation can guard against bad actors while providing clear constructive direction for compliant participants. In fact, an upcoming bill clarifying this regulatory framework could pave the way for broader adoption and integration into the global financial system.

Building Public Goods for the Benefit of All

Traditional finance is built on private, closed networks. But the internet has shown us the power of open protocols (like TCP/IP and email) to drive global coordination and innovation.

Blockchains are the internet-native financial layer. They combine the composability of public protocols with the economic power of private enterprises, offering reliable neutrality, auditability, and programmability. Adding stablecoins to this foundation gives us something we have never truly had: an open monetary infrastructure.

You can think of it as a public highway system where private companies can still manufacture vehicles, run businesses, and create roadside attractions, but the roads themselves are neutral and open to everyone.

What blockchain networks and stablecoins do is not just cut costs; they give rise to new categories of software:

• Programmable payments between machines: Imagine a market driven by AI agents automatically facilitating transactions for computing resources and other services.

• Micropayments for media, music, and AI contributions: Imagine setting a budget with simple rules and letting "smart" wallets dispense payments.

• Transparent payments with complete audit trails: Imagine using these systems to track government spending.

• Global commerce without cumbersome intermediaries: Imagine completing international transactions instantly at very low costs; in fact, this is no longer just imagination, as it is already happening.

The era of blockchain networks and stablecoins has arrived: technology, market demand, and political will are converging. A stablecoin bill may be submitted for consideration this year, and regulators are weighing frameworks that ultimately match risks with appropriate oversight. Just as early internet startups thrived once it was clear they wouldn't be shut down by telecom companies or copyright lawyers, cryptocurrencies are ready to leap from financial experimentation to foundational infrastructure, with stablecoins leading the way.

We do not need to patch the old system; we can build a better new one.