Chris Dixon: stablecoin, the "WhatsApp moment" in the currency field

Original author: Chris Dixon, founding partner of a16z Crypto

Original compilation: Luffy, Foresight News

The internet has made information free and globalized, 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 strayed off course.

Today, the global financial system resembles a patchwork of corporate networks: centralized, closed, and predatory. Behind each 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 brokers, card networks, and so on, with each link taking a cut, which adds delays and imposes various rules. These networks levy unnecessary taxes on businesses, stifle innovation, and introduce high-friction bottlenecks to channels that should be neutral.

Stablecoins, which are cryptocurrencies pegged to stable assets such as the US dollar, represent a way forward, a reset, and a means of bringing the original vision of the internet into the realm of currency.

Disruptive Opportunities Brought by Stablecoins

The current payment system is not built for the internet, but rather for a world filled with intermediaries. Even today, international remittance fees can be as high as 10% (in September 2024, the average fee for a $200 remittance is 6.62%). These are not just frictions; they are effectively a regressive tax levied on some of the world's poorest workers. The system we inherit is slow, opaque, and exclusive, leaving billions of people unable to access adequate services or completely excluded from the global financial system.

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

This is not just talk, but something that is already happening. Currently, companies like SpaceX are using stablecoins to manage corporate funds (including remitting funds back to the home country from local currencies with high volatility such as Argentina and Nigeria). Other companies, such as ScaleAI, are using stablecoins to pay global employees faster and cheaper. Meanwhile, on the business-to-consumer (B2C) side, Stripe is the first widely used service provider to offer cryptocurrency payments, charging a 1.5% fee at checkout, which is only half of traditional payment institutions. This could greatly increase the profit margins of certain businesses: as Sam Broner from a16z Crypto pointed out, for low-margin businesses like grocery stores, a 1.5% reduction in fees could potentially double net profits. And in a blockchain-based competitive market, I expect transaction fees to decrease even further.

Unlike the old financial system, which developed in isolation, stablecoins are global. They run on blockchain: an open, programmable network on which anyone can build applications without having to negotiate with dozens of cross-border banks. These advantages have been recognized. In 2024, stablecoins transferred $15.6 trillion in value, comparable to Visa's trading volume. While this number primarily represents money flows (rather than retail payments), its scale suggests that we are on the verge of a financial infrastructure revolution that no longer relies on piecing together 20th-century systems.

On the contrary, we can build entirely new, truly internet-native entities, or what Stripe refers to as "room temperature superconductors for financial services," where what is achieved is not lossless energy transmission, but lossless value transmission.

The "WhatsApp Moment" in the Currency Sector

Stablecoins are our first real opportunity to make currency do what email has done for communication: open, instant, and borderless.

Think about the development of SMS. Before the emergence of applications like WhatsApp, sending a cross-border SMS cost 30 cents. Even so, whether the message would be successfully delivered depended on luck. Later, internet-native instant messaging services emerged: instant, global, and free. Today, the payment sector is in a stage similar to that of SMS in 2008: divided by national borders, burdened by intermediaries, and artificially set barriers.

Stablecoins provide a whole new alternative. Instead of piecing together clunky, expensive, and outdated systems, stablecoins flow seamlessly on the global blockchain. These systems are programmable and composable. Stablecoins have significantly reduced remittance costs: sending $200 from the United States to Colombia using traditional methods costs $12.13, while using stablecoins only costs $0.01. The fees for converting stablecoins to local currency range from 5% to 0%, and prices continue to decline due to market competition.

Just as WhatsApp disrupted the expensive international phone business, blockchain payments and stablecoins are changing the way money is transferred globally.

Regulation: From Bottleneck to Breakthrough

People often see regulation as a barrier, but wise legislation is actually the key to opening up new opportunities.

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

This is changing. Policymakers are now actively developing rules to recognize and regulate stablecoins that will keep the U.S. competitive, protect consumers, and allow innovation to flourish. Well-thought-out regulation can guard against bad actors while providing a clear direction for compliance actors to build on. In fact, an upcoming bill clarifying this regulation could pave the way for wider adoption and integration into the global financial system.

Building Public Products for the Benefit of the Masses

Traditional finance is built on private, closed networks. But the Internet has shown us the power of open protocols (such as TCP/IP and email) in driving global coordination and innovation.

Blockchain is the native financial layer of the Internet. It combines the composability of public protocols with the economic power of private enterprises, featuring reliable neutrality, auditability, and programmability. By adding stablecoins on top of this foundation, we obtain something we have never truly possessed: an open monetary infrastructure.

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

Blockchain networks and stablecoins do more than just reduce costs; they have spawned a new category of software:

• Programmable payments between machines: Imagine a market automatically facilitating transactions of computing resources and other services driven by artificial intelligence agents.
• Micropayments for contributions in media, music, and artificial intelligence: Imagine setting a budget with simple rules, and then letting a "smart" wallet distribute the payments.
• Transparent payments with complete audit trails: Imagine using these systems to track government spending.
• Global commerce without complicated intermediaries: Imagine completing international transactions instantly at a very low cost; in fact, this is no longer imagination, because it is happening.

The era of blockchain networks and stablecoins has arrived: technology, market demand, and political will are converging. A stablecoin bill is likely to be submitted for consideration this year, and regulators are weighing the framework to ultimately match the risks with the right regulation. In the same way that early internet startups were able to thrive once they were sure they wouldn't be shut down by telcos or copyright lawyers, cryptocurrencies are poised to leapfrog from financial experimentation to infrastructure pillars, and stablecoins will lead the way.

We don't need to fix the old system; we can build a better new system.