Major retailers like Walmart and Amazon are exploring their own stablecoins—digital currencies pegged to the dollar—as a way to slash transaction costs and lock in customer loyalty. If rolled out, these coins could radically shift how you pay for everyday purchases and even how you interact with banks.
And it’s not just retail. Travel companies, including major airlines and platforms like Expedia, are also considering launching their own branded stablecoins.
What Are Stablecoins
Stablecoins are a type of cryptocurrency. However, there are several differences between stablecoins and other cryptocurrencies such as Bitcoin, Ether, Tether, and others.
The chief feature that separates stablecoin from other cryptos is that it is designed for stability. Bitcoin and the like may rise and fall in value based on speculation, like a penny stock. Stablecoin, on the other hand, links its value to a fiat currency such as the U. S. dollar. Furthermore, Most stablecoin issuers hold reserves of the fiat currency as collateral to back value.
As a result, stablecoins have a more practical application. They are less an investment than a means for making payments. In that regard, they facilitate domestic and cross-border transactions quicker and at a lower cost than fiat currencies. That is part of what has drawn the interest of businesses.
Why Businesses Are Considering Issuing Stablecoins
There are four main components of a payment system that impact a business’s bottom line: cost, timeliness, reliability, and convenience.
The top stablecoins have proven to be reliable, and regulations will ensure they stay that way. In addition, they are accessible worldwide, making them convenient. However, the greatest appeal of stablecoins is their cost and timeliness.
Every time you use a credit or debit card to make a purchase – in person or online – retailers incur an interchange or swipe fee. Those are the fees paid to card companies such as Mastercard or Visa and the banks issuing the cards. Those fees typically range from one to three percent of the purchase price.
Large companies, like Amazon and Walmart, generate hundreds of billions of dollars in sales per year. Eliminating swipe fees would mean tens of millions of dollars in savings per year. Those savings could then be passed on to customers, used for expansion, or infrastructure.
In addition to saving costs, stablecoin transactions can save time. And, as you may have heard, time is money.
Traditional payment methods using checks, debit, and credit cards can take days to settle. That leaves the merchant hanging while they wait to get their money. In contrast, stablecoin settlements occur almost immediately, 24 hours a day, every day. That includes international transactions.
Traditional payments, on the other hand, are made during traditional banking hours. For companies selling and/or sourcing internationally, such as Amazon and Walmart, the cash flow boost would be significant.
Rising Cost of Swipe Fees
Last year, retailers and e-commerce companies paid a record $187.2 billion in swipe fees for credit and debit cards. That is according to a Merchants Payment Coalition (MPC) report.
“With no competition to hold them in check, price-fixed swipe fees rise every year and shot up again last year,” said MPC Executive Committee member Christine Pollack. She is also vice president of government relations at FMI – The Food Industry Association.
Last year’s swipe fees were up nearly 10% over 2023. Over the previous 10 years, the total of debit and credit card processing fees has nearly tripled, according to MPC.
Swipe fees are second only to labor costs for most merchants, says MPC. In addition, those fees drive up costs by about $1,200 a year for the average family.
“As Main Street small businesses and American families continue to face economic uncertainty, the giant card networks and Wall Street banks continue to take more money out of their pockets every day,” said Pollack. “These fees contribute to inflation and siphon off money that could be used to hold down prices or invest in local communities.”
Boom In Stablecoin Adoption
Stablecoin transaction volume reached $27.6 trillion last year, surpassing Visa and Mastercard combined by 7.68%, according to a CEX-10 report. Although that number is a little misleading. That is because the figure includes investment as well as purchase transactions. All the same, it shows that stablecoin is growing as a payment option.
The total volume of stablecoins issued totals $211.6 billion. Of that, $151.7 billion is from Tether and $57.2 billion is from Circle, reports CoinPaid Media. Meanwhile, the number of unique addresses using stablecoins hit 35 million. Tether’s stablecoin is known as USDT, while Circle’s is USDC.
The gap in volume between these two major stablecoins is due in large part to the places where they have been adopted. Although both stablecoins are traded globally, USDT operates primarily in Europe and Asia. USDC is primarily traded in North America.
Banks Considering Joint Stablecoin
Banks stand to lose billions of dollars if retail behemoths like Amazon and Walmart begin issuing their own stablecoins. As a result, they too are looking into producing their own stablecoins.
Major banks, such as J. P. Morgan Chase, Bank of America, Wells Fargo, and Citigroup, are considering banding together to create a stablecoin, according to the Wall Street Journal.
Morgan has already put a toe in the water. It launched the JPM Coin in 2019. The private stablecoin is for institutional investors. Internal settlements are quicker and more efficient. Plus, it operates on Morgan’s proprietary blockchain, Onyx.
However, the private banking colossus upped the ante last month. It issued JPMD, which is a digital version of commercial customer accounts. However, JPMD is not strictly a stablecoin. It is a deposit token. The simple difference is that stablecoins are backed by a currency, most often the U. S. dollar or treasuries. JPMD is backed by deposits of commercial customers. As a result, JPMD tokens have the same FDIC coverage as the deposits that stand behind them.
JPMD is also different from JPM Coin in that it runs on Base, Coinbase’s public blockchain.
Banks could lose customers and income if Stablecoins issued by large tech or retail firms become widely used. They may also be threatened by crypto companies encroaching on their turf.
Crypto Companies Becoming Banks
Anchorage Digital was granted a national banking charter in 2021. It remains the only cryptocurrency custodian to become a bank. However, other firms are making their move now, and more are considering entering the banking business.
Last week, two firms – Circle, a stablecoin company, and Ripple, a cryptocurrency business, announced they had applied for national banking charters. In addition, Fidelity Digital Assets, which already holds a trust license in New York state, has applied for a national trust charter.
Other crypto concerns considering making a bank application include Coinbase, BitGo, and Wise. In addition, Erebor, a newly created digital bank backed by PayPal founder Peter Thiel, is applying for a charter.
Not Your Average Bank
National trust banks are not like regular banks. They are not allowed to accept deposits or make loans.
The main functions of national trust banks are to manage the assets of individuals, families, or organizations. They also hold and safeguard assets as well as perform other fiduciary responsibilities.
Having a national charter will allow stablecoin firms to expand their services, including offering payment infrastructures.
Some financial institutions and businesses are not jumping on the stablecoin bandwagon for the moment. They are waiting to see what rules are adopted to govern stablecoins.
Regulatory Structure
A number of bills pertaining to stablecoin are floating around Congress right now. Perhaps the most significant are the Genius Act and the Stable Act. Both bills establish similar regulatory frameworks. The Genius Acte passed the Senate last month and is now awaiting action in the House. On the other hand, the Stable Act was recently reported out of committee but has not faced a House vote.
Both bills would require stablecoins to be pegged to the dollar, reserve-backed, with monthly review and annual audits.
For a measure to become law, there will probably be some negotiation. Among the issues to be resolved are:
- If the Office of the Comptroller of the Currency (OCC) acts alone as the regulator of stablecoins and their issuers.
- What role, if any, will states have in licensing and regulating stablecoins?
- If non-banks can issue stablecoins.
- Whether foreign issuers should be allowed.
- What investor protections should be defined in the statute?
Many companies are not waiting for regulatory details. They are jumping in now.
More Companies Including Stablecoin
Just last month Shopify partnered with Coinbase and Stripe to allow sellers to accept USDC stablecoins. Also in June, Stripe acquired Privy, a digital wallet firm, to simplify crypto onboarding.
Prior to that, Visa joined with Bridge, a stablecoin payment platform, in April to create a stablecoin credit card.
Coinbase recently launched Coinbase Business. It is an operating account for small businesses and start-ups. It allows businesses to manage crypto transactions and assets, including stablecoins.
Is Stablecoin Use Inevitable
The integration of stablecoins into the global economy and the fabric of our everyday lives began at a slow walk years ago. It has quietly built to a full gallop as private businesses, financial institutions, and individuals join today.
However, stablecoins still have to jump some serious obstacles to become mainstream.
There are technical challenges for businesses accepting stablecoins. And, even more for companies minting their own stablecoins.
Some of those challenges include: integrating with existing banking systems, unique security risks, connecting blockchains, regulation compliance, and anti-money laundering safeguards.
Perhaps the greatest obstacle to universal stablecoin acceptance is the consumer. For all the hype cryptocurrencies have received, many of us still do not understand them. A large part of speeding up the integration of stablecoins into the mainstream will be a concerted effort to educate consumers.
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Max K. Erkiletian began writing for newspapers while still in high school. He went on to become an award-winning journalist and co-founder of the print magazine Free Bird. He has written for a wide range of regional and national publications as well as many on-line publications. That has afforded him the opportunity to interview a variety of prominent figures from former Chairman of the Federal Reserve Bank Paul Volker to Blues musicians Muddy Waters and B. B. King. Max lives in Springfield, MO with his wife Karen and their cat – Pudge. He spends as much time as possible with his kids, grandchildren, and great-grandchildren.
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