a16z Crypto Founder: Stablecoin, "WhatsApp Moment" in the currency field

Original author: Chris Dixon, founding partner of a16z Crypto

Original translation: Luffy, Foresight News

The Internet makes information free and global, but why is transferring money still so difficult and expensive?

The early Internet promised such a future where anyone could publish, build or trade without permission. Protocols like email and the World Wide Web are open and neutral, and they have triggered a big explosion of creativity, innovation and entrepreneurship. But in the process of development, we have deviated from the track.

Today, the global financial system is like a pieced together corporate network: centralized, closed and predatory. Behind each transaction is an intermediary chain as complex as Rub Goldberg mechanical devices: sales, payment processors, acquiring banks, issuing banks, local banks, agency banks, foreign exchange dealers, bank card networks, etc. Each link needs to get a share, which increases delays and imposes various rules. These networks impose unnecessary taxes on commerce, curbing innovation, and bringing high friction bottlenecks to the supposedly neutral channels.

Stablecoins, or cryptocurrencies pegged to stable assets such as the US dollar, are a way out, a reset, and a way to bring the initial vision of the Internet into the currency field.

Disruptive Opportunities brought by Stablecoins

The current payment system is not built for the Internet, but for a world full of intermediary institutions. Even today, international remittance fees may be as high as 10% (in September 2024, the average remittance fee of a US$200 remittance was 6.62%. These are not just friction, but are actually decreasing taxes imposed on some of the world's poorest workers. The system we inherited is slow, opaque and exclusive, leaving billions of people without access to adequate services or being completely excluded from the global financial system.

For many companies, 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 complete the liquidation, with a cost of between USD 14 and USD 150 per transaction, which involves passing through up to five intermediaries, each with a commission. Stablecoins can bypass traditional systems such as the SWIFT network and related clearing and settlement processes, making such transactions almost free and instantly completed.

This is not a paper talk, but something is already happening. Currently, SpaceX is using stablecoins to manage corporate funds (including remitting funds back to its own country from countries with high local currencies such as Argentina and Nigeria). Other companies, such as ScaleAI, are using stablecoins to pay employees around the world faster and cheaper. Meanwhile, Stripe is the first widely used service provider to offer cryptocurrency payments when it comes to business-to-consumer (B2C), which charges a 1.5% handling fee at checkout, only half of the traditional payment institutions. This could greatly increase profit margins for some businesses: As Sam Broner of a16z Crypto pointed out, a 1.5% reduction in handling fees could potentially double net profit for businesses like grocery stores. And in a competitive market based on blockchain, I expect transaction fees to be lowered.

Unlike the old financial system that develops in isolation, stablecoins are global. They operate on blockchain: it is an open, programmable network on which anyone can build applications without negotiating with dozens of cross-border banks, just accessing the network. People have recognized these advantages. In 2024, the stablecoin transferred $15.6 trillion in value, comparable to Visa's trading volume. While this number mainly represents flow of capital (rather than retail payments), its size still shows that we are on the verge of a change in financial infrastructure that no longer relies on pieced together 20th-century systems.

Instead, we can build new, truly Internet-based native things, or as Stripe calls "ambient temperature superconductor for financial services", where we achieve not lossless energy transmission, but lossless value transmission.

"WhatsApp Moment" in the Currency Field

Stablecoins are the first time we have a real chance to make money do what emails do for communication: open, instant and borderless.

Think about the development history of text messages. Before apps like WhatsApp appeared, it was 30 cents to send a text message across the border. Even so, whether the text message can be delivered successfully depends on luck. Later, instant messaging services based on the Internet native appeared: instant, global, and free. The current stage in the payment field is like the text message in 2008: divided by national borders, dragged down by intermediaries, and artificial thresholds are set.

Stablecoins offer a completely new alternative. Instead of pieced together clumsy, expensive and outdated systems, stablecoins flow seamlessly on global blockchains. These systems are programmable and combinable. Stablecoins are already cutting remittance costs significantly: using traditional methods to send $200 from the United States to Colombia costs $12.13, while using stablecoins costs only $0.01. The handling fee for converting stablecoins to local currencies ranges from 5% to 0%, and prices continue to decline due to market competition.

Just as WhatsApp disrupts expensive international phone business, blockchain payments and stablecoins are changing the way funds are transferred worldwide.

Regulation: From bottleneck to breakthrough

It is easy for people to see regulation as a barrier, but wise legislation is actually the key to opening up a new situation.

Establishing clear rules for stablecoins and crypto markets could ultimately lead these technologies to go beyond the experimental field and toward widespread use. Decentralized finance (DeFi) has been trapped in a self-sufficiency crypto-intra-circulating economy for many years. It is not because the tools are useless, but because regulators make it extremely difficult to integrate into the traditional financial system.

This is changing. Policymakers are now actively formulating rules to recognize and regulate stablecoins, which can both maintain the competitiveness of the United States, protect consumers, and allow innovation to flourish. Thoughtful regulation can prevent bad actors while providing clear construction directions for compliance participants. In fact, an upcoming bill clarifying this regulatory provision could pave the way for wider adoption and integration into the global financial system.

Build public products that benefit the public

Traditional finance is built on a private and closed network. But the Internet shows us the power of open protocols such as TCP/IP and email to drive global coordination and innovation.

Blockchain is the native financial layer of the Internet. They combine the composability of public agreements with the economic strength of private enterprises, with reliable neutrality, auditability and programmability. Adding stablecoins on this basis gives you something we never really have: an open monetary infrastructure.

Think of it as a public highway system where private companies can still make vehicles, run businesses, build roadside attractions, but the road itself is neutral and open to everyone.

Blockchain networks and stablecoins do more than just cut fees, they have spawned new software categories:

• Programmable payments between machines: Imagine a market driven by an artificial intelligence agent that automatically facilitates transactions of computer resources and other services.

• Micropayments for media, music and artificial intelligence contributions: Imagine setting a budget with simple rules and then having a "smart" wallet make payments.

• Transparent payments with full audit trail: Imagine using these systems to track government spending.

• Global business without complicated intermediaries: imagine completing international transactions instantly at extremely low costs; in fact, this is no longer an imagination because it is happening.

The era of blockchain networks and stablecoins has arrived: technology, market demand and political will are gathering. A stablecoin bill may be submitted for consideration this year, and regulators are weighing the framework to ultimately match risks with appropriate regulation. Just as early Internet startups can thrive once they are determined not to be shut down by telecom companies or copyright lawyers, cryptocurrencies are ready to leap from financial experiments to infrastructure pillars, and stablecoins will lead this change.

We don't have to patch the old system, we can build a better new system.