Has the Time Come for Stablecoins?

The answer to our titular question may be yes, and sooner than you think.

A leading merchant association and a group representing stablecoin interests have thrown their weight behind efforts to bring stablecoins into the U.S. payments mainstream. The move by the Merchant Payments Coalition and the Payment Choice Coalition seeks to “promote their shared goals of enhancing innovation, competition, and choice in U.S. payments,” the two groups said in a statement released last month.

The MPC argues stablecoins—cryptocurrency whose value is tied to a fiat currency such as the U.S. dollar—would represent an innovative approach to making retail payments more efficient. Indeed, stablecoins “represent a much less expensive proposition for merchants on a per-transaction basis,” Aaron McPherson, principal at AFM Consulting, told us.

But estimates of acceptance costs for digital currencies like stablecoins vary, while spotty retail acceptance makes it hard to arrive at associated costs. “The cost to establish acceptance of stablecoins may be a barrier for some merchants, because they would have to integrate wallets into their existing checkout systems, but today’s technology stack should make that easier,” figures McPherson.

Experts like McPherson say the latest move by the MPC and the PCC shouldn’t be underestimated, as it is “both a big step forward for stablecoins and a way to bring down the cost of acceptance compared to credit cards,” he notes. The MPC says it is backing legislation “to provide a solid, reliable regulatory structure for stablecoins” while the PCC is looking “to ensure a competitive payments landscape,” according to the joint statement from the two groups.

Merchant groups have long decried the cost of card acceptance. The MPC along with other merchant groups has backed the Credit Card Competition Act, legislation aimed at moderating credit card acceptance costs by requiring processors to offer a choice of networks. The PCC represents small businesses and trade associations, as well as companies involved in working toward regulation of stablecoins.

So could this type of crypto find a foothold where digital currencies like Bitcoin haven’t? The maddening answer is a great big “maybe.” Stablecoins, like other digital currencies, remain a fringe payment method, though their very stability of value sets them apart in contrast to the often wild swings in value holders of coins such as Bitcoin have experienced.

Still, it remains unclear for the time being how many merchants would be willing to accept the coins. That’s critical. “Merchant acceptance of stablecoins is absolutely crucial for them to get traction in the U.S.,” notes McPherson. However, they could catch on sooner with the general public, he notes, adding, “they are already popular in African countries.”

—John Stewart, Editor john@digitaltransactions.net