With Donald Trump’s inauguration this week the noise surrounding cryptocurrency is certainly here to stay. However, the retail payments world has yet to find a compelling use case for crypto and, despite a few headline grabbing experiments, consumers cannot purchase much directly with crypto currencies on the digital high street. Does Stripe’s purchase of Bridge, a specialist in stablecoin payments, for $1.1bn late last year, demonstrate the product has finally found a compelling use case in retail payments, and particularly marketplaces? 

Stablecoins are a type of cryptocurrency designed to minimise price volatility by pegging their value to a stable asset, such as the US dollar or euro. There are two potential use cases where we see stablecoins immediately adding value, both occur in the marketplace segment where Stripe already has a strong position with its Connect product. The fact that over 75% of cross border eCommerce flows through marketplaces points to where these use cases emerge: 

1. Remitting seller funds from markets with exchange controls: Stablecoins can more easily move funds out of markets with exchange controls e.g. Brazil or India. This movement also occur at much lower costs and much more quickly than traditional FX and remittance flows.  
2. Paying out in volatile currencies: Sellers can hold funds in stablecoins pegged to the USD and decide when to convert to their domestic currency, or another currency, again with no exchange controls. If a market emerges to spend the stablecoins directly, so much the better, but this is not a requirement.   

To bring this to life let’s consider a sales corridor between two South American markets which incur both exchange controls along and high volatility. When a Venezuela Seller tries to sell their products/services into Brazil, how do stablecoins address these issues? 

• The Venezuelan seller can list on a Brazilian marketplace, where it can be sold in Real, and purchased using a buyer’s preferred payment type e.g. Pix 

• Stripe process the transaction from the buyer as the marketplace’s acquirer in the traditional way, and use the Bridge infrastructure to convert Real into USDC (for example) 

• The USDC is instantly credited to the seller’s account. There is no actual currency movement anywhere.  

• The seller can then convert the USDC into Venezuelan Bolivar (or other currency) as and when they need it, or the currency rate is attractive. This avoids the risks associated with fluctuations in the Bolivar which may occur between listing on the marketplace and goods being sold.  

These use cases work today and are not predicated on wide-spread adoption of crypto by consumers or merchants, nor does it require Stripe to suddenly replace the world’s payments infrastructure by becoming or displacing Visa/Mastercard. They work behind the scenes are attractive because they remove friction created by costly processes and high regulatory barriers. We await to see the roll out of these use cases with interest!