I’m really grateful to the various thought partners (who I thank at the end of this piece) for their feedback on earlier drafts, particularly those who have disagreed with me. While I feel strongly about the logic of my argument, I recognize that it’s very likely I’m wrong. I welcome further feedback and am putting this out there to be convinced otherwise.

There’s a lot of buzz about stablecoins in U.S. consumer payments. But most commentators see stablecoins as a sustaining rather than disruptive technology. They argue that, while financial institutions will use them to more efficiently settle between each other, stables do not provide enough value to most U.S. consumers to justify a switch from the dominant and sticky payment method: cards.  

In this piece, I want to take the other side of this bet and make a case for how stablecoins can go mainstream as a means of payment (not just settlement) in the U.S. 

Stablecoins can break through in U.S. consumer payments the same way credit cards overcame the bootstrapping problem to go mainstream — first by leaning into intrinsic advantages along three factors consumers and merchants care about (convenience, incentives, and increased sales), then building an open network that standardizes and connects fragmented systems and unlocks aggregated supply and demand.

How Credit Cards Bootstrapped a New Payment Network

Let’s first establish that it is really, really, really hard to get people to adopt a new payment method.¹ 

A payment method is only useful if other people are on the network, but other people will not be on the network until it’s useful. Credit cards overcame this bootstrapping problem to become the most widely used form of U.S. consumer payments (37%), surpassing the previously dominant payment methods: cash, check, and early charge cards that were merchant-specific or sector-specific.² It did this in two steps.

Step One: Lean into intrinsic features that don’t require a network

In step one, credit cards leaned into intrinsic features to solve a pain point for a subset of consumers and merchants on one or more of three axes: convenience, incentives, and increased sales.³ To see how, I’ll focus on the story of the first mass-market, bank-issued credit card — BankAmericard — launched by Bank of America in Fresno, California in 1958.⁴ As I’ll describe, this card later became the underpinning of the Visa credit card network we know and love today.

First, BankAmericard offered convenience. Instead of carrying cash or writing a check at the register, consumers could simply pay later at the end of the month. While merchants already offered charge cards that provided similar delayed payment, those programs were limited to individual merchants or specific categories like T&E. BankAmericard, by contrast, could be used at any participating merchant. This appealed not only to cash and check users but also to existing charge card holders who were tired of juggling multiple store-specific accounts. 

Second, Bank of America used incentives to drive adoption, famously mailing out 65,000 unsolicited BankAmericard credit cards to the residents of Fresno. Each recipient received a pre-approved line of flexible credit — an unprecedented move at the time. Cash and checks offered no mechanism for incentives like free credit. Early charge cards did provide short-term non-revolving credit, but they were typically reserved for repeat or wealthier customers and could only be used at specific merchants or within certain sectors. BankAmericard, by contrast, offered broader and more accessible credit — particularly attractive to lower-income consumers who were previously boxed out. 

Third, BankAmericard unlocked increased sales by allowing consumers to buy on credit. Cash and checks were not drivers of sales because they were limited to funds the consumer already had — there was no extension of purchasing power. Early charge cards did boost sales by allowing consumers to buy on credit, but offering these cards required merchants to manage their own credit systems, customer onboarding, collections, and risk — all of which involved significant operational overhead. This made such programs feasible only for large merchants/associations. BankAmericard offered the sales-boosting benefits of consumer credit to small merchants.⁵

The BankAmericard program, despite some initial significant bumps, found success in one city (Fresno) amongst pockets of initial consumers and merchants for which it solved a real pain point based on one or more of these intrinsic features. It then repeated that success in city after city in the state of California. But BofA, which was only permitted to operate in California due to regulation at the time, quickly “realized that . . . for their card to be truly useful, it had to be accepted nationwide.” So it licensed the card to banks outside California for a $25,000 franchise fee and transaction royalties. Each licensee bank used the IP to build up its own base of consumers and merchants in its local geography.

Step Two: String together the fiefdoms

At this point, the BankAmericard program had evolved into a series of geographically dispersed fiefdoms, with isolated pockets of consumers and merchants using the card in each region based on one or more intrinsic features. While it worked decently well within each fiefdom, it could not scale. 

On the operational side, interoperability between banks was a major problem: authorizing interchange transactions between two different banks using the BankAmericard IP required a merchant to contact their acquiring bank, which then had to reach out to the issuing bank to confirm the cardholder’s authorization — all while the customer stood waiting in the store. This process could take up to 20 minutes, leading to fraud risks and a terrible customer experience.⁶ Clearing and settlement were equally fraught: while the acquiring bank received payment from the issuing bank, it had little incentive to promptly share the transaction details needed for the issuer to bill the cardholder. On the organizational side, the program was run by BofA — a competitor to the licensee banks — creating a “fundamental distrust” between them.

To address these problems, the BankAmericard program was spun out in 1970 into a for-profit non-stock membership association called National BankAmericard Inc. (NBI), which later rebranded as Visa. Ownership and control shifted from BofA to the participating banks. In addition to shifting the locus of control, NBI established a standardized set of rules, procedures, and dispute-resolution mechanisms to solve the organizational challenges. To tackle the operational issues, it built a switch-based authorization system called BASE that allowed merchants’ banks to route authorization requests directly into the issuing banks’ systems. Suddenly, interchange authorizations could take less than a minute and transactions authorized 24/7. This made the system “fast enough to be a viable competitor to cash and checks, removing one of the critical barriers to adoption.” Then BASE moved on to clearing and settlement, replacing the paper-based process with electronic records and shifting settlement from bilateral arrangements between banks to centralized processing and net settlement through the BASE network. A weeklong process could now be done overnight. 

Stringing these fiefdoms together had the effect of aggregating supply and demand to overcome the bootstrapping problem of a new payment method. At this point, mainstream consumers and merchants were motivated to join by the network itself, as it allowed them to tap into the other side. For consumers, the network created a flywheel of convenience — each additional merchant increased the utility of the card. For merchants, it offered the promise of incremental sales from consumers eager to use a more convenient payment method. Over time, the network began using interchange fees generated by network interoperability to offer incentives, further driving both consumer and merchant adoption. For example, while large department stores were initially reluctant to accept bank-issued cards due to their own charge card loyalty programs, Visa ultimately won them over by introducing co-branded loyalty cards, enabling retailers to retain customer incentives while sharing in interchange revenue.

The Intrinsic Features of Stablecoins

Stablecoins can go mainstream by following the same playbook that allowed credit cards to dethrone cash, checks, and early charge cards. Let’s see how the intrinsic features of stablecoins stack up across the same three dimensions: convenience, incentives, and increased sales. 

Convenience

Right now, stablecoins aren’t convenient enough to be an acceptable payment option for most consumers, who must first on-ramp from fiat into the crypto world.⁷ I recently onboarded my sister-in-law onto crypto, and I was reminded how truly horrible this UX is — you need to provide extremely sensitive information (e.g., social security number) even though you already have provided this information to the bank you’re pulling funds from. And that’s not enough — you need another token, the gas token (e.g., ETH), to pay for transactions on the chain. You also need to make sure the stablecoin is on the same chain the merchant is on (e.g., USDC on Base is not the same thing as USDC on Solana). It’s completely broken from a consumer convenience standpoint.

Despite this, I’m confident these issues will soon get solved. Under the Biden administration, the Office of the Comptroller of the Currency (OCC) effectively prohibited banks from custodying any crypto, including stablecoins. But several months ago, it rescinded this position. This means banks will finally be able to custody stablecoins, vertically integrating the fiat world with the crypto world in a way that has simply not been possible to date and addressing the root of much of this broken UX flow. Important technical developments like account abstraction, gas sponsoring, and passkeys are also improving UX. 

Merchant Incentives

Stablecoins offer new and exciting ways to create incentives for merchants,⁸ particularly through whitelabeled stablecoins. 

A whitelabeled stablecoin is issued by one entity, usually a regulated financial or infrastructure provider (like Paxos, Bridge, M^0, BitGo, Agora, and Brale), but branded and distributed by another, such as a merchant that wants its own digital dollar without handling backend operations or regulatory compliance. The branding partner (e.g., the merchant) earns yield on the float (when the value stays in its stablecoins).

There are clear parallels between whitelabeled stablecoins and programs like Starbucks Rewards. Both invest the float of funds onboarded into the system in short-term instruments, and keep the interest earned. And like with Starbucks Rewards, whitelabeled stablecoins can be structured to give customers store credits and rewards that can only be redeemed within the merchant’s ecosystem.

While whitelabeled stablecoins resemble prepaid rewards programs in structure, there are important differences that suggest whitelabeled stablecoins will be significantly more viable for merchants than traditional prepaid rewards programs (which are limited to the largest of retailers).

First, the ease of launching one of these programs is about to collapse to near zero as whitelabeled issuance becomes commoditized. The GENIUS Act provides a framework for issuing stablecoins in the U.S. and establishes a new class of issuer with lighter compliance burdens than banks (the nonbank permitted payment stablecoin issuer). As a result, a cottage industry is going to develop around whitelabeling stablecoins. Service providers will exist to abstract away the UX, consumer protection, and compliance functions of such programs⁹ (which are extremely difficult to do on a global scale with traditional rewards programs). Merchants will be able to roll out branded digital dollars with minimal effort. For merchants with sufficient leverage to temporarily “trap” value, the question becomes: why wouldn’t they launch their own rewards program?

Second, these stablecoins differ from traditional rewards programs because they can be used outside the issuing merchant’s ecosystem. Consumers will be significantly more willing to temporarily trap value there because they know they can take value out (converting it back into fiat), can transfer it to others (like a gift card), and, eventually, use it with other merchants (more on this interoperable end state below). While merchants could demand custom stablecoins that are non-transferable, I believe they will realize their whitelabeled stablecoin is significantly more likely to be adopted if it is transferable; permanently trapping value makes that value highly inconvenient for consumers and makes them less willing to adopt whitelabeled stablecoins. This is reminiscent of charge cards in the early 1900s (e.g., “courtesy cards” for oil) — which functioned effectively as loyalty programs and only worked with an individual merchant. By the 1950s, they had lost out to interoperable T&E cards like Diners Club (and, of course, eventually credit cards) that supported a collection of merchants.¹⁰ For similar reasons, I do not think most issuers will be incentivized to offer non-transferable stablecoins, particularly issuers that want to lean into the network effects of making each stablecoin they issue interoperable with each other.

Consumer Incentives 

Stablecoins provide a completely different way to offer consumer rewards than exists with credit cards. Merchants can indirectly use the yield earned on their whitelabeled stablecoins to offer targeted incentives — like instant discounts, shipping credits, early access, or even VIP support queues. Although the GENIUS Act prohibits the passing through of yield “solely” in connection with holding the stablecoin, I expect these types of loyalty rewards to be acceptable. 

Because stablecoins are programmable in ways cards are not, they can natively access yield opportunities onchain. (To be clear, I’m referring to fiat-backed stablecoins tapping into DeFi, not dollar-denominated onchain hedge funds masquerading as stablecoins.) Applications like Legend and YieldClub will encourage users to hold value in stables — rather than earn nothing sitting in a checking account — by routing the float into lending protocols like Morpho to earn yield. This is where I think stablecoins will hit escape velocity on rewards. Yield becomes a hook: it drives users to convert into stables to access DeFi, and if spending within that experience is seamless, many will choose to transact directly in stablecoins.¹¹ 

As a final point, the history of charge and credit cards shows repeated use¹² of unsolicited mail campaigns to drive consumer adoption — most famously BankAmericard’s 1958 “Fresno Drop.” If there’s one thing crypto excels at, it’s the airdrop: the unilateral, instant transfer of value to wallets at global scale to incentivize engagement. While unsolicited credit card mailings were banned under the 1970 amendments to the Truth in Lending Act, this prohibition appears specific to credit cards and was largely motivated by concerns around unauthorized debt creation and fraud risks stemming from delayed authorization systems.¹³ Stablecoin issuers can pursue similar tactics — using airdrops to distribute free stablecoins (or other tokens) and onboard new users into crypto with a desire to spend their stables.¹⁴

Increased Sales 

Stablecoins are a bearer asset like cash, so they do not inherently help merchants increase sales like credit does. However, just as credit card companies built the concept of credit on top of bank deposits, it’s not difficult to see how providers could offer a comparable program, with stablecoins underneath. And I’m seeing more and more companies flipping the credit paradigm on its head and arguing that DeFi incentives enable a new primitive that will drive sales — so-called “buy now, pay never.” Under this, the stablecoins that are “spent” will be put into escrow, earn yield in DeFi, and pay off some of the purchases at the end of the month. This will, in theory, encourage spending by consumers that merchants will want to tap into.

How to Bootstrap a Stablecoin Network

We can summarize the intrinsic features of stablecoins as follows: 

• Stablecoins are generally neither convenient nor a net-new source of sales (although reaching parity with credit cards seems very possible in the near future).
• Stablecoins can offer meaningful incentives to merchants and consumers.

The question is — how can stablecoins follow the “two-step” process of credit cards to bootstrap a new payment method? Let’s look at each step.

Step One: Lean into intrinsic features that don’t require a network 

BankAmericard built initial fiefdoms of supply and demand by leaning into intrinsic features that solved a pain point for specific consumers and merchants. Stablecoins can follow this path by focusing on niche use cases where (1) stablecoins are actually more convenient for consumers than existing payment alternatives and therefore generate sales or (2) merchants are incentivized to offer stablecoins to consumers who are willing to forgo convenience for rewards.

Niche One: (Comparative) convenience and sales generation 

While stablecoins are generally not convenient right now, they would be for consumers not being served by existing payment methods. These consumers will be willing to overcome any onboarding inconvenience into stablecoin world. And merchants will accept stablecoins to generate sales from these previously unreachable customers.

A prime example¹⁵ is U.S. merchants with non-U.S. consumers. It is extremely difficult and/or expensive for consumers in certain jurisdictions, particularly LATAM, to access U.S. merchants’ goods and services because U.S. merchants typically transact in dollars and these consumers have extreme difficulty accessing dollars. In Mexico, USD accounts are only available to those living within 20 km of the U.S. border; in Colombia and Brazil, dollar banking is prohibited entirely; and in Argentina, while USD accounts exist, they are tightly controlled, subject to volume caps, and usually offered at an official exchange rate far below the market rate. This constraint means U.S. merchants lose out on these sales.

Stablecoins provide non-U.S. consumers with unprecedented access to the dollar to purchase these goods and services. This means stablecoins are actually comparatively convenient for these consumers because there is often no other reasonable way to get dollars to make purchases. And they represent a new sales channel for merchants because these consumers were otherwise inaccessible. U.S. merchants with a lot of demand from non-U.S. consumers, like many AI services companies, will therefore be driven to accept stablecoins to tap into these sales. 

Niche Two: Incentive-first

There are all sorts of businesses with customers willing to get over convenience in exchange for rewards. My favorite restaurant in the city offers a 3% discount if I pay in cash. You better believe I make an extra trip to the bank to get some cash because I want this discount, even though it’s highly inconvenient. 

Merchants will be directly incentivized to offer branded whitelabeled stablecoins as a way to fund loyalty programs that offer consumers discounts and perks that drive sales. Certain consumers will be willing to tolerate the friction of onboarding into the crypto world and converting value into a whitelabeled stablecoin — especially when the incentives are strong and the product is one they are obsessed with or already use regularly. The logic is simple — I’m willing to endure a clunky experience and even lock in funds if I love the product, know I’ll use the balance, and get meaningful rewards in return. This is exactly why prepaid rewards programs like Starbucks Rewards are so popular — Starbucks junkies need to get their coffee fix and are okay loading $25 at a time because they know they’ll use it eventually and Starbucks gives incentives like free coffees in exchange. 

The sweet spot for a whitelabeled stablecoin is merchants with at least one of the following:

• Cult-like following. E.g., I can guarantee you that if Taylor Swift required her fans to purchase her concert tickets in “TaylorUSD,” they would do it. She could then incentivize fans to keep the value in TaylorUSD by offering them first dibs on future tickets or discounts on merchandise. And other merchants may be willing to accept TaylorUSD to target her fans for sales promotions.
• High velocity of intra-platform use. E.g., Poshmark is a marketplace for second-hand goods, where in 2019, 48% of sellers used a portion of their earnings on the marketplace to buy things on the marketplace. If Poshmark sellers started accepting “PoshUSD,” many would keep that value in the stablecoin to simply use it as a buyer with another seller.

Step Two: String together the fiefdoms

Since the above are niche use cases, it follows that usage will be relatively ad hoc and fragmented. Various participants across the stack will define their own rules and standards (including around customer protection¹⁶) for supporting stablecoin payments, leading to fragmented experiences. Adding further fragmentation, stablecoins will be issued across multiple chains, making acceptance more technically demanding. Many will be whitelabeled and accepted only by a limited set of merchants. The result will resemble a patchwork of fiefdoms — each operating sustainably within its localized niche, but lacking the standardization and interoperability needed to reach the mainstream.

What they’ll need is a full-blown and neutral network to string it all together. The network will establish rules, standards around compliance and consumer protection, and technical interoperability to connect these fiefdoms. The open and permissionless nature of stablecoins will make aggregating fragmented supply and demand across these fiefdoms feasible. To solve the coordination problem, the network will need to be open and owned by its participants — not vertically integrated with other parts of the payment stack (e.g., issuance). This aligns with Variant’s thesis that turning users into owners allows networks to scale in ways otherwise impossible. I’m particularly a fan of Atum’s approach; it’s building a stablecoin network that embodies these principles: open, neutral, and user-owned. 

By aggregating this siloed supply and demand, the network will solve the bootstrapping problem of a new payment method. Just as consumers are willing to endure a one-time inconvenience to sign up for a credit card today, the value of joining the stablecoin network will eventually be high enough to warrant any net inconvenience in onboarding into stablecoin world. From here, stablecoins will reach U.S. consumer payments Valhalla — mainstream adoption.

Conclusion

Stablecoins won’t dethrone cards by directly competing with them in the mainstream — they’ll get there by starting at the edges. By solving real pain points in niche contexts, stablecoins can create pockets of sustainable adoption rooted in comparative convenience or superior incentives. The key unlock will be aggregating these fragmented use cases into an open, standardized, and participant-owned network that can coordinate supply and demand and unlock scale. If that happens, the shift to stablecoins in U.S. consumer payments won’t look like a sudden disruption — it’ll feel, in hindsight, like the inevitable next step.

1. While I’m focusing on consumer payments in one region (the U.S.), there are other use cases that have stronger needs to solve, like B2B payments, payouts (to emerging markets), treasury, etc. My focus here on consumer payments should not suggest anything about thinking consumer payments are the larger problem or that Variant is not excited in these other use cases — we very much are.

2. Many of these arguments could apply to the success of debit cards dethroning cash and check as well. Debit cards are the second-most-popular payment method in consumer payments in the U.S., at 33%. To ensure this piece does not balloon more than it already has, I am focusing only on credit cards.

3. This is a slight amendment on the “Glenbrook Theory” of what motivates payment choices documented in the bible on U.S. payments, “Payments Systems in the U.S.” by Carol Coye Benson, Scott Loftesness and Russ Jones. Although a little dated, it’s an excellent book for going deeper on payments.

4. All information and quotes in this section and the next come from the definitive history of Visa by David L. Stearns, “Electronic Value Exchange: Origins of the VISA Electronic Payment System” (Springer, 2011). It’s a must-read for anyone looking to go deeper on payments and understand how we got to where we are today.

5. Although early T&E card programs also involved third parties that helped manage these complexities for merchants, their support was limited to the specific sectors they served.

6. Authorizing non-interchange transactions was also a really bad experience, but it was more manageable as the acquiring bank could just look at its own books and records.

7. It also introduces significant cost — most of the margin on stablecoin payments comes from the on- and off-ramp intermediaries.

8. There will be a proliferation of these whitelabeled stablecoins issued not just by merchants but more broadly. For example, fintechs, marketplaces, card networks, banks, and payment service providers. I am focusing solely on merchants for the purpose of this piece.

9. Or the issuers will vertically integrate this function themselves.

10. Stearns (2011).

11. However, some argue that this is a “bad” feature of a payment option, as consumers are less willing to spend value when it is actively earning yield.

12. As just one other example, in 1939, Standard Oil of Indiana distributed 250,000 unsolicited cards directly to consumers. See Stearns (2011).

13. The provision reads: “No credit card shall be issued except in response to a request or application therefor.”

14. Banks use this tactic all the time, by offering free money for opening up a checking account.

15. This piece only touches on one of many relevant use cases. Another important one: the large swath of consumers who are unbanked even though they are digitally native. 

16. Consumers have come to expect a certain level of protection with credit cards, so it’s likely that various participants in the stack will offer similar forms of insurance in cases of fraud, scams, or undelivered goods as a feature to encourage use of their supporting products or their stablecoin. For example, we can imagine banks offering such insurance for users who custody with them or who use their whitelabeled stablecoin. Coinbase and Shopify have already partnered to build their own commerce payments protocol to manage some of these complexities. Despite what many commentators state, there is no reason these consumer protections need to look the same way as our current paradigm, which is based on laws written 50 years ago. Put differently, there’s no requirement that this “insurance” take the same form it does today — a structure many, particularly merchants, view as suboptimal.

Thank you to Pete Cooling (Atum), Chukwuma Okpalugo (Paxos), David Stearns, Greg Di Prisco (M^0), Zach Abrams (Bridge), Bryce Ferguson and Hannah Arnold (Turnkey), Rob Hadick (Dragonfly), Max and Amhed (Moni), Diego and Cairo (Credit), Lucas Posada (Takenos), James Ross Vázquez (Utila), Mykel Pereira (Legend), chaskin.eth (Ethereum Foundation) and Shimon Newman (Moto) for their thoughtful feedback and discussion on this article.

Thank you to my superb colleagues Jesse, Caleb, Jake, and Alana for invaluable discussions and debate on this topic. 

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