The 'Stablecoin Sandwich' is Dead: Crypto Payments and User Relationships

The landscape of stablecoin payments is evolving, moving away from a purely transactional model towards one where user relationships and distribution are paramount. This shift signals a maturation of the market, where simply offering a stablecoin is no longer sufficient to gain a competitive edge.

According to insights from a key figure involved with Meta's now-defunct Diem project, the true competitive advantage in the stablecoin space now resides in the distribution networks controlled by existing players. The traditional "stablecoin sandwich" – the idea of a neutral payment rail facilitating transactions – is becoming less relevant.

This evolving dynamic suggests that the future of stablecoin adoption hinges on building strong user relationships and leveraging established distribution channels. Incumbent stablecoin issuers, with their existing user base and integrated platforms, possess a significant advantage in this new paradigm.

Expert View

Our analysis indicates a fundamental change in the dynamics of the stablecoin market. The initial focus was on creating a stable and efficient digital currency pegged to fiat. Now, the emphasis has shifted to onboarding and retaining users. This isn't just about offering a superior technological product; it's about effectively reaching users and providing a seamless experience within a trusted ecosystem.

The "distribution moat" highlights the importance of partnerships, integrations with existing financial infrastructure, and building trust with users. New entrants will find it increasingly challenging to compete solely on the basis of technological innovation or a slightly different pegging mechanism. They must devise novel strategies to acquire users and establish their presence within the established financial landscape.

Furthermore, regulatory clarity (or lack thereof) plays a crucial role. Stablecoin issuers operating within well-defined regulatory frameworks will be better positioned to build trust and expand their distribution networks.

What To Watch

Several key factors will shape the future of stablecoin payments. Keep an eye on:

• The evolution of regulatory frameworks surrounding stablecoins in major jurisdictions.
• The success of different distribution strategies employed by both incumbent and emerging stablecoin issuers.
• The integration of stablecoins into existing e-commerce platforms and financial applications.
• The development of new use cases for stablecoins beyond simple payments, such as remittances, DeFi applications, and cross-border transactions.
• The potential for central bank digital currencies (CBDCs) to disrupt or complement the stablecoin ecosystem.

The interplay of these factors will determine which stablecoins ultimately succeed in achieving widespread adoption and establishing themselves as essential components of the future financial system.

Source: CoinDesk