Stablecoins 101 and what it means for Visa

Summary

“If you are not a little bit confused, you are not paying enough attention”

Oliver Jenkyn’s comment surmises the state of payments today pretty well.

Blockchains and Stablecoins are one of the hottest topics today in payments. Crypto for the longest time has been associated with: wildly fluctuating prices, no asset backing, lack of trust by users and financial institutions, meme coins and unexplainable volatility.

Stablecoins change exactly that. They introduce stability in this space. And they are doing this by pegging the value of the stablecoin to the value of USD.

In simple terms, it is digital cash that moves on blockchain rails. It combines the stability of traditional money with some of the features that make crypto infrastructure powerful: speed, programmability, global reach, and 24/7 availability.

These are also what makes this interesting for Visa.

To understand this better, we need to start from the start.

First, what is a blockchain?

Let’s start with an analogy. Imagine a Google Sheet that records who paid whom. But instead of that one standalone sheet on the cloud google drive, independent copies of it are stored across thousands of computers around the world. Every time someone wants to add a new transaction, this network checks whether it is valid. Does the sender actually have the money? Is the digital signature correct? Is this the right amount? Once the network agrees that the transaction is valid, it is added to the record. From that point on, it becomes extremely difficult to change. To fake or rewrite an old transaction, someone would not just need to edit one spreadsheet. They would need to convince thousands of independent copies of the spreadsheet to accept the same false version of history. That is the basic idea of a blockchain: a shared, tamper-resistant ledger that many entities can verify, but no single party fully controls.

A more technical definition is that a blockchain is a distributed ledger maintained by a network of independent computers called nodes. Transactions are grouped into blocks. Each block is cryptographically linked to the previous one, forming a chain. To change an old record, someone would have to change not just that block, but every block after it, and convince the network to accept that altered history. This is what makes blockchains useful for payments. They create a shared record of who owns what, without needing every participant to rely on the same central database.

The delays in the traditional banking rails could be for delivery of funds or for settlement. And these delays have costs and inefficiencies. And blockchain infrastructure can help mitigate some of those things, reducing both costs and time of delivery of funds (settlement and payment both).

Key Blockchain Terms You’ll Hear:

Now, what is a Stablecoin?

Bitcoin and Ethereum are cryptocurrencies, but their prices fluctuate wildly. Bitcoin can swing 20% in a single day. That makes them impractical for everyday payments. Nobody wants to pay $5 for a coffee if the $5 coin might be worth $4 tomorrow.

A stablecoin is a digital currency that is designed to maintain a stable value by being “pegged” to a real-world asset, most commonly the U.S. dollar. One USDC (the most widely used stablecoin) is always meant to be worth exactly $1.00.

Simple definition: A stablecoin is digital cash. Tt has the speed, programmability, and global reach of crypto, but the price stability (more or less) of a dollar bill.

Stablecoins sit quiet nicely in the middle: the best of both worlds of banking and crypto.

Market Size (as of 2026)

• ~$300 billion in total stablecoin in circulation
• $33 trillion in stablecoin transactions processed in 2025, a 72% year-over-year increase
• Dominated by USDT (Tether) and USDC (Circle), both pegged to the U.S. dollar

There are 3 types of Stablecoins but for our purpose (and for all practical ones) there is only one that we need to discuss. We will always be referring to fiat-backed stablecoins like USDC and USDT, which represent 95%+ of stablecoin usage in payments.

1. Fiat Backed
1. The issuer holds real dollars (or equivalent short-term assets like Treasury bills) in a bank account: one dollar for every stablecoin token in circulation. The ratio is always 1:1, meaning every stablecoin token is backed by dollar equivalent.

Examples: USDC (Circle), USDT (Tether), PayPal USD (PYUSD

2. Crypto-Backed
1. Backed by other cryptocurrencies, but more is locked up than is issued (to account for price swings).
3. Algorithmic
1. Tries to maintain the peg through algorithmic supply expansion and contraction. No real-world assets backing it. History has shown these to be fragile. (Riskiest of the three)

Who Issues Stablecoins?

A stablecoin issuer is the company that creates the token, maintains the reserve, and is responsible for honoring redemptions. Think of them like a private mint.

Major Issuers Today

What Makes Circle (USDC) Popular with Institutions?

• Regulated under U.S. money transmission laws
• Reserves held in segregated accounts at regulated U.S. banks
• Monthly attestations from Deloitte published publicly
• Compliant with the GENIUS Act (2025), the U.S. federal stablecoin law
• Visa’s preferred stablecoin partner for settlement

Who Funds (Backs) a Stablecoin?

This is one of the most important concepts. The “backing” is what gives a stablecoin its value and stability.

For USDC (Fiat-Backed): The Reserve

When someone buys 1,000 USDC, Circle receives $1,000 in real money. That money is placed into:

• Short-term U.S. Treasury Bills
• Cash at U.S. Regulated Banks
• TOTAL RESERVE = 1:1 with all USDC in circulation
• Independent Auditor: Deloitte (monthly attestation)  

Key Point: The reserve earns interest (Treasury yields), which is kept by the issuer; not passed on to stablecoin holders. This is a major revenue source for issuers. Circle earned over $1.5 billion in interest income in 2024.

Who Are the “Funders” in Practice?

1. Institutional investors: hedge funds, trading desks, crypto exchanges (Coinbase, Binance) depositing large sums
2. Corporations: treasury teams holding stablecoins as a cash management tool
3. Individuals: retail users converting fiat via apps or exchanges
4. Payment companies: fintech firms loading stablecoins for payment corridors

Retail users typically cannot mint USDC directly. They buy it from exchanges or apps that have mint/redeem access.

Who Can Mint?

• Directly: Licensed financial institutions, large crypto exchanges, Circle’s verified business partners
• Indirectly (via exchanges): Retail users buying USDC on Coinbase, Kraken, etc.

Here is an indicative flow of how minting works:

How Does a Stablecoin Move?

This is where stablecoins get truly powerful. Moving stablecoins is fundamentally different from moving money in the traditional banking system. In the typical transfer, the timing of delivery and settlement is measured in business days. Along with intermediary costs.

For Stablecoin its minutes. And very little cost.

How Does a Stablecoin Get Redeemed? also known as (Burning)

Redemption (also called “burning”) is the reverse of minting. When someone wants to convert their stablecoins back to real dollars, the tokens are destroyed and fiat is returned.

What are the emerging use cases for Stablecoins?

Cross-Border Payments and Remittances

The Problem Today: Global remittances reached $905 billion in 2024 - Average cost: 6.2% of transfer amount (According to World Bank). Example: Sending $200 from the U.S. to Mexico costs ~$12 in fees and takes 1–3 days

With Stablecoins: Cost: Under 1% for the on-chain transfer itself (often under $0.10) though converting in and out of local currency at either end typically adds cost on top of that. Speed: seconds for the transfer to settle on-chain.

Example: A migrant worker sends $200 USDC from their phone; it settles in the family's wallet in Mexico within seconds. Cashing it out at a local exchange for pesos is a separate step, still far faster than a multi-day wire, but not instant the way the on-chain leg is.

Business-to-Business (B2B) Payments

Large companies send payments to suppliers and partners globally. Traditional correspondent banking is slow, expensive, and opaque.

Stablecoin advantages for B2B:

• Real-time settlement: no waiting T+2 for funds to clear
• Programmability: smart contracts can automatically release payment when goods are confirmed delivered, reducing reliance on traditional letters of credit for straightforward transactions (though LOCs still offer financing and dispute-resolution functions that programmable payments don't fully replace yet
• Transparency: both parties can see payment status in real time
• Cost: eliminates SWIFT fees, FX spread, and correspondent bank charges

Treasury and Cash Management

CFOs and treasury teams at multinationals hold cash across dozens of countries in different currencies. Moving money between subsidiaries requires bank wires, FX conversions, and days of delay.

With stablecoins: Move dollar-equivalent value between offices instantly. Some treasury teams also park excess cash in yield-bearing stablecoin products for potential returns, though under the GENIUS Act, these yield-bearing tokens are a distinct category from standard "payment stablecoins" like USDC, and carry their own counterparty and smart-contract risk.

Payments for Gig Workers, Creators, and Freelancers

Millions of gig workers (Uber, Fiverr, etc.) and content creators (YouTube, Twitch) wait days or weeks to be paid. They may be in countries where local payment infrastructure is poor.

Stablecoins enable: Instant payout as soon as a job is completed. Direct-to-wallet payments, bypassing slow ACH or international wire timelines. This provides access for workers in underbanked regions (wallet ≠ bank account)

Visa Direct’s Stablecoin Payouts Pilot (2025/2026) is specifically targeting this use case.

Stablecoin-Linked Cards (Spending Anywhere)

One of the fastest-growing use cases: consumers and businesses hold stablecoins but spend them anywhere Visa or other schemes are accepted. The merchant never touches crypto and receives ordinary local currency. Issuer settles with Visa (either with fiat or Stablecoin).

This is what Visa’s partnership with Bridge (Stripe) enables, and it’s live in 18 countries as of 2026, expanding to 100+ countries.

Emerging Market Dollar Access

In countries with high inflation (Argentina, Venezuela, Turkey, Nigeria, Lebanon etc.), citizens want to hold U.S. dollars but cannot easily open USD bank accounts. Stablecoins give anyone with a smartphone access to digital dollars.

What is Visa doing in this space?

Visa Strategy in this space, as you’d expect, has several dimensions. I’ve tried to classify them in 5 broad pillars:

1. USDC settlement (with Circle): back-end, bank-to-Visa

Banks settle their Visa obligations in USDC instead of wiring USD. Live in the US since December 2025 (Cross River Bank, Lead Bank, via Solana), reaching a $3.5B annualized run rate at launch. Enables instant, 24/7/365 settlement (vs. T+1, business-days-only wires) and 7-day acquirer settlement.

2. Multi-chain expansion: infrastructure breadth

Grew from 4 to 9 supported blockchains on April 29, 2026 — adding Arc (Circle), Base (Coinbase), Canton Network, Polygon, and Tempo (Stripe) to existing Ethereum, Solana, Stellar, and Avalanche support. Run rate hit $7B (+50% QoQ) at this milestone. Positions Visa as a chain-agnostic settlement layer.

3. Stablecoin-linked cards (Bridge/Stripe partnership): consumer spending

Consumers hold stablecoins in a Bridge wallet; Bridge converts to fiat in real time at point of sale; Visa routes it as a normal payment; merchants receive ordinary local currency. Launched 2025 in Latin America, live in 18 countries by early 2026, expanding to 100+ by end of 2026. 160+ stablecoin card programs live/in development globally as of June 2026 (up from 130+ in April 2026).

4. Visa Direct stablecoin payouts pilot: worker/creator payments

Lets platforms pay gig workers, freelancers, and creators directly to stablecoin wallets instead of bank accounts or cards, particularly valuable in underbanked regions. Piloted with select partners since November 2025; broader rollout planned for H2 2026, pending regulatory clarity.

5. Open USD (OUSD) consortium stablecoin: strategic hedge

Announced June 30, 2026 by Open Standard, an independent entity with Zach Abrams (Bridge co-founder) as founding CEO. 140+ founding partners including Visa, Mastercard, Stripe, Coinbase, BlackRock, BNY, American Express, Google, and Ripple. Unlike USDC/USDT: zero mint/redemption fees, no volume caps, and nearly all reserve income shared back to partners rather than kept by a single issuer; governance sits with a partner board, not one company. Not yet live — expected later in 2026, launching first on Solana. Visa's stated rationale: hedge against depending on any single third-party issuer (Circle or Tether) by co-owning a neutral rail alongside its rivals.

Conclusion

Stablecoins fix crypto's volatility problem and that's exactly why banks, card networks, and regulators stopped ignoring them. Visa's bet is that stablecoins co-exist with card networks, just like banking rails across the world, or any other payment network have. Furthermore, Visa epitomises trust. Question of payments are almost always answered with “trust first” and thats how money philosophically always moves: whether its cash or its digital equivalents or whatever comes next.

Confused yet? Good. That means you're paying attention.