Mastercard says stablecoins have a long way to go for mainstream payments

Despite the significant hype surrounding stablecoins, Mastercard believes they are not yet ready for widespread use as an everyday payment tool. According to Bloomberg, Jorn Lambert, Mastercard’s Chief Product Officer, the technology behind stablecoins is promising, with attributes like fast transactions, low fees, and 24/7 availability. However, these features alone are not sufficient to make them a viable payment tool. Mastercard’s view is that stablecoins still lack the essential elements that drive consumer adoption, such as a predictable and seamless user experience, broad distribution, and ease of use.

Currently, the primary use case for stablecoins is not for everyday payments but for cryptocurrency trading, which accounts for about 90% of their usage. While some platforms like Shopify and Coinbase have begun enabling stablecoin payments for consumers, uptake has been limited. This is due to friction at the checkout stage and the fact that the benefits are not yet clear when compared to traditional payment methods.

Furthermore, the full cost of using stablecoins goes beyond the token itself. According to Raj Seshadri, Mastercard’s Chief Commercial Payments Officer, additional complexities such as conversion to and from fiat currency, compliance requirements, and settlement processes add layers of difficulty to what should be a seamless transaction.

Initially, stablecoins were promoted as a way to bypass traditional card networks and lower transaction costs. However, companies like Mastercard are now reframing their role and positioning themselves as infrastructure providers that can help stablecoins scale securely by integrating them with existing financial systems.

Since at least 2021, Mastercard has been building out the partnerships and infrastructure necessary to support stablecoin transactions. These efforts include:

• A collaboration with Paxos to support the minting and redemption of the USDG stablecoin.
• Ongoing support for other tokens, including USDC from Circle, PYUSD from PayPal, and FIUSD from Fiserv.

By providing this infrastructure, Mastercard aims to be the “bridge between digital assets and the traditional financial system”. The company can provide network attributes such as global merchant acceptance, security safeguards, and regulatory compliance, which are needed to make stablecoins usable at scale.

Mastercard’s efforts are taking place as central banks and financial regulators worldwide are also paying close attention to stablecoins. Banks are considering whether to issue their own stablecoins or deposit tokens to maintain control over customer funds. At the same time, governments are looking to promote domestic digital currency innovation to reduce their dependence on foreign currencies. The pending regulatory clarity has also attracted new participants into the digital asset sector.

While the technology behind stablecoins is powerful, Mastercard believes that a long road remains before they can become a viable everyday payment tool. The focus, for now, remains on building the foundational elements and infrastructure required to make them a practical and seamless part of the global financial system.