Foundering Podcast Summary: “Evolving Money: A Faster, Cheaper Way to Pay”
Release Date: January 16, 2025
Introduction
In the January 16, 2025 episode of Foundering, hosted by Bloomberg, the focus shifts to the transformative potential of stablecoins in the global payments landscape. Titled “Evolving Money: A Faster, Cheaper Way to Pay” and produced as sponsored content by Coinbase and Bloomberg Media Studios, this episode delves into how stablecoins—cryptocurrencies pegged to fiat currencies like the US Dollar—are poised to revolutionize the way individuals and businesses handle payments and store long-term value.
The Evolution of Payment Systems
The episode opens with a historical perspective on the progression of payment methods, tracing back to the mid-20th century. Jose Fernandez Diponte, Senior Vice President of Digital Currencies at PayPal, recounts the origins of the credit card industry:
“The invention of the credit card was a major update to how people and businesses make payments. And as payments went digital in the 21st century, everything seemed like it got even more convenient. But we also deal with the fees and delays that come with that convenience.”
[05:28]
The narrative highlights Frank McNamara’s 1949 introduction of the Diners Club card, an innovation that laid the foundation for modern credit systems. Dr. Sean Venotta, financial historian and author of Plastic Banks, Credit Cards, and the End of Financial Control, provides context:
“If you were well off, you shopped at fancy department stores, you would be familiar with metal tokens that were called charge plates that you'd be able to use to charge goods. But it was always built around individual relationships with specific stores that you had to build up over time.”
[03:59]
This historical backdrop sets the stage for understanding the current shifts in the payments industry.
The Rise of Digital Payments and Emerging Challenges
As the world transitioned to digital payments, the conveniences came with inherent drawbacks such as high transaction fees and lengthy settlement times. Diponte emphasizes the inefficiencies that persist despite digital advancements:
“Now we may be at the beginning of another shift that's just as big as the one that started when Frank McNamara debuted the Diners Club card. Thanks to a new kind of digital currency.”
[05:31]
Embracing Stablecoins: Diponte’s Journey from Skepticism to Advocacy
Diponte shares his initial skepticism towards cryptocurrency, which transformed as he witnessed the practical applications of stablecoins:
“I've been in crypto since 2015. I was very, very skeptical walking into it. The first use case that I had on crypto was in payments and it was about moving money cross border between bank accounts using a blockchain layer. I was looking at the account where money was leaving and then the account where money was arriving and it was five minutes from one place to the other across 9,000 miles of ocean. This is something that you could not do before. I think it was the moment that brought it to life for me.”
[06:18]
Stablecoins, pegged to stable fiat currencies and backed by reserves, offer several advantages:
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Speed and Efficiency: Transactions settle in seconds rather than days. Diponte illustrates this with a comparison:
“If I can send the same amount of money on a stablecoin on a high throughput blockchain, what is going to happen is the payment will settle in seconds, not in days.”
[08:04] -
Reduced Costs: Lower transaction fees make cross-border payments more affordable.
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Programmability and Interoperability: Enhanced flexibility in financial operations.
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Stability: Pegging to fiat currencies minimizes volatility, making stablecoins reliable for everyday transactions.
Benefits of Stablecoins in Cross-Border Transactions
The conversation underscores how stablecoins address the limitations of traditional payment systems, particularly in international contexts. Diponte provides a real-world example:
“I was talking a few weeks ago to someone who was using a stablecoin to send value from their wallet in the U.S. to a relative in Malawi in Southern Africa to a local wallet. And they did the experiment of sending the stablecoin on one side and then sending the money on traditional rails. The person on the receiving end ended up with 40% more on their local currency just because it was not only faster but it was more liquidity on that side and they could get a better exchange rate.”
[09:07]
This example highlights significant benefits:
- Increased Speed: Immediate transfer of funds regardless of banking hours.
- Enhanced Exchange Rates: Better rates due to higher liquidity.
- Reduced Counterparty Risk: Eliminates the need for pre-funded local accounts, mitigating risks in unstable markets.
PayPal’s Strategic Move into Stablecoins
PayPal’s aggressive push into stablecoin adoption marks a pivotal moment in the payments industry. Diponte discusses PayPal’s launch of its proprietary stablecoin, PayPal USD, and its integration into the existing payment ecosystem:
“Earlier this year they launched a proprietary stablecoin pegged to the US dollar, PayPal USD. Because this is not going to be a hack, this is going to be a tool in the toolbox of the CFO and it should coexist with the instruments and the platforms that they are using today.”
[11:07]
PayPal’s extensive merchant network—36 million merchants—positions the company to facilitate widespread stablecoin adoption by providing a trusted and familiar platform for businesses to transition seamlessly.
Case Study: Fig Tree Pots
A compelling case study featured in the episode is Fig Tree Pots, a small ceramics business in Austin, Texas. Rene, the CEO, illustrates the transformative impact of stablecoins:
“When you are offering an alternative. I mean, her eyes lit up Saying, okay, so you're telling me now they can pay me in this stablecoin instrument. I can receive that in the wallet that I do all the time, I can send it quickly to my bank account and I can get that additional business.”
[13:00]
By adopting stablecoins, Fig Tree Pots can overcome barriers to international payments, enabling the business to tap into new markets without the complexities and costs previously associated with cross-border transactions.
PayPal’s Vision for the Future of Payments
Diponte reflects on PayPal’s long-standing role in the digital payments revolution and its current trajectory with stablecoins:
“Over two decades ago, PayPal was at the forefront of the financial system's shift to a digital cashless world... PayPal is taking another huge leap forward, but with an eye toward practical adoption of this game changing technology.”
[13:42]
He contrasts ideological motivations behind blockchain with PayPal’s pragmatic approach, emphasizing the company’s focus on enhancing financial infrastructure:
“We started on these because we were experimenting with some of these protocols five years ago, and we were able to move value for a cost that is the equivalent of 26 times cheaper than moving money from a bank account to a bank account. And it's 400 times cheaper than moving money through a paper check.”
[14:05]
Overcoming Behavioral Shifts in Payment Technologies
Diponte acknowledges the challenges in altering entrenched payment behaviors, drawing parallels with the adoption of credit cards and digital payments:
“Think about the waves of innovation in payments. The credit card is a very good example... When you're trying to change that behavior, you need to provide a ton of additional value in the short term for folks to change. We will see that with the stablecoin payments as.”
[15:11]
He underscores the necessity for stablecoins to offer immediate and tangible benefits to encourage widespread adoption, much like previous payment innovations.
Conclusion: The Promise of Stablecoins
The episode concludes with Diponte’s optimistic outlook on stablecoins reshaping the payments ecosystem:
“Like credit cards 75 years ago, stablecoins come with a new infrastructure that can break down decades-old obstacles to making everyday payments. And like so many people have embraced a life without paper bills, companies and consumers today are realizing that stablecoins could reshape our basic expectations of how to move money.”
[15:53]
Closing Remarks
“Evolving Money: A Faster, Cheaper Way to Pay” offers an insightful exploration into how stablecoins are not merely a technological innovation but a fundamental shift poised to address longstanding inefficiencies in the global financial system. Through expert interviews and real-world examples, the episode paints a comprehensive picture of the potential for stablecoins to mainstream and revolutionize the way we handle money.
Thank you to Sean Venotta and Jose Fernandez Diponte for their contributions. This episode of Evolving Money is produced by Coinbase and Bloomberg Media Studios and is part of the Foundering series.