Podcast Summary: Unchained – The Chopping Block: Stablecoin-as-a-Service: The Next Big Crypto Gold Rush? (Ep. 906)

Host: Laura Shin
Panelists: Haseeb Qureshi (Dragonfly), Tom Schmidt, Tarun Chitra (Gauntlet), Chris Burniske
Special Guest: Gordon Lau (Chief Economist & Head of Research, Circle)
Date: September 18, 2025

Overview

This episode of "The Chopping Block" explores the rapidly evolving landscape of stablecoin infrastructure—focusing on the competitive race to launch Layer 1 “stablecoin chains” and the rise of stablecoin-as-a-service offerings. The discussion dives into the business, technical, and regulatory aspects surrounding Circle's new chain, Ark, and the recently announced Tempo chain (from Paradigm & Stripe). Key topics include the persistent dominance of USD-backed stablecoins, the struggle for non-USD stablecoin adoption, the “neobank” future of branded or white-label stablecoins, and the strategic maneuvering among exchanges and ecosystems to capture stablecoin yield.

Key Discussion Points & Insights

1. The Emergence of Stablecoin-Centric Blockchains

• Ark (by Circle) and Tempo (by Paradigm & Stripe): Both are new Layer 1 blockchains tailored for stablecoins—intended to streamline payments, remittances, and other “stablefi” (stablecoin finance) services.
  • Ark uses USDC (and Euro variants) as the gas/fee token, touting subsecond deterministic finality and built-in privacy features.
  • Tempo will enable fees in any supported stablecoin and is launching with high-profile corporate design partners as validators (Anthropic, DoorDash, Visa, and more).
  • Both start with permissioned validator sets but claim they will become more decentralized over time.
  • Discussion around the ETH community’s negative reaction to new Layer 1s, fearing dilution of the Ethereum network (04:00–05:00).

Notable Quote:

“The central object is a stablecoin instead of a gas token like Ethereum… potentially creates new use cases, new demand, or is going to be more for what the broad masses of people coming on chain are going to be using these things.”
— Haseeb Qureshi (03:10)

2. Lessons from Libra and the Regulatory Overhang

• The Tempo launch drew comparisons to Facebook’s ill-fated Libra, which famously challenged global monetary sovereignty with a currency basket approach—prompting intense regulatory backlash and eventually being killed by policymakers.
• Gordon Lau recounts how Libra’s design “threatened the monetary policy sovereignty of every single central bank out there,” catalyzing significant institutional learning at Circle (05:10–06:19).

3. The Domination of USD-Stablecoins & the Elusive FX (Foreign Exchange) Dream

• Panel consensus: Despite recurring dreams of onchain local-currency stablecoins and FX-friendly DeFi, USD-denominated stablecoins remain nearly 99% of market share.

• Tarun’s skepticism:

  • “Everyone really emphasizes the FX stuff but like I've never really figured out how much people actually care... People love dollar stablecoins and it's really hard to pry them out of their hands. They do not want to.” (10:07–11:37)

• Gordon (Circle) response: The eventual tokenization of local assets (bonds, equities) will require local-currency stablecoins, but mass adoption is years off—current demand is overwhelmingly for holding dollars, especially in unstable economies. (12:06–15:10)

4. Will Non-USD Stablecoins Ever Matter?

• Panel prediction:
  • Euro might be the next most relevant (if regulatory friction can be resolved), but currently, there isn’t a strong economic or structural reason for non-dollar dominance. (21:04–23:00)
  • Quote: “I just sort of feel like the European governments want to find every possible way to add an extra tax... the most frictionful.” — Tarun (21:51)

5. Stablecoin Chains vs. Stablecoin-as-a-Service

• Ecosystem bargaining:
  • The recent “USDH bake-off” in Solana and the Hyperliquid exchange’s push to launch native stablecoins signal a new era of “stablecoin-as-a-service” and collective bargaining for yield between chains/exchanges and issuers.
  • Question: Can these alternatives succeed without the liquidity and trust that Circle/USDC or Tether/USDT enjoy?
  • Gordon (Circle): Building a global liquidity network is extremely difficult and takes years of institutional, regulatory, and banking integration (32:00–33:15).

6. Network Effects, Branding, and User Psychology

• The power of liquidity & branding:
  • The network effects of dominant stablecoins are powerful and hard to disrupt.
  • Forced conversions, as Binance did with BUSD, rarely succeed long-term; ultimately, liquidity and user trust dictate adoption. (35:20–38:13)

Notable Quote:

“It's the users that's making the adoption choice... Forced conversion goes against the very basic premise of crypto, which is not your keys, not your tokens.”
— Gordon Lau (37:25)

7. Rise of White-Label / Branded Stablecoins

• Are we heading for a “neobank” future?
  • The proliferation of white-label or app-specific stablecoins (e.g., Polymarket USD, Hyperliquid USDH) is likened to the explosion of credit card reward points and local banks—more about user experience within closed ecosystems than being true “money.” (43:09–47:52)
  • Liquidity, redemption guarantees, and default risk become more complex as these products are more akin to lines of credit or gift cards than globally fungible cash.
  • Tom: “I also would not be surprised if we just continue to see these small little pockets... like Discords or my Minecraft server neobank and we all have the same stablecoin.” (41:54–43:09)

8. The Economics of Yield, Arbitrage, and Sustainable Business Models

• Lessons from BUSD & incentives:
  • The initial success of BUSD on Binance was due to aggressive incentives, high yields, and arbitrage opportunities, not organic user demand.
  • As interest rates fall and mint/redeem costs rise, the economics change, making it harder for new entrants to offer competitive yield.
  • “I don’t see how you can sustain a high yield that’s just way different than what the safe asset yield is if you are fully fiat-backed... We don’t want a repeat of that happening.” — Gordon (55:57)
• Panel concern: Many current stablecoin-as-a-service offerings may simply lack sufficient demand and could dilute their own liquidity advantages. (50:45–51:38)

9. What’s Next? Predictions for the Future of Stablecoins

• The duopoly will likely persist, with new entrants finding only niche, specialized verticals (like DeFi Summer did for USDC).
• Supply (of new branded stablecoins) is outpacing demand; only real user need, trust, and liquidity will enable a contender to break out.
• “Some startup will be like, yo, that's all we're going to focus on is just growing that little tiny seedling and that's going to be our just complete mission and they'll get to own that vertical once it arises.” — Haseeb (58:13)

Memorable Moments & Quotes (with Timestamps)

• Libra Backstory: “At one of the Christmas parties there were definitely people celebrating the [Libra] don at the Fed... It fundamentally just threatened the monetary policy sovereignty of every single central bank out there.” — Gordon (05:41–05:52)
• On FX & Tokenization: “Imagine someday you have massive amount of on chain real world asset… those companies are not going to trade in a dollar denominated stablecoin, they have to have a local stablecoin for it to trade.” — Gordon (13:30–14:30)
• Stablecoin Network Effects: “If you look at local currency pairs on crypto exchanges… most of those exchanges still have USD stablecoin dominance.” — Tarun (15:10)
• On Solana’s Push for a Native Stablecoin: “You can make your new stablecoin but actually getting adoption in like fee bearing things is very expensive…” — Tarun (35:36)
• Liquidity Moat: “Once upon a time… we thought one stablecoin would be totally dominant… What we've seen is more or less a duopoly where there's tether, there's circle, and then distant third is Athena…” — Haseeb (38:40)
• White Label Explosion Skepticism: “There's so much supply and maybe I'm wrong. I don't know how you feel.” — Tarun (50:43)
• Where’s Real Demand?: “I have yet to see that many demands generating.” — Tarun (50:45)
• Regulatory Nuance: “One of the provisions in the Genus act is stablecoins cannot pay users directly in interest. And I think that's going to actually some of the stablecoins that's been out there marketing interest payment, I don't think that actually qualifies under the Genus Act.” — Gordon (41:25)

Important Timestamps for Segments

• 03:10 – The concept and motivations behind stablecoin-centric chains
• 05:41 – Historical regulatory response to Libra and its echoes today
• 10:07 – Debate over real-world demand for non-USD stablecoins
• 12:06–15:10 – Gordon’s explanation of FX, tokenization, and why local stablecoins might eventually matter
• 21:04–23:00 – Will the Euro or some other currency ever dethrone the dollar?
• 26:13–29:54 – The Hyperliquid/Circle deal and the new norm of stablecoin bargaining
• 35:20–38:13 – Liquidity, branding, and failed attempts at forced stablecoin adoption
• 43:09–47:52 – Potential for white-label/app-branded stablecoins and their limitations
• 55:57 – Dangers of unsustainable yield and lessons from Terra/Luna

Conclusion & What to Watch

• The stablecoin “gold rush” is well underway, but the barriers to unseating USDC or USDT are immense: trust, liquidity, and regulatory clarity all matter far more than mere technical or business innovation.
• The next phase of competition may be among specialized use cases or “verticals,” not generic stablecoins.
• Upcoming: Ark’s public testnet launch is on the horizon. (60:23)

Show’s closing message:

“We welcome startups to build on Ark. Regardless of what stablecoin you start with... Look out for the test night launch, public test night launch of Ark that's upcoming.”
– Gordon Lau (59:26, 60:23)

This episode captures a pivotal moment in stablecoin evolution, raising fundamental questions about money, markets, and the intersection of technology and regulation.