Bursar Bulletin: The one about Stablecoins
What do the US, Argentina and Stripe have in common this week? Stablecoins.
What’s newsworthy this week?
The biggest news stories in Fintech right now all revolve around Stablecoins.
The US embraces Stablecoins as the future of Crypto (and potentially the backbone of Finance in general (read the full EO here).
Stripe, arguably the best known Fintech out there, closes its $1.1BN acquisition of a company dubbed the “Stripe of Stablecoins” (read more at TechCrunch).
Argentine President Javier Milei also embraced stablecoins; and it royally backfired (read more at Reuters).
This week I will do my best to break down what Stablecoins are (and perhaps more importantly what they are not), why they have huge potential, and also dive into the huge risks they can represent (à la Libra-gate). I also take a bit of a stand - perhaps contrarian to Stablecoin devotees out there - on why I think there are applications in Higher Education, but not in the broad sweeping way one might think.
I’ll quickly address the elephant in the room - what are Stablecoins? Coinbase describes them nicely as a type of digital currency designed to maintain a stable value, typically by being pegged to a reserve asset like the U.S. dollar. One of my favorite fintech writers, Matt Brown, did a 1,000 word deep dive into Stablecoins - read it here.
The way I like to think about Stablecoins is comparing it to transport. The traditional banking system looks a lot like sea-based travel where you take long rides on old ships that have to come into anchor at large ports. This restricts where you can “get on and get off” (ie why coastal cities are often the largest, and why big banks control the majority of global financial transactions). Stablecoins act a lot more like airports/airlines where you hop on in a location (landlocked or not) and are transported in hours, not days, to another location (landlocked or not). It’s not the perfect analogy, but hopefully at least frames conceptually why these are an advancement and how they can unlock finance for a broader audience (because of easier and cheaper transmission).
The US embraces stablecoins as the future of Crypto (and Finance?)
In February, the new Administration signed an Executive Order that effectively designated Stablecoins as the major priority for their crypto agenda. The EO, titled Strengthening American Leadership in Digital Financial Technology, is a very big deal in my opinion for a number of reasons.
First, the EO tied “protecting the sovereignty of the United States Dollar” to the adoption and promotion of “lawful and legitimate” stablecoins. This is the first time the US government has admitted that adoption of blockchain technology in the creation and circulation of US money supply is not inevitable, but actually an existential risk to the US dollar maintaining its dominance as the world reserve currency. This actually makes complete sense in a historical context; technology developments have shaped global powers for centuries, including back to the mass minting of the first coins (my guess is the Lydians would find the word Stablecoin ironic as we continue to see pump and dump schemes proliferate).
Second, the EO hints at, although doesn’t make explicit, the potential creation/adoption of a US currency based Central Bank Digital Currency. In short, this would change how money is created and used.
Third, the EO referenced the creation of a Federal regulatory framework for the issuance and operation of digital assets, including stablecoins. Providing what will essentially be a roadmap for these things is the proverbial green light for a ton of investment that was previously sitting on the sidelines to move into the industry. This will move digital assets from being a thing of the future to a thing of now - for both industries that are ready for it and those that are not.
Fourth, the EO explicitly does talk about creating a reserve of digital assets for the US. This is akin to Fort Knox and the gold reserves the US has. While you could argue that putting Fort Knox on a USB might have some risks, it isn’t a bad hedge to make sure the US has a seat at the table as these technologies grow in adoption and usage.
The investment cycle has already started; Stripe paid $1.1BN to acquire the “Stripe for Stablecoins”
Any thoughts about the investment cycle in Stablecoins still being a thing we were waiting for can be put to bed. One of the largest Fintechs in the world, Stripe, announced a couple months ago that it will be paying $1.1BN for startup Bridge - and this week announced the closing of that deal.
Why is this significant? Stripe became one of the largest fintech companies ever by making access to existing payment rails (card, ACH etc.) easy and online. The fact that their largest acquisition ever (by far) is this one, signals that they believe their continued success hinges on this new technology. By implication, this means they believe that Stablecoins will be a huge part of the financial and payments ecosystem. I, for one, wouldn’t bet against that being true.
Argentine President Javier Milei also embraced Stablecoins; and it backfired in a big way
President Milei, best known for the historic transformation of his Argentinian government through ruthless spending cuts, got caught up in a bit of a Stablecoin scandal. For reasons only known to him (for now), he decided to publicly back a new Stablecoin project called Libra
“I am spreading the word that this is to fund Argentines who do projects and who do not have access to financing,” he told TN. The price of the coin soared after the president’s endorsement then quickly collapsed, leading to losses for thousands of investors. Milei deleted his tweet hours after posting it, saying he had doubts about the matter. (CNN World)
Initial reports suggest that losses to everyday people that piled into the $LIBRA coin after the President endorsed it surpass $4 billion. This unfortunately epitomizes both how rapidly these coins can be adopted, but also how quickly these things can unravel when they are mismanaged (or even worse - are fraudulent to begin with).
While the first two stories above highlight the promise and adulation of Stablecoins, this one highlights an unfortunate reality. A technology can be robust, on-chain, off-chain, permissionless, traceable, untraceable or whatever other buzz word you want to throw in there, but if the owners are able to manipulate through perception or celebrity endorsement, they will - and they did.
I am excited to see what comes of the US Executive Order we discussed earlier - my hope is that it is the beginning of the end of pump and dump schemes built around these meme coins. We shall see.
What might this mean for Higher Ed?
This is where I have some strong opinions. I think there are two specific areas where Stablecoins can and will disrupt payments in Higher Ed, and my belief is that for the rest of it, Stablecoins should really play no part. It would be like using a Ferrari for USPS deliveries - it would work, but it feels a waste and over the top (though maybe paper checks would get to the Business Office faster).
Let’s start with where it shouldn’t fit- domestic payments. Candidly, payments in Higher Education still have a long way to go in adopting the first wave of online money movement. The percent of online payments actually declined YoY from 2023 to 2024 (NACUBO 2024 Annual Survey). But regardless of adoption, the US payments system actually offers relatively efficient (both speed and price) payment systems. ACH, while not perfect, is extremely inexpensive, and when paired with innovations like RTP and FedNow, is only getting better. While it is often easy to want to fantasize about leveraging the latest and greatest tech, my view is that we don’t need that in Higher Ed for domestic payments - what we need is technology to accelerate the adoption of the perfectly fine online payment methods we do have. What I fantasize about is moving the industry away from paper check!
Now, to where I see Stablecoins having a material impact on Higher Ed:
International students paying for tuition
Third Party Payments from overseas organizations
International students pay exorbitant fees using todays payment providers. The fees are large because, prior to Stablecoins, these providers had to stand up a crazy amount of infrastructure to facilitate these payments. It required finding bank partners in each country, setting up money movement accounts, and building ledgering tech on top of each, and integrating back with their domestic banking system to facilitate international payments from most countries. This doesn’t even take into account the capital requirements needed to operate a system like this.
Stablecoins offer an alternative to standing up all this infrastructure. You can “simply” use Stablecoins (USDC for example) to move funds across countries without all the bank account infrastructure set up. This would likely save the average international student thousands of dollars in fees every year; a serious competitive advantage for Universities as international tuition revenue becomes the driver of growth for most.
I also see this being an opportunity to facilitate payments from international Third Party Sponsors way more easily; international checks and wires cause a ton of problems - lost in the mail, reconciliation, wrong account instructions etc. Not to mention the fees that may be charged to both the University and the originator.
Next week
I have a great case study to share next week on how one of our partner Universities is rethinking 529 payments - and how it is leading to crazy better outcomes for student families. I thought about releasing it this week, but the news about Milei really drove it home that Stablecoins were worth the time.
I might also try out our first poll to see if we can deliver back some real-time feedback and value from your colleagues. I am excited to try a few different things to build this community and bring Higher Ed payments professionals together!
See you next week!
Cal