Stablecoins Are Coming for the Most Profitable Toll Booth in Finance

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Begin with a clear-eyed appreciation of how good this business is, because the threat only matters in proportion
to the prize it threatens. Visa and Mastercard are toll collectors on the movement of money. They do not lend,
they do not take credit risk, they hold almost no receivables — they simply operate the rails over which card
payments flow, and take a tiny percentage of each transaction. Because the volume is colossal — over $20
trillion a year between them — those tiny percentages compound into enormous, growing, capital-light profit. In
recent quarters Visa generated net revenue around $10.9 billion at operating margins near 67%; Mastercard around
$8.4 billion at operating margins near 58%. These are software-like margins on the plumbing of global commerce, a
near-perfect business that has made shareholders rich for decades.

The reason it has been so durable is the two-sided network effect, which is genuinely one of the strongest moats
in business. Consumers carry Visa and Mastercard because nearly every merchant accepts them; merchants accept
them because nearly every consumer carries them. Neither side can leave without the other, and no new entrant can
assemble both sides at once, which is why challenger after challenger has either failed or — more commonly —
given up and built on top of the existing rails. PayPal, Apple Pay, Google Pay, the buy-now-pay-later apps: all
of them, underneath, are mostly just more sophisticated ways of initiating a payment that still travels over a
Visa or Mastercard. They did not disrupt the toll booth; they became new lanes feeding into it.

This essay is about why the stablecoin threat is, for the first time, a different kind of thing — and about why,
despite the genuine strength of the moat, the duopoly's own defensive scramble tells you the threat is real.

The first bypass that goes around, not over

The crucial distinction is geometric: every prior "disruptor" rode over the card rails; stablecoins propose to
go around them. A stablecoin is a dollar-pegged digital token, backed by reserves, that can be sent directly from payer to payee
over a blockchain, settling in seconds, with no card network in the middle taking its cut. When a merchant
accepts a stablecoin payment, the transaction does not touch Visa or Mastercard at all — there is no interchange,
no network fee, no toll. The payment simply moves, peer to peer, over rails the card networks do not own and
cannot tax.

This is why stablecoins are categorically different from the failed disruptors of the past. The reason PayPal and
Apple Pay never threatened the toll booth is that they still needed the toll road — they were better cars on the
same highway. Stablecoins are a parallel highway. And the people most eager to build the on-ramps to that parallel
highway are precisely the people who have spent decades resenting the toll: the merchants. Every retailer in
America pays interchange fees of roughly 2-3% on card transactions, a cost that comes straight out of already-thin
retail margins and that they have fought, lobbied against, and litigated over for years without ever escaping. For
the first time, they have a technology that lets them route around it, and a legal framework that lets them use it.

The GENIUS Act handed the merchants the keys

The legal framework is the second half of why this threat is real now and was not before. In mid-2025, the United
States passed the GENIUS Act — a federal law establishing, for the first time, a clear regulatory framework for
payment stablecoins, with requirements for reserves, transparency, and compliance. The significance is not the
rules themselves but what they enable: the law empowers non-bank entities — retailers, technology firms, even
airlines — to participate in issuing and using dollar-backed stablecoins within a sanctioned legal structure.

Consider who that empowers. Walmart and Amazon — the largest merchants on Earth, with the most transactions, the
most to save from escaping interchange, and the scale to make their own digital dollars viable — are exploring
exactly this. A Walmart that issues or accepts a stablecoin and steers its customers toward paying with it could,
in principle, bypass billions of dollars of card fees a year. Multiply that across the largest retailers, and the
threat to interchange revenue is no longer theoretical. The GENIUS Act did not invent stablecoins, but it did
something more dangerous to the duopoly: it gave the merchants — the toll-payers with the deepest pockets and the
longest grudge — a legal, legitimate, federally-blessed road around the toll booth. The stablecoin market
capitalization, already large, is projected to approach $1 trillion by late 2026, and tens of trillions of
dollars in stablecoin volume are already settling on-chain. The bypass is not a blueprint. It is under
construction.

The defensive scramble is the tell

The most telling evidence that the threat is real comes not from the bears but from Visa and Mastercard
themselves, because companies do not spend billions defending against a danger they believe is imaginary.
Mastercard agreed to acquire BVNK, a stablecoin-infrastructure firm, for up to $1.8 billion — its largest
stablecoin bet to date — explicitly to connect on-chain payment rails with its existing card infrastructure. Visa
has pursued its own stablecoin partnerships and settlement initiatives. The strategy, sensibly, is to own the
bypass — to become the trusted layer that issues, settles, and provides compliance for stablecoin transactions,
so that even if payments migrate to the new rails, Visa and Mastercard still collect a fee somewhere in the flow.

This is intelligent defense, and it may well work — but notice what it concedes. A company that was certain its
moat was impregnable would not spend $1.8 billion buying the thing that threatens it. The acquisition is an
admission, written in capital, that the stablecoin rails are real enough to need a foothold in. And it points to
a deeper problem: even in the optimistic scenario where the networks successfully insert themselves into the
stablecoin flow, the economics of being a stablecoin-settlement or compliance provider are almost certainly
worse than the economics of collecting 2-3% interchange on a card swipe. The whole reason merchants want
stablecoins is that they are cheaper; if Visa and Mastercard become stablecoin intermediaries, they are migrating
their own customers from a high-toll road to a low-toll road that they happen to also operate. They may keep the
volume. They are unlikely to keep the margin. Owning the bypass is better than being bypassed — but it is a
defense that protects the franchise by shrinking the toll.

What the bulls genuinely get right

In fairness, the bull case is strong, and the long history of failed Visa/Mastercard short theses demands real
humility from any skeptic. Several points genuinely cut against the disruption narrative. First, the consumer side
of the network is far stickier than the merchant side, and it is the consumer side the bears underweight.
Consumers do not use cards only to move money; they use them for fraud protection, chargebacks, dispute
resolution, rewards points, and the credit function — borrowing money interest-free for a month — none of which a
raw stablecoin transfer provides. A merchant may want you to pay in stablecoins to save the fee, but you, the
consumer, have little incentive to give up your rewards and your fraud protection to save the merchant money.
Without consumer adoption, the merchant's parallel highway has no traffic. Second, the moat's universality is
brutally hard to replicate: a stablecoin is only useful if it is widely accepted, and achieving the
near-universal acceptance Visa and Mastercard spent sixty years building is a colossal chicken-and-egg problem.
Third, the networks are adapting aggressively and from a position of strength, with the balance sheets,
relationships, and regulatory sophistication to shape how stablecoins integrate rather than be steamrolled by
them. And fourth, the stocks' multiples have already compressed — Visa's price-to-earnings ratio has fallen to
the mid-20s, well below its historical premium — meaning a meaningful dose of the fear is already reflected in the price rather than waiting to surprise it.

The honest synthesis is that the stablecoin threat is real and different in kind from prior disruptions, but it
is an erosion risk, not an extinction risk — most likely to chip away at specific, fee-sensitive flows
(large-merchant settlement, business-to-business payments, cross-border transfers) over years, rather than to
collapse the consumer card franchise overnight. The duopoly will probably remain enormously profitable for a long
time. But "remain enormously profitable while a federally-sanctioned, merchant-backed bypass slowly diverts the
most fee-rich flows" is a materially different future than the one the market priced for two decades — the future
in which nothing could ever route around the toll at all.

A new front in a very old war

To understand why the merchants will push stablecoins hard, you have to understand that this is not a new
grievance but the latest battle in a war merchants have waged against interchange for decades — and that
context makes the threat more durable than a passing crypto fad. Retailers have fought card fees through
litigation, through massive antitrust settlements, and through legislation, scoring partial victories like the
Durbin Amendment's caps on debit interchange and pressing continually for more, including efforts aimed at credit-
card fees. They have a permanent, structural, profit-driven motivation to reduce or eliminate the toll, because
on razor-thin retail margins, a 2-3% interchange fee is often a large fraction of a store's entire profit on a
sale. This is not a constituency that will lose interest when the crypto news cycle moves on. It is the most
motivated, best-funded, most persistent adversary the card networks have, and stablecoins have just handed it the
most powerful weapon it has ever had.

And the political winds have shifted in a way that compounds the danger. The same deregulatory, crypto-friendly
posture that produced the GENIUS Act is broadly sympathetic to the argument that the card duopoly's fees are a
tax on commerce that technology should be allowed to compete away. When the merchants' decades-old desire to
escape interchange aligns with a regulatory environment eager to bless new payment rails and a technology that
actually works, you have the three ingredients — motivation, means, and permission — that no previous disruption
ever assembled at once. PayPal had the technology but not the regulatory mandate to bypass the rails or the
merchant coalition to drive it; the stablecoin push has all three. That alignment is what makes this a structural
threat rather than a cyclical scare, and it is why the duopoly's response has been to buy its way into the new
system rather than to dismiss it.

Stablecoins are not the only bypass

It is worth widening the lens, because stablecoins are actually the second bypass to emerge, and the first one is
already demonstrating that the toll booth can be routed around where authorities choose to build the road. Across
the world, government-backed real-time payment systems have quietly begun doing to interchange what stablecoins
threaten to do: India's UPI, Brazil's Pix, Europe's SEPA Instant, and the United States' FedNow all enable
direct, account-to-account payments that settle instantly and bypass the card networks entirely. In the countries
where these systems have been aggressively adopted, they have captured enormous volumes of payments that would
once have flowed over Visa and Mastercard rails — Pix in Brazil and UPI in India have become dominant payment
methods, dramatically faster and cheaper than cards, and the card networks have watched a generation of domestic
transactions migrate away from them.

The significance for the stablecoin debate is that the real-time-rails experience is a live, real-world proof of
concept that the duopoly's moat is not impregnable when a determined party — there, governments; here, merchants
and regulators — builds and promotes an alternative rail. The bulls who insist nothing can dislodge the card
networks have to reckon with the fact that something already has, in some of the largest economies on Earth, via
account-to-account rails. Stablecoins are simply a second, privately-driven version of the same idea, aimed at
the same toll, with the added force of the merchants' profit motive behind it. Two independent bypasses now exist
where, for sixty years, there were none — and a moat that is being approached from two directions at once is a
moat that has, at minimum, stopped being the certainty it was priced as.

The cross-border and B2B flank

It is worth identifying precisely where the bypass is most likely to gain traction first, because the threat is
not uniform — it is sharpest exactly where the card networks' fees are highest and their consumer-side advantages
are weakest. Cross-border payments are the prime target: sending money internationally over the traditional
system is slow and expensive, often carrying fees far above domestic interchange, and a stablecoin can move a
dollar across the world in seconds for a fraction of the cost, with none of the consumer-rewards considerations
that protect the domestic card business. Business-to-business payments are similarly exposed — large companies
paying each other do not care about rewards points or chargebacks; they care about cost and speed, exactly where
stablecoins win.

This matters because cross-border and certain commercial flows are among the highest-margin parts of Visa and
Mastercard's business — the premium segments that contribute disproportionately to profit relative to their
volume. So the stablecoin bypass is not aiming at the low-value end of the network; it is aiming, first and most
naturally, at some of the most profitable flows the duopoly carries. A threat that takes your most profitable
business first, even if it leaves your largest business intact for years, is a threat to the quality of your
earnings well before it becomes a threat to their existence. The market, accustomed to two decades of the
duopoly's flows only ever growing, has not historically had to price the possibility that the richest of those
flows could be peeled away by a cheaper rail.

The kicker

For twenty years, the smart-money trade was to ignore every prophet who declared Visa and Mastercard doomed,
because every prophet was wrong — the disruptors kept turning out to be new customers for the toll booth rather
than competitors to it. That history is real and it should make anyone cautious about declaring this time
different. But the geometry of this threat genuinely is different: stablecoins do not feed into the toll road,
they route around it, and the road around is being paved by a federal law and funded by the merchants who have
hated the toll for decades and finally have a way out. Visa and Mastercard see it clearly — clearly enough to
spend nearly two billion dollars buying a piece of the bypass — and their best case is not to stop the new road
but to own a stretch of it, at a toll lower than the one they have collected for sixty years. The duopoly is not
about to fall. But for the first time in the lifetime of most investors who own it, the most profitable toll
booth in finance has a credible competitor for the traffic, and the question is no longer whether anything can
route around it, but how much, and how fast, and how much of the margin survives the trip.

Every disruptor for twenty years turned out to be another car on Visa's highway, and the lesson the market
learned was that the toll could never be escaped. Then the merchants who paid the toll got a law, and a
technology, and began quietly paving a road that goes around — and the toll collectors, who insist they are
unthreatened, are spending billions to buy the first mile of it. That is not what invincibility looks like. It is
what a great business looks like the moment it stops being able to take the road entirely for granted, which is a
different and more interesting thing to own than the sure thing the market mistook it for — and a great deal
depends, now, on how much of the toll survives the day the traffic finally has somewhere cheaper and faster to go than the only road it has ever known.