Layer One: Stablecoin payments could rival Visa and Mastercard within five years

Welcome to Layer One: the newsletter and podcast on the intersection of crypto and the real world. Hosted by The Block's Kelvin Sparks and John Wu, President of Ava Labs, Layer One brings you inside the institutional conversations driving blockchain forward.

Last time on the podcast, we were joined by Spencer Bogart, General Partner at Blockchain Capital, to discuss how to succeed as an early-stage crypto investor.

In this week's newsletter, we're taking a look at how a surge in stablecoin development could see them overtake the world’s biggest payment companies, and how those firms are reacting.

P.S. Don't forget to check out The Starting Block: The Block's new daily live show. Catch an exclusive, in-person livestream interview with Binance founder Changpeng "CZ" Zhao on X and YouTube, June 29 at 8 a.m. ET.

Stablecoin payments could rival Visa and Mastercard within five years, as infrastructure development accelerates

Last week marked the launch of the Avalanche Payments Collective, a joint initiative between 28 institutions and startups across the AVAX ecosystem. Its founding members include investment management firms Franklin Templeton and VanEck, stablecoin issuers Paxos and Ethena, and centralized exchange Kraken. Together, their reach extends across 150 countries and spans virtually every facet of the burgeoning blockchain payments sector.

The breadth of the coalition reflects a growing industry trend: buoyed by regulatory clarity after the passing of the GENIUS Act last July, many builders are now focused on developing the infrastructure for digital money to flow through existing financial systems. In other words, rather than simply increasing the supply of stablecoins, their focus is on expanding the range of things that businesses and individuals can do with them.

With the total stablecoin supply plateauing around the $300 billion mark in recent months, following a roughly 20% increase after the passage of the GENIUS Act, this is likely where the next major unlock lies.

In a Q2 report on the future of stablecoin payments, Chainalysis predicted that broad adoption across merchant, B2B, and cross-border payments could drive stablecoin transaction volume as high as $1.5 quadrillion by 2035, assuming favorable macro tailwinds. Estimates on current levels vary quite widely; Chainalysis’ own figures are among the more generous, placing the total volume for 2025 in the region of $28 trillion.

Parsing the different categories of activity from these raw figures relies on a degree of estimation and assumption, but doing so reveals several interesting findings. According to research from The Block, approximately 10% of total stablecoin transaction volume can be attributed to B2B payments. Another 1% came from cross-border remittances, while an estimated 0.65% (under $200 billion) was generated by merchant payments.

Although still just small fractions of the total, these numbers are increasing as the pace of infrastructure development accelerates.

Chainalysis’ own forecasts expect merchant payments volume in particular to scale by several orders of magnitude, as stablecoin rails become the default at points of sale worldwide. The research firm estimates that stablecoin-based merchant payments could surpass both Visa and Mastercard’s combined offchain volume as early as 2031 (approximately $24.8 trillion annually, according to both firms’ most recent filings).

However, framing this as a head-to-head competition would be misleading; these legacy payment giants themselves are also in the process of retrofitting their networks with stablecoins.

Visa this month expanded its USDC settlement pilot program — which has been available to select U.S. banking partners since December — now targeting a wider range of blockchains, coins, and regions. The world’s largest payments network also revealed plans to develop a tokenized deposits system, as well as a partnership with OpenAI geared towards enabling AI agents to transact on its network.

Mastercard is likewise leaning heavily into the sector, having acquired stablecoin infrastructure firm BVNK for a reported $1.8 billion earlier this year. This month, the payments giant rolled out 24/7 stablecoin settlement options across the U.S. and LATAM, with plans for further expansion later in the year. Mastercard has also launched the Crypto Partner Program to foster collaborations with blockchain startups, of which stablecoin debit card issuer Rain — a founding member of the Avalanche Payments Collective — was one of the first beneficiaries.

Rather than losing business to crypto-native competitors, these legacy payment networks may instead become some of the largest processors of stablecoin payments worldwide.

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In the Headlines: The stories driving the conversation this week

• The Solana Foundation has partnered with South Korea’s Toss Bank to develop its stablecoin payments infrastructure. The web-only bank plans to explore new systems for payments, settlement, and cross-border remittances. South Korea has emerged as a regional leader in institutional blockchain adoption in recent years.  NHN KCP, the country’s largest payments processor and an inaugural Avalanche Payments Collective member, is currently building a payments-focused L1 on the network.
• Alchemy is launching dedicated Visa cards for AI agent payments. Through its new AgentCards, the blockchain infrastructure firm — which specializes in tools for DeFi and fintech developers — will facilitate payments for onchain AI agents, allowing them to spend money in the real world to access goods and services. It also plans to integrate support for Coinbase’s x402 payments protocol and other emerging agentic payments solutions.
• The Bank of England has scrapped its planned caps on individual stablecoin holdings. The UK central bank published a draft Code of Practice for stablecoin issuers this week, omitting previously unpopular holding limits of £20,000 ($26,000) for individuals and £10 million ($13 million) for businesses. Under the latest draft guidelines, systemic GBP stablecoins will instead be subject to an issuance guardrail, meaning issuers can have no more than £40 billion ($52.7 billion) of a given stablecoin in circulation.

Top of the Charts: Centralized exchange reserves still account for roughly 40% of all stablecoin supply

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