Stablecoins and the Future of Payments

We examine whether financial market participants, in aggregate, expect stablecoins to play an important role in payments. Using high-frequency variation in stock prices, we estimate that U.S. legislation supporting the use of stablecoins in payments reduced the market value of listed incumbent payment firms by 18% or approximately $300 billion, consistent with stablecoins increasing competition in the payments sector. This impact is larger than that of other recent pro-competitive regulatory shocks and (i) proportionately larger for incumbents focused on cross-border payments, (ii) smaller for incumbents protected by network effects, and (iii) smaller for incumbents already offering crypto-related services.