I’m a payments innovator who has lived and worked around the world for a large global bank for nearly 20 years. For a long time, the best way to improve payments for businesses and consumers was to build on top of the existing financial infrastructure. But what is clear is that we now need a truly digital form of money: thoughtfully constructed and appropriately regulated fiat-currency-backed stablecoins. Just as a range of previously physical things have gone digital in our lives to provide better experiences and instant gratification, so must money.
It’s easy to see why the current payments infrastructure has endured. Trillions of dollars of payments are reliably and securely processed each day around the world. Cross border and domestic payments globally have become cheaper, faster and easier for many people over the last five to ten years. This happened because of the arrival of fintechs, technology advancements, regulatory support to increase competition, the launch of domestic instant payments schemes in markets around the world, and because banks invested in improved payments capabilities. But these improvements have not gotten us where we need to be. The digital form factors of money that do exist, like credit cards, are insufficient to support where the world’s economic activity is going.
To be able to finally crack the code on today’s unsolved payment challenges of cost, time and access – and for the new digital economy to thrive, money around the world that consumers and businesses use daily needs to go fully digital. Tweaks and incremental improvements to today’s analog money won’t get us there.
Trusted stablecoins like USDC are digital versions of the money you use every day. Unlike other cryptocurrencies, stablecoins have the price stability and value referenceability of commonly used and held fiat money – like the U.S. dollar – to make them relevant for consumers and businesses in everyday commercial transactions. And because stablecoins are entirely digital, they can do things your existing money can’t do today.
Stablecoins are globally mobile across economic ecosystems, enabling instant settlements, micropayments, and are always on, 24×7, 365 days a year. This means the digital properties of stablecoins will address the current pains of remittances and cross-border payments, for example, by enabling inexpensive instant settlement across borders. This alone will offer tremendous value for a large number of people worldwide.
All stablecoins are not the same, however. I serve as a special advisor to Centre, founded by Circle and Coinbase. It is a stablecoin standards organization providing a reliable, replicable framework for stablecoin issuance based on the principles of transparency and integrity, starting with USDC.
Digital money is essentially code, enabling programmability. So transactions can be seamless for users – if I receive the asset, then you will receive the funds, without anyone having to issue manual instructions or an institution intervening.
The benefits will be many. Stablecoins will ensure, for another example, that content creators for the first time will be able to reliably enforce their intellectual property, as the assets they create are shared, trade hands and potentially rise in value. Stablecoins will power micro-entrepreneurs who sell products online through videos, and enable advertisers to efficiently make instant micropayments to influencers. Real-time global digital commerce, which people everywhere are increasingly participating in, requires real time digital settlement across borders. Access to money will be democratized– if you have a phone, you will be able to have an operating account to receive payments and send money. You’ll also be able to participate in decentralized finance (known as DeFi) to access credit and grow your wealth.
While most national governments are currently assessing issuing digital currency (known as central bank digital currency or CDBC), there are many profound design considerations. For example, how private will citizens want or need CDBC to be? What will commercial banking’s role be if you leave your deposits at the central bank, and who will provide lending? So it will take a long time for many countries to issue CDBC, and it will likely be largely focused on domestic use cases and priorities. Meanwhile, we need digital money that will work globally today, and the private sector is moving forward with solutions.
Contrast the opportunities offered by digital money and the emerging digital economy with the payments systems we have today. They are fragmented, with very limited interoperability and restricted access. Payments generally work well when you are within a specific ecosystem, but they stop working well whenever you leave it. It’s expensive, time consuming, painful and sometimes technically impossible to move money across ecosystems. So for both consumers and businesses, sending wire payments from country A to country B is too costly and difficult. For those people sending remittances of hard earned funds home to their families, it costs too much and takes too much time. It is still expensive for a merchant to accept digital payments from customers. And there is an urgent matter of fairness: access to financial services is still largely limited to those consumers and businesses that can afford it. That is inconsistent with the democratization of access that the internet otherwise enables.
The world is hurtling towards a new phase of the digital economy, well beyond the traditional e-commerce activities of merely buying physical goods online. We are entering a new and critical chapter of the internet’s evolution, sometimes called Web3. This move means we are going from accessing a world of information (“read”) and publishing all kinds of content (“write”), to an internet that will enable true ownership. Read, write, and own.
This next-generation global digital economy means that the impressive and wonderful creativity of humans can be appropriately and fairly rewarded. For the first time unique digital assets will be created, bought and enjoyed by anyone else in the world. It also means that most folks will be spending even more time online. We are living increasingly digital lives, in digital worlds. The metaverse is a real thing, and you may want to own a digital piece of land and a digital wardrobe, perhaps even more than you will want many physical goods. You are likely to be spending more of your discretionary income in the future on digital assets that reflect your passions and hobbies, which may enable you to experience and enjoy these interests more dynamically than by owning static physical goods.
The digital economy, digital assets, and the metaverse are by definition global, transcending our physical locations. While we are still in the very early days of this future world, the implications on the future of money are profound. Trusted, well-designed and well-implemented stablecoins will be an important part of the answer.
Morgan McKenney held a variety of senior executive roles globally in payments innovation for businesses and consumers at Citi for the last nearly 20 years. She is currently a special advisor to Centre, established by Coinbase and Circle to support the development of trusted stablecoins globally, starting with USDC. Morgan is also a Limited Partner Advisor at Nyca Partners, a leading venture capital firm focused on connecting innovative companies to the global financial system, an Executive-in-Residence for Global Blockchain Business Council (GBBC) and a Bain External Advisor.