#265—The IMF is worried about crypto adoption

Meanwhile, Visa is double down on stablecoins

Sep 11, 2023

Welcome to Yaka Stuff, our weekly newsletter that covers news, industry perspectives, and updates from the Hard Yaka ecosystem. Check out our last report here.

This week:

The IMF is worried about crypto adoption
Another half trillion dollars in credit card fees
Visa’s continued cryptoization
The world’s second-largest non-dollar-pegged stablecoin
What we’re reading: The Fidelity Mafia

1. The IMF is worried about crypto adoption

They call it “cryptoization,” a term from the IMF’s latest report on crypto-assets. For instance, they see it as a risk to monetary policy:

The widespread adoption of crypto-assets could threaten the effectiveness of monetary
policy. The transmission of monetary policy would weaken if firms and households prefer to save and invest in crypto-assets that are not pegged to the domestic fiat currency or to use them as payment instruments or medium of account (IMF 2020).4 The risk of currency substitution (“cryptoization”) is particularly pertinent for countries with unstable currencies and weak monetary frameworks. 5, 6 Cryptoization is more likely to be associated with the adoption of stablecoins denominated in foreign currencies which, relative to other crypto-assets, purport to offer a less volatile alternative to the domestic currency.7

Of course, the best way to mitigate those risks is to sound financial management—although in some cases, that’s easier said than done:

Developing effective frameworks and policies is the best way to limit substitution into crypto-assets. Robust macroeconomic policies and credible institutional frameworks are fundamental to protect monetary sovereignty. Weak monetary policy frameworks, combined with fiscal deficits and pressures for central bank financing, undermine monetary credibility and instigate currency substitution (Adrian and others 2021; IMF 2020).

Because the ultimate risk is existential:

Rapid cryptoization can have an impact on the monetary independence and financial stability of economies.

As Axios reported, the report heavily focused on stablecoins:

The report took particular aim at stablecoins, reiterating the push for countries to get aligned with each other in terms of how they handle stablecoins and limit the potential for those instruments to create shocks to the global system.

2. Another half trillion in credit card fees

Put it another way, it’s another reason for merchants to consider blockchain-based payment rails.

The other week, we covered the rise of Visa for The Weekend. As it happened, I had missed a WSJ report the day before about both Visa and Mastercard’s plans to hike fees—most of them having to do with online purchases.

The result? Merchants could pay an extra half trillion dollars in fees.

Here’s the WSJ:

The fee increases are scheduled to start in October and April, according to people familiar with the matter and documents viewed by The Wall Street Journal. Many of the increases are for online purchases.
The changes could result in merchants paying an additional $502 million annually in fees, according to CMSPI, a consulting company that works with merchants.
Increases in network fees will make up a little more than half of that revenue, CMSPI estimated. The rest will come from increases in interchange fees, also called swipe fees. Merchants pay these fees when shoppers pay via credit card.

And then last week, Mastercard responded, saying that the story is wrong.

3. Visa’s continued cryptoization

Visa didn’t respond to the WSJ report, but they did double down on stablecoins.

Here’s Axios:

Visa is extending its experimentation with stablecoins via the Solana blockchain, Brady writes.
Why it matters: Blockchain boosters have long contended that they provide a better way to move money around the world, with faster settlement and lower costs than legacy payment rails, which have lots of intermediaries.
Details: Visa will work with Worldpay and Nuvel to extend its payment settlement capabilities on the Solana blockchain.
…
What's happening: Since 2021, Crypto.com has used USDC to fulfill its settlement obligations on its Visa card in Australia and now intends to roll out this capability in other markets.

According to a press release from Visa, the pilot reduced the time and complexity for many of these payments.

Meanwhile, Visa's looking to extend use of USDC to manage settlements to Worldpay and Nuvei, who can route them to merchants using their services.

4. The world’s second-largest non-dollar-pegged stablecoin

You probably wouldn’t have guessed but it’s backed by the volatile Turkish Lira.

Here’s Coindesk (via Jun Hiraga):

The Ethereum-based TRYB stablecoin from Turkey-based fintech company BiLira is pegged to the lira, allowing users to issue and redeem 1 TRYB for 1 TRY. According to the official website, the stablecoin is 100% backed by fiat reserves held in Turkish banks.
Data from Coingecko show the market cap of TRYB has surged by 325% to $136.10 million in three weeks. That makes it the world's second-largest non-USD-pegged stablecoin, just behind Tether's euro-pegged stablecoin EURt, which has a market cap of $224 million. Tether is also behind the world’s largest stablecoin, dollar-pegged USDT, with an almost $83 billion market cap.
"Since the Turkish lira price has been very volatile and losing value against the U.S. dollar, the TRYB token is mostly a medium of exchange currency. Our customers have been using the TRYB token as a gateway to exchange their Turkish lira fiat into cryptocurrency and vice versa," BiLira told CoinDesk in an email.

5. What we’re reading: The Fidelity Mafia

One of themes in a post-FTX crypto world is the arrival of big established financial titans. There’s BlackRock and their ETF application. There’s Citadel and Charles Schwab backing a new exchange.

And then there’s the OG, Fidelity.