Airwallex founder challenges stablecoins, will Circle become the new payment giant?

On-chain, stablecoins are building a circulation network worth billions of dollars.

Written by: Pzai, Foresight News

On June 7, Jack Zhang, the founder of the cross-border payment platform Airwallex, stated on X: "I can't see any way for stablecoins to reduce costs – the slippage from stablecoins to the receiving currency is much more expensive than the forex interbank market," further adding, "I still haven't seen a use case for how cryptocurrencies have helped anything in the past 15 years," which quickly sparked heated discussions in the community.

Jack, who previously worked as an engineer at the National Australia Bank, has a strong background in traditional finance. When encountering the emerging stablecoin payments, he believes that stablecoins do not have many advantages over traditional methods. As a result, some crypto users carefully discussed this issue with him in the comments of his tweet. This article takes you through the debate on the pros and cons of stablecoins.

Simon Taylor, the strategy director of the crypto compliance product platform Sardine, stated that the value of stablecoins lies not in reducing withdrawal costs, but rather in offering lower costs for southern countries, along with global liquidity and settlement speed. Richard Liu, co-founder of Huma Finance, emphasized that the existing banking infrastructure still cannot address the current compliance extension issues, and that stablecoins bring a "different model" for cross-border payments, bluntly stating that the traditional banking system is "predatory."

On June 6, Airwallex announced the completion of a $300 million financing round with a valuation of $6.2 billion, while Circle debuted on the New York Stock Exchange with a first-day stock price surge of 168.48% and a market capitalization surpassing $18.4 billion.

At a time when the stablecoin market is becoming more and more in full swing, this tweet also reflects the concern of traditional cross-border payment platforms about market competition. Especially when the difference in capital recognition between the two is so significant, the market's tilt towards on-chain finance is so visible. In 2024, stablecoins will reach $27.6 trillion in total on-chain transactions, surpassing Visa and Mastercard combined for the first time (about $25.5 trillion), indicating that the size of its payment network has effectively threatened the dominance of traditional giants.

The root of anxiety for traditional platforms lies in the reconstruction of the cross-border payment logic by stablecoins. On the one hand, stablecoins directly impact the speed and cost advantages of traditional cross-border payments with their efficiency advantages of 24/7 real-time settlement and significantly lower costs compared to the SWIFT system; on the other hand, in underdeveloped financial regions (such as Latin America and Southeast Asia), stablecoins have become a "survival tool" to evade identity restrictions, capital controls, and local currency depreciation, which is an incremental market difficult for the existing traditional banking system to cover.

However, in addition to the existing stablecoin advantages, traditional platforms still hold phased defensive barriers. Stablecoins are currently facing the structural shortcoming of "high withdrawal costs" - when relying on centralized exchanges or payment card channels to exchange fiat currencies, the slippage loss is significantly higher than that in the interbank foreign exchange market; However, the lack of local fiat liquidity pools further restricts the penetration of direct payment scenarios. In addition, traditional financial institutions maintain advantages in B2B payment and retail scenarios by virtue of the advantages of clearing networks, compliance licenses, and banking system integration. However, in the long run, if issuers such as Circle can break through fiat currency exchange blockages through CBDC tokenization or local stablecoins, the anxiety of traditional platforms may turn into a sense of urgency to be forced to transform.