WEEKLY - SWIFT-busters and stablecoin strategies
plus, assorted links and more
Hello everyone, I hope you’re all doing well! Seriously, HOW can it be May already… I don’t feel anything like ready for summer, can we slow things down a bit?
You’re reading the free weekly Crypto is Macro Now, where I reshare/update a couple of posts from the week, offer some interesting links I came across in my weekly reading, and include something from outside the crypto/macro sphere that is currently inspiring me (it’s a fascinating world out there).
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Production note: I’m travelling next week, so the free weekly newsletter will not publish next Saturday.
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I talk about markets, stablecoins, tokenization, geopolitics and more, as well as the economy and investment narratives.
There are also updates on the forces driving the big macro shifts and why they matter for the crypto ecosystem.
And there are usually assorted links to reads and podcasts, plus a daily music recommendation because why not.
In this newsletter:
The SWIFT-busters are gathering
Assorted links: libertarianism, world order, culture revival, forests and more
Eurovision irreverence
Some of the topics discussed in this week’s premium dailies:
(a short week, due to Monday’s blackout and Friday’s public holiday)
Coming up: GDP, PCE, jobs, refunding and more
Stripe: A stablecoin engine
Reading the crypto funding tea leaves
Crypto in space
The SWIFT-busters are gathering
Macro-Crypto Bits: GDP, job openings, Russian crypto
GDP misdirection
Are the policy errors deliberate?
Inadvertent decentralization
Macro-Crypto Bits: inflation, jobs, Ukraine, gold, China and more
The SWIFT-busters are gathering
Last week, Circle – issuer of the second-largest stablecoin USDC – unveiled a payments platform to facilitate global payments by coordinating their execution and offering related services such as wallets, smart contracts, billing, settlement and more.
If this sounds familiar, well, on Tuesday I wrote about Stripe’s move to do something similar: further broaden payment services for its over 1 million business clients, by integrating its own stablecoin into the user interface.
There are similarities, but also huge differences between the two approaches. Let’s look at those, and also at what the moves say about the evolution of the stablecoin market.
First, the two are approaching the stablecoin payments network model from very different directions. Stripe already is a vast payments platform and wants to deepen the use of stablecoins to enhance the customer experience. Circle is a stablecoin issuer that wants to build a payments platform. Stripe wants to add a new tool to its already popular service. Circle wants to add a new service to its already popular tool.
Neither insist that their stablecoin be the only token used on their platforms – last year, Stripe started processing USDC payments and announced the $1.1 billion acquisition of Bridge to enable any business to issue their own stablecoins. Likewise, Circle’s payment platform will handle fiat, USDC and other stablecoins. It’s not about the token, it’s about the service, but Circle already has the token, Stripe already has the service, and both want to deepen overall utility.
Second, the bulk of Stripe’s customers are small businesses, individual websites and the like, although many of their clients are large enterprises. Breadth of service is important and a strong growth funnel, but the main driver for retail use is convenience. The Circle Payments Network (CPN), on the other hand, is built for institutions. Convenience is important, but even more so are the value-add services like compliance, governance, tracking, liquidity and the like. Stripe’s customer base is already sprawling, so a smart expansion strategy would be to offer a broader range of services (the word “vertical” appears 14 times in its latest investor letter). Circle’s direct customers are large entities that can mint and redeem, and the CPN appears to be a significant add-on for them and other financial service firms. In both cases, deeper utility is the objective, greater use of stablecoins more broadly will benefit the bottom line of each, but Circle and Stripe are starting with very different client bases and a correspondingly different approach.
Third, the driving motivation feels different. I’m inferring here, I have no inside information, but it seems that Stripe wants to dominate payments and related services, and given the potential scale, it might as well issue its own stablecoin, own the stack and also earn income on the reserves. For Stripe, it feels like it’s about the spread and depth of the business, as well as an additional source of recurring revenue.
For Circle, it feels like it’s about valuation. Of course, service is important, but earlier this year, the firm filed the S-1 pursuant to going public. Stripe doesn’t care about that; in a recent interview the Collison brothers confirmed they don’t see the need to. This is relevant because the P/E multiple for a low-margin, steady income stablecoin issuer, like Circle, would be much lower than that for a payments company which can benefit from network effects and ancillary services.
An intriguing twist is what Circle’s move implies for the regulatory outlook, not just for stablecoins but for payments in general.
Last week, the Wall Street Journal reported that several large crypto firms such as Circle, BitGo, Coinbase and others were contemplating applying for banking charters (although a Circle spokesperson has denied this). A banking license could end up being a requirement in the stablecoin legislation currently working its way through Congress – but even beyond that, a successful application would enable a range of additional services such as deposit and lending.
And yet, no other bank controls a global payment network. SWIFT, which coordinates transfers between global banks, is owned by a wide consortium of banks; but the CPN, which aims to replicate SWIFT’s messaging but for a range of assets, is owned by Circle. How will regulators feel about this?
We know that most banks would love to be seen more as a tech company, especially where their stock market valuations are concerned – but regulators don’t want banks to incur the risk associated with high-growth ventures. We also know that many tech companies would love to be able to offer banking-like services and have banking-like data on their users – but regulators want to limit their impact on the financial sector for a wide range of reasons including privacy and stability.
Circle is straddling a divide here. It is a tech company that has been offering banking-like services (issuance of a payment and settlement token, and since the purchase of Hashnote, asset tokenization). If it becomes a bank, it will want to emphasize its tech company characteristics for the sake of its share price – only, it will also have burdensome regulatory costs to deal with, which could dampen earnings.
Zooming out, both Circle’s and Stripe’s move hint at a deep restructuring of global finance – not tomorrow, but soon. As more cross-border payments happen on blockchain networks, fewer banks will need to use SWIFT’s messaging service. The consortium of course knows this, and last year SWIFT announced that in 2025 it would launch a pilot for digital asset payments, swaps, settlement and tokenization.
In sum, competition between global platforms is picking up, triggered by the spreading convenience of stablecoins and other tokenized assets. Global coordination could get chaotic for a while, with different regulators and institutions supporting different solutions. But, ideally, in the end the user benefits. All this may sound like a maturation of the digital asset ecosystem – but I’ll argue it’s still very early days.
ASSORTED LINKS
There are plenty of good accounts of the Iberian blackout out there, but I’m a fan of Irina Slav’s writing and her account seems to be front-of-paywall, so I’ll share hers. Basically, we still don’t fully know what happened, and official versions are contradicting each other. But it looks like the long-warned risks of renewable energy dependence are, indeed, real. Who knew. (Blackout, Irina Slav on energy)
Noah Smith, a long-time critic of libertarian ideology, acknowledges that many of its free-market ideas are not so bad after all, at least compared to current extremes on both the right and left. On the right, there’s the chaotic populism of the current Administration that rhymes more with Perón than Milei. On the left, there’s housing restrictions that raise rents and government make-work programs that waste money. Libertarianism, he argues, has flaws as an ideology – but politically, we need it. (I owe the libertarians an apology, Noahopinion)
Ray Dalio believes that the tariff wars have served a crucial purpose: they have woken the world up to the unsustainability of the US trade situation (low production relative to consumption of goods, reliance on export of depreciating assets), and to the dangers of interdependence. Moves to adapt to the new reality are going to have deep geopolitical as well as monetary repercussions, and it is these investors should be focusing on, not day-to-day vibe shifts. (It’s Too Late: The Changes Are Coming, @RayDalio)
The Verge has the blow-by-blow account of how Apple’s decisions led to an angry judge ruling. An angry judge has ruled that Apple must now relinquish its control over payments originated on iOS, which could be a big deal for both crypto-related apps and stablecoin adoption. I’ll comment on this in more depth on Monday. (‘Cook chose poorly’: how Apple blew up its control over the App Store, The Verge)
Omid Malekan eloquently summarizes why permissioned blockchains are at best a waste of time, and at worst a brake on the potential of blockchain technology to reform markets. I totally agree with the premise – private blockchains risk rebuilding the same gated towers that public blockchains want to disrupt. They risk recreating similar inefficiencies while not actually solving for the pernicious effects of centralization. But, I think – unfortunately – that they will work, and they will dominate the first leg of the institutional tokenization movement. As the crypto ecosystem knows all too well, what should happen is not necessarily what will happen, and both regulators and institutions have a walls-up mentality that a new technology will not be able to shake, at least not for quite a while. (On the Perils of Permissioning Part 1: Private Chains Will Never Work, Omid Malekan)
Yes, yes and yes – Ted Gioia shares 30 ideas for policies and private initiatives to revive culture. (30 Ways to Revitalize Arts & Culture, The Honest Broker)
If you haven’t seen “Margin Call”, the film about a Wall Street investment bank realising finance was about to come crashing down, you absolutely should. It’s dense, cold, and well-acted – a fable for our times and one that we can sincerely hope eventually fades in relevance. Semafor has a good account of how it was made. (Why ‘Margin Call’ remains Wall Street’s favorite movie — and the best indictment of it, Semafor)
And if things are just getting a bit much, you might be interested in the sounds of a forest. The Pines, by film-maker and artist Joshua Bonnetta, is four hours of a “spectral collage” created out of 8,760 hours of audio recorded amongst pine trees in upstate New York. (‘Chipmunks were obsessed with my mics’: the man who recorded a tree for a year, The Guardian)
HAVE A GREAT WEEKEND!
(in this section, I share stuff that has NOTHING to do with macro or crypto, ‘cos it’s the weekend and life is interesting)
Today I’m sharing another Eurovision entry, with the big final coming up in a couple of weeks. For any American readers who don’t understand why us culture-mad Europeans care, it’s because the event presents a glorious festival of insanity, spectacle and a temporary reframing of national pride, with the occasional interruption of great music.
This year, the tone seems to be more self-mocking than usual. A couple of weeks ago I shared Estonia’s mad contribution which I still can’t get out of my head (my son returned from a recent trip to the country with Espresso socks, the son has become that culturally important). Here, I marvel at Sweden’s shift from self-indulgent intensity to a fun poke at traditional culture. I expect to see these dance moves on club floors across the continent before long (were I ever to go to clubs which I probably won’t, but you know what I mean).
DISCLAIMER: I never give trading ideas, and NOTHING I say is investment advice! I hold some BTC, ETH and a tiny amount of some smaller tokens, but they’re all long-term holdings – I don’t trade.