Visa Isn't Worried About Stablecoins. 3 Stablecoins to Watch as Companies Explore This Powerful Growth Catalyst.

Key Points

• The total size of the stablecoin industry ($250 billion) still pales in comparison to Visa's market cap ($700 billion).

• As a result of their size and global reach, Tether and USDC have the greatest potential to disrupt Visa.

• PayPal's new stablecoin could play an important role in driving transaction growth at consumer-facing businesses.

• 10 stocks we like better than USDC ›

Stablecoins have exploded onto the crypto scene, and are now a $250 billion industry with strong political backing at the highest levels. New stablecoin legislation, recently signed into law, ensures that stablecoins aren't going away anytime soon. In fact, Treasury Secretary Scott Bessent thinks they could be worth as much as $2 trillion within the next few years.

Despite all the buzz surrounding stablecoins, many payment providers -- including Visa (NYSE: V) -- say they are not worried. For now, stablecoins pose no direct risk. But what about in a few years? Here are three stablecoins to watch.

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USDC and Tether

The two stablecoins with the greatest potential to disrupt Visa are USDC (CRYPTO: USDC) and Tether (CRYPTO: USDT). As new stablecoin research from The Motley Fool points out, these two stablecoins are truly dominant. Together, they account for 90% of the value of the $250 billion stablecoin market.

Image source: Getty Images.

Granted, if you are only comparing market caps, it's easy to miss the big picture. After all, Visa has a hefty market cap of nearly $700 billion. That's more than four times the market cap of stablecoin leader Tether, which has a market cap of $158.9 billion. And Visa is more than 10 times the size of USDC, which has a comparatively tiny market cap of $62.6 billion.

But what if we look at the transaction volume of stablecoins instead? According to new research from Messari, stablecoins have already surpassed Visa in terms of overall transaction volume. Tether is particularly strong in Africa and Asia, while USDC leads the way in the U.S. and Europe.

PayPal USD

The third stablecoin to watch is from PayPal (NASDAQ: PYPL), and it's called PayPal USD (CRYPTO: PYUSD). It launched back in August 2023 and currently has a market cap of $883.7 million. According to Motley Fool stablecoin research, it now ranks as the seventh most popular stablecoin in the world.

That's where things get interesting, because PayPal has the sort of name brand recognition and consumer clout to make a real difference in the world of payments. It's easy to see how PayPal could decide to push PayPal USD as a form of payment on sites like eBay before rolling it out to a much larger audience.

And, indeed, if you check your PayPal app, there's now a section called "PYUSD Rewards" within the "Crypto" tab. Right now, you can earn 4% by buying and holding PYUSD with PayPal. This seems like a very clever way to onboard new stablecoin users -- entice them with the 4% yield, then encourage them to spend those PayPal stablecoins at partner sites.

Visa vs. stablecoins

So why isn't Visa worried? First of all, Visa says that stablecoins are really nothing new. According to the head of crypto at Visa, they are "just another way to represent an existing currency." Technically that's true, since stablecoins are really just "digital dollars," and dollars have been around for nearly 250 years.

Second, the number of use cases for stablecoins is still rather limited. Mostly, says Visa, they are used for high-value cross-border payments. This is what is likely inflating the value of stablecoin transactions in the Messari crypto report.

Third, stablecoins are mostly popular in emerging markets, where crypto investors view them as a potential hedge against hyperinflation. In places like Latin America, it's arguably better to own a dollar-linked stablecoin than your own nation's currency.

Finally, in the United States, it's not like you're going to go to your favorite supermarket and pay for anything with stablecoins. The technology is just too new, and it's not ready for retail yet. Conceptually, it sounds fantastic. However, replacing one payment system with another is not something you do over the weekend.

What happens next for stablecoins?

That being said, Visa is hardly ignoring stablecoins. The company has already worked to integrate stablecoins into its payment and settlement network. And it has plenty of interesting stablecoin projects on tap, including a new one that just launched in Central and Eastern Europe, the Middle East, and Africa's emerging markets.

Of the three stablecoins mentioned above, the one that has the most potential to disrupt Visa is likely USDC. While Tether is much bigger than USDC, it's easier to find a merchant within the U.S. that will accept USDC. Moreover, USDC has lined up some powerful partners within the U.S., including Coinbase Global (NASDAQ: COIN).

While many people think of Coinbase as just a cryptocurrency exchange, the company actually has a growing number of initiatives that involve its proprietary blockchain (Base). One of these is Coinbase Payments, which rolled out in June. This back-end stablecoin integration from Coinbase is what enabled Shopify to start offering stablecoin payment options this summer.

And don't forget about the retailers that are planning stablecoin launches of their own. The Wall Street Journal recently reported that both Amazon and Walmart were planning stablecoin launches. The goal, most likely, is to avoid credit card processing fees by accepting stablecoin payments instead.

So keep your eyes on the stablecoin industry. There are a lot of interesting developments going on, and the size of the industry is certain to grow by leaps and bounds in the coming years. Finding the right stablecoin investment opportunity now could pay off big later.

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Dominic Basulto has positions in Amazon and USDC. The Motley Fool has positions in and recommends Amazon, PayPal, Shopify, Visa, Walmart, and eBay. The Motley Fool recommends Coinbase Global and recommends the following options: long January 2027 $42.50 calls on PayPal and short September 2025 $77.50 calls on PayPal. The Motley Fool has a disclosure policy.