Woofun AI reports that Blockchain Capital investor Jonah Burian, as compiled by Jiahuan for ChainCatcher, challenges the prevailing narrative that stablecoins are the ultimate solution for cross-currency payments. While stablecoins excel when both parties wish to hold digital assets, their value proposition becomes nuanced when converting between fiat currencies, such as sending dollars to receive Mexican pesos. The core argument posits that fintech companies like Wise have already achieved significant reductions in cost and latency without relying on blockchain technology, suggesting that the true innovation of stablecoins lies not in direct efficiency gains but in structural market changes.

The traditional correspondent banking system remains inherently inefficient due to its reliance on multiple intermediary institutions. Consider a scenario where Alice in the United States wishes to send pesos to Bob in Mexico. Since neither of their local banks has a presence in the other country, they must rely on a correspondent bank, such as GlobalBank, to facilitate the transaction. GlobalBank holds a deposit of dollars from Alice's bank and a corresponding deposit of pesos at BancoMX in Mexico.

When Alice initiates the transfer, her bank deducts the funds and notifies GlobalBank, which then converts the dollars into pesos at its own exchange rate, capturing a spread, and instructs BancoMX to credit Bob's account. This process involves coordination through the SWIFT system, which incurs additional messaging costs. The average combined cost of fees and exchange rate differences for consumer cross-border remittances via bank channels is close to 15%.

Furthermore, the transaction typically takes 1 to 5 business days, as each intermediate step requires manual processing and reconciliation, resulting in a system that is both expensive and slow.

Fintech companies disrupted this model by introducing net settlement mechanisms that eliminate the need for physical cross-border fund movements. In 2011, two friends in London identified a similar problem: one received a salary in Euros but needed British Pounds to live in the UK, while the other earned in Pounds but needed Euros to repay a mortgage in Estonia. Instead of transferring funds across borders, they simply exchanged local currencies, with Pounds going into the London account and Euros into the Estonian account. This concept evolved into Wise, which scaled the model by matching large volumes of funds moving in opposite directions.

In the case of Alice and Bob, Alice sends dollars to Wise's U.S. account, and Wise pays Bob using pesos it already holds in Mexico. No money crosses national borders; the company effectively takes money from one pocket and pays it out from another. To manage balance sheet risks, Wise conducts net settlement for opposing transactions, offsetting cash flows internally. Only when there is a severe imbalance in currency supply does the company rely on the traditional financial system. This network is built using partner banks, financial licenses, and local partners, ensuring operational compliance in each jurisdiction.

Wise's efficiency is reflected in its cost structure and transparency. The company charges a small fee in advance and performs conversions at the market intermediate rate, avoiding hidden profits from exchange rate differences.

Woofun AI data shows its comprehensive expense ratio for cross-border services in FY26 dropped to around 0.5%. The latest figure for Q1 FY27 was 0.50%, significantly lower than the World Bank's estimate of 3.5% for purely digital remittance service providers. This demonstrates that Wise has already achieved a level of cost efficiency that rivals or exceeds many traditional and digital competitors. The speed of transfers is also enhanced, as the underlying process involves local payments rather than international wire transfers, resulting in near-instantaneous delivery from the user's perspective. This model has set a high benchmark for cross-border payment efficiency, challenging the notion that blockchain technology is necessary for low-cost, fast transfers.

The stablecoin 'sandwich' mechanism offers a different approach to cross-border payments. In this model, Alice converts $100 into 100 USDC, which is then sent to Bob in Mexico via the blockchain. The on-chain transfer cost is less than a cent, and the transaction completes in seconds. Bob then uses a local withdrawal service to convert the USDC into Mexican pesos and transfer the funds to his bank account. This structure, known as Fiat → Stablecoin → Fiat, appears efficient on the surface.

However, from the perspective of end users, it is not necessarily superior to Wise. The on-chain transfer of USDC is indeed cheap and fast, and competition in funding services has driven the cost of converting dollars into stablecoins toward zero. The critical issue remains the final withdrawal step, where Bob must convert the dollar-stablecoin pair into local currency. In some markets, the exchange rate difference between dollars and local currencies can still be significant, meaning that the blockchain does not automatically eliminate the cost of converting between the two end currencies.

Stablecoins are not inherently cheaper for end users because the primary cost drivers lie in the funding and withdrawal services, not the on-chain transfer. The funding service, which converts fiat currency into stablecoins, has become increasingly competitive, with costs approaching zero. Similarly, the on-chain transfer cost is negligible.

However, the final withdrawal step, where stablecoins are converted back into local currency, often involves significant exchange rate differences. This is particularly true in markets with limited liquidity or high volatility. As a result, the total cost of a stablecoin-based transfer may not be lower than that of a fintech solution like Wise, which uses net settlement to minimize exchange rate spreads. The blockchain provides a cheap and fast intermediate layer, but it does not address the fundamental challenge of converting between different fiat currencies at competitive rates.

The true value of stablecoins lies in their ability to enable open competition and modularization in the payment industry. Building a global payment network like Wise is extremely difficult, requiring extensive regulatory approvals, local partnerships, and operational infrastructure. Stablecoins lower this barrier by allowing companies to focus on specific parts of the payment process.

A new entrant no longer needs to build a global banking network from scratch; instead, it can find an excellent funding channel on the payer side and an excellent withdrawal channel on the receiver side, connecting them directly through stablecoins. This unbundling of payment networks allows modular providers to compete in an open market. Previously, companies like Wise controlled the entire payment corridor, earning profits from the entire process.

Under the stablecoin system, local withdrawal service providers in different regions can compete directly for each currency conversion, fostering a more competitive environment.

This modular approach is particularly beneficial for long-tail cross-border payment corridors with smaller transaction volumes that were previously difficult to reach by global payment networks. Since companies no longer need to build a global network, regional service providers can focus solely on part of the world rather than trying to cover the entire globe. Yellow Card, a portfolio company of Blockchain Capital, uses a similar model, focusing on stablecoin payments and fiat conversion services in multiple African countries. By concentrating on specific regions, these providers can achieve greater efficiency and lower costs. This fragmentation of the market allows more participants to enter, fostering competition that truly reduces costs for consumers. The ability to focus on regional strengths enables providers to optimize their operations and offer better services to local customers.

However, market fragmentation also brings risks of re-integration and vertical integration. There are already many stablecoin payment orchestration platforms that combine different funding, on-chain settlement, and withdrawal services. The largest companies are beginning to re-engage in vertical integration, potentially consolidating the market again. If this trend continues, the advantage brought by stablecoins might gradually diminish, as the open payment ecosystem could become more centralized.

Nevertheless, the key point is that an open payment ecosystem remains open. It is difficult for any single company to monopolize it, as the modular nature of stablecoin payments allows for easy entry by new competitors. If a middleman starts earning excessively high profits from exchange rate differences, another local withdrawal service provider can enter the competition at a lower price. This dynamic ensures that the market remains competitive and responsive to consumer needs.

As the overall expense ratio in the cross-border payment industry continues to decline, the value previously taken by various intermediaries should eventually flow back more to consumers and businesses. The most direct manifestation of this is that transferring funds across borders will become increasingly cheap. The unbundling of payment networks through stablecoins has created a more competitive landscape, where modular providers can drive down costs in long-tail corridors. While stablecoins may not be inherently cheaper than fintech solutions like Wise, their ability to enable open competition and modularization offers a significant advantage.

This shift marks a structural change in the payment industry, where the focus moves from building integrated networks to optimizing specific components of the payment process. The result is a more efficient and accessible global payment system, benefiting both consumers and businesses.