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News has trickled out that Stripe has acquired stablecoin platform Bridge for $1.1 billion.
This acquisition is one of the largest ever in the crypto space, and stablecoins are expected to provide critical liquidity to the crypto market and improve the efficiency of TradFi. It gave some credence to the idea that this could be the case.
This story also comes days after Stripe officially announced that it has re-enabled stablecoin cryptocurrency payments in the US.
At the risk of adding more noise to an already crowded news event, here are three quick thoughts on the deal, starting with its impact on Solana.
1. Solana is not the only one betting on stablecoins
With Solana's North Star that stablecoins are fast and cheap, with promise for things like remittances and payments, as opposed to cryptocurrencies that store more value like Bitcoin, blockchain Intuitively suitable for stable.
As a result, Solana has seen a lot of betting on stablecoins in recent months. A significant portion of the change was spent on liquidity incentives to bring PayPal's stablecoin to Solana. Startups like Perena, Sphere, and Lulo are building Solana-native businesses primarily focused on stables. Although stablecoins are a huge market, they are not yet widely used in the mainstream financial world, and it is an open question whether all these bets will pay off.
But Stripe's acquisition of Bridge at least indicates that Solana isn't the only horse in the stable.
“All payments and [infrastructure] provider follows [Stripe’s] Lead the way, or at least start looking around,” Lulo co-founder Jesse Browner told me via text message.
2. Building a stablecoin payment platform is extremely difficult
I hosted Coinflow CEO and founder Daniel Lev on the Lightspeed podcast and he made some interesting points about this deal. Stripe isn't made of dinosaurs. The fintech giant became interested in Bitcoin a decade ago and built several payment infrastructures between 2014 and 2018.
This time, Stripe has reintegrated crypto payments, presumably through this very expensive acquisition. As an established internet payments company, you would think Stripe would have at least considered building stablecoin on-ramp and off-ramp services in-house.
“You can't launch it overnight,” Lev said of the stablecoin payment business. “There's a regulatory moat, there's a partnership moat, and there's a huge amount of regulation that we have to deal with.” [criteria]Therefore, not many developers will be able to jump on this opportunity today or tomorrow. Much still needs to be done to launch compliant and legal products in this space. ”
3. Cryptocurrency ventures may be developed through further M&A
One of the biggest problems with cryptocurrency ventures is that cryptocurrency startups almost never do an IPO. If VCs want to report returns, they can rely on token allocation, but airdrops are the only exit opportunity for VCs and can lead to short-term thinking and inappropriate price behavior. With the Stripe acquisition, Bridge just proved that there can be a second way for VCs to exit their investments.
“Everyone in crypto VC has two viable paths to exit: equity-based (IPO, acquisition) and token launch + listing,” said Sam Lehman, principal at Symbolic Capital. “We know it's much healthier for the industry as a whole.” said in the text.
Lehman added that another consequence of crypto ventures' reliance on tokens is that crypto VCs tend to be cautious about investing in startups that don't plan to launch a token. After the Stripe acquisition, this attitude has started to soften.
“To be clear, this is not a silver bullet. Web2 VC does not make a living on acquisitions and needs an IPO to get 100x returns. “I don't think anyone thinks this means we're going to start doing crypto IPOs in earnest, but it's a step in the right direction,” Lehman said.
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