Let's get to the big story.
Breakdown.
Stablecoins can be described as the quiet plumbing of the digital asset world for nearly a decade, but 2025 was the year that the pipes burst into the mainstream.
While the tech world was obsessed with large language models and the promise of artificial gen AI, stablecoins were actually moving money from instant corporate payments.
To rewriting the rules of cross border trade, the tech is proving it's more than just a crypto sidekick and as we enter the new year, the real turf war has just begun.
Well joining me this morning to weigh in is Christian Catalini, founder of MIT crypto Economics lab and also co-founder of Light Spark and co-creator of Libra.
Good morning, Christian.
Thank you so much for joining.
So first and foremost, I understand that you've argued that stablecoins aren't necessarily a threat to traditional bank deposits, but rather a critical upgrade to the world's aging financial infrastructure.
So in 5 years' time, do you expect a stablecoin to be issued by a crypto native tech firm, or would you say perhaps a global bank?
Good morning.
Uh, the reality, it's going to be both.
Uh, I think you're going to see some fierce competition between new entrants that are using the technology to really rebuild the piping, the wiring, uh, payments and financial services from the ground up, as well as incumbents, of course, starting to respond.
They now understand it's, it's inevitable, it's happening, and they really need to embrace the technology or be left behind.
And in New York morning trade, we're keeping a close eye on the price of Bitcoin, which has fallen below that 66,000 level.
But we've seen plenty of volatility over the years when it comes to digital assets, and I understand you've written for the Harvard Business Review that we need to stop thinking of Bitcoin solely as digital gold.
So give us an overview of why you're thinking this right now.
Yes, the first piece of advice I would give to anyone following the price of Bitcoin is change the toggle on your screen to a log scale.
The price of Bitcoin makes a lot, makes a lot more sense when you're not really looking at it on a linear scale, but on a log scale that kind of smooths out all of these ups and downs that you're seeing month to month or year to year.
The reality is that what is really driving the price of Bitcoin over the long haul is steady technological adoption.
Economists call it a technology S curve.
As the technology kind of gets adopted from, you know, the early adopter fringe to mainstream institutions and now even sovereign. the price of Bitcoin will rise, and it's really a reflection, not so much of being kind of digital gold.
That theory often, often mentioned, it's kind of, it's been debunked.
Gold moves in a very different way than Bitcoin.
It has more of an inflation hedge perspective.
Bitcoin might be more of a hedge against systemic system collapse, but that's a very difficult theory to test, right, because you have to go through that collapse to really experience it.
It has been behaving a lot more like a high beta tech stock, and so when people are bullish about the market, when risk is not something people are concerned about, Bitcoin tends to rally.
Of course the Fed being more awkish, as you were mentioning in your summary for today, it's, it's a negative sign for the price of Bitcoin in a market that is risk off.
People, of course, are moving away from Bitcoin.
And there's some additional uncertainty too, of course, across a number of different parts of the geopolitical sphere that are really impacting what's happening in the crypto market right now.
And while I have you here, I do want to ask you about the intersection of crypto as well as artificial intelligence.
So I understand you're currently unpacking the economics of a world run by AI as well as autonomous agents, and as these models begin to execute tasks independently, they won't be waiting, say, 3 days for a bank clearinghouse.
So does crypto become the native language of the machine economy?
And what is your timeline for this?
So let's start with the timeline.
I think in the next 12 to 24 months, we're going to see some very transformative changes, and people are probably underestimating the impact on the economy, the impact on jobs.
Uh, these models, even if you were to freeze them in time where they are today, can already do a substantial share of what we do, uh, every day.
But when it comes to the intersection of crypto and AI, I think sometimes people are excessively bullish.
When you think about agentic commerce, a consumer trying to plan a travel with, you know, flight and bookings, a lot of that will go through the traditional rails, right?
So you could see a large PSP like a Stripe do a collaboration with OpenAI, which we've seen, and that will deliver probably a lot of the reality of a junk e-commerce.
That's one part of the story where crypto, I don't think will play a major role and traditional players, including the credit cards, have an important role to play.
Then there's another side of the equation which is new applications, machine to machine payments.
We are seeing some of this with open claw, people building these bots that are kind of autonomously engaging in commerce, in transactions, and interactions on the internet.
For that you will need crypto.
You will need rails that are 24/7 programmable, and really deliver new types of applications that I don't think we've imagined yet.
So whatever AI will need, I think crypto will deliver on that new, you know, new white space of new applications and services.
Yes, and while I have you here, I do want to ask you about stablecoins.
So the fear has been that stablecoins would hollow out the banking system by pulling deposits away from traditional accounts, but so far the data out there suggests that this isn't happening at scale.
So how do you see all of this unfolding and what does it mean for consumers?
Yeah, so there's been actually some quite rigorous economic research on exactly these topics.
Stablecoins to date have not moved consumers over.
There's not been redeposit substitutions.
The banks keep talking about it, mostly because, of course, they're worried about competition.
They now realize that this is a technology that will compete with their products and services, will force, you know, your checking account to become a lot more useful to maybe offer.
You even rewards and so they're trying to kind of slow the process down with Genius.
I think there was already the idea that yes, issuers of stablecoins cannot distribute yield, so that they cannot compete directly with deposits, but distributors of stablecoins should be able to do loyalty and rewards.
That's now all up for debate, and that's why you're seeing so much 10 tension around the Market Infrastructure Act.
But the reality is that I think in the long term, there's strong switching costs, so people have a lot of their financial life tied to checking accounts, and overcoming that friction is still a massive hurdle for the new products and services.
But you know, if you project 5 years in To the future, it is very clear that stablecoins will be part of the plumbing, that consumers will have more choice, that businesses will have more choice, costs will come down, features will be better, and so banks will have really, you know, to wake up and fight for the market share that they currently hold.
Yes, and as you mentioned, we are seeing this shakeout among issuers as well as networks as regulation finally catching catches up to this technology.
But if you are a legacy financial institution and you're sitting on the sidelines today, what do you think is the single biggest risk here?
The single biggest risk I would say is inaction.
Try to understand the technology, import it, work with the right teams on the technological side that can bring you the capabilities that you need.
Don't try to go for flashy consortia with multiple entities that will move, you know, very slowly.
Just embrace it, apply it, and essentially I think you. will realize really quickly that for most incumbents this is a technology that actually plays to your strengths.
You have distribution.
You have regulatory modes.
You have the experience and years and years of data which, by the way, in an AI driven economy become even more useful.
Apply them, use the technology and kind of disrupt yourself before somebody else does it.
Well, Christian, we will have to leave it there for today, but thank you so much for joining us.
Thank you so much for all of your insights as well as perspective.
Thank you so much.
It was a pleasure.
