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As the global war race on Bitcoin continues to heat up, another major U.S. competitor for Bitcoin’s superiority has emerged. According to a Friday filing with the U.S. SEC, the United Arab Emirates (UAE), through its sovereign wealth fund Mubadala Investment Company, invested approximately $436.9 million in BlackRock’s IBIT during the fourth quarter of last year, further intensifying the battle for dominance in the digital asset space. This move coincided with the company securing a commercial license to operate in Abu Dhabi, highlighting the growing institutional interest in Bitcoin within the Gulf nation. While BlackRock’s IBIT remains the largest Bitcoin spot fund by assets under management, currently holding around $57.46 billion, Mubadala is now the seventh largest investor. Notably, this latest investment from Abu Dhabi is not the country’s first foray into Bitcoin. In 2023, authorities in the city made substantial investments in Bitcoin mining, demonstrating a broader strategy to integrate digital assets into their financial ecosystem. Reacting to this development, U.S. Senator Cynthia Lummis, a staunch Bitcoin advocate, tweeter, “I told you the race was on. It’s time for America to win.” Lummis, who has been vocal about the need for the U.S. to enhance its Bitcoin strategy, has previously warned of a potential “crypto arms race” with nations like China and the UAE, consistently pushing for policies that would ensure the U.S. remains at the forefront of financial innovation and security. In a Friday interview with Bitcoin Magazine, Lummis detailed a proposal that would see the U.S. establish a strategic Bitcoin reserve. Under this plan, the government would accumulate 200,000 Bitcoin annually over five years, eventually holding a total of one million Bitcoin. This reserve, she argues, could be leveraged to stabilize the U.S. dollar as the world’s reserve currency, ultimately strengthening America’s economic position. “This asset is transforming not only our country but our world, and the United States needs to be the Global leader, as President Trump just said,” said Lummis. The UAE isn’t the only nation challenging the U.S. in the Bitcoin race. On Friday, British multinational bank Barclays also disclosed its investment in IBIT, holding approximately 2.5 million shares valued at $131.2 million. Goldman Sachs remains the largest institutional investor in IBIT, with around $1.3 billion in holdings. The investment bank has also invested $294 million in Fidelity’s Bitcoin ETF (FBTC), bringing its total exposure to over $1.6 billion.

Author: @bridge__harris Compiled by: Baihua Blockchain For the $1 trillion "duopoly" of Visa and Mastercard, stablecoins pose a challenge. Unless these two companies can adapt in a timely manner, they will face increasing pressure due to regulatory changes in cryptocurrency and the fierce rise of emerging competitors. If the Credit Card Competition Act (CCCA) passes, it will require large banks to provide at least one additional network option for merchants, beyond the Visa and Mastercard options currently available for processing credit card transactions. This would weaken Visa and Mastercard's pricing power, and importantly, stablecoin networks may seize the opportunity to compete with them through lower fees. However, it is worth noting that the likelihood of the CCCA passing is very low—only a 3% chance in the Senate and 9% in the House. Therefore, while its passage would be beneficial, it currently seems unlikely. Currently, Visa and Mastercard charge merchants swipe fees of up to 2-3%, which is typically the second-largest cost for merchants after payroll. Unfortunately, small merchants are particularly affected by these high fees. Large corporations like Walmart have enough negotiating power to reduce transaction costs, thus obtaining more favorable rates than small merchants, who are tightly locked into Visa and Mastercard. This is also one reason why Visa and Mastercard have profit margins exceeding 50%: small merchants have no choice but to rely on Visa and Mastercard, as they control 80% of the credit card market. In short, merchants cannot afford the additional costs of breaking free from these two companies—this is what is referred to as a "typical duopoly" (Senator Josh Hawley). A stablecoin network could reduce swipe fees to nearly zero. Merchants hate swipe fees—this is entirely reasonable—if they could choose a low-fee network that does not limit their market size, they would switch without hesitation. The desire for merchants to avoid card processing fees is not a new concept; the key issue is how to incentivize consumers to change their payment methods: "How does the first person to use a new currency succeed, and how about the millionth?" (Peter Thiel) The gradual popularity of Account-to-Account (A2A) payments as a payment method has proven that consumers are willing to change their payment habits under the right conditions. Fred Wilson of Union Square Ventures even predicts that by 2025, direct interbank payments in certain areas of the U.S. will exceed the fees of credit card payments. Better regulation, particularly the introduction of the Consumer Financial Protection Bureau (CFPB) Section 1033, which clearly supports government backing of open banking, makes it easier for retailers to offer A2A transactions, helping them avoid card processing fees and providing consumers with more payment options. Moreover, the user experience of payment banks may ultimately be more consumer-friendly—similar to the ShopPay experience. Walmart has already launched a payment bank product, and both large and small merchants are beginning to follow suit. To persuade consumers to choose this payment method, Walmart has added instant transfer features, allowing consumers to avoid multiple pending transactions and thus avoid overdrafts. "New technology makes A2A payments more feasible for small merchants, providing a viable alternative to avoid card processing fees."—Sophia Goldberg, co-founder of Ansa. The demand for cheaper, faster, and more efficient payment methods (i.e., stablecoins) is clearly strong. So the question arises: how does the transition to a stablecoin network actually work? From a functional perspective, do consumers need a differently branded card, or can they continue using their regular Visa/Mastercard cards while merchants have the option to process through other networks due to mandatory regulations? This is not clearly stated in the Credit Card Competition Act, and we can only see how the compatibility of these new networks with cards will ultimately develop. Mass adoption requires meeting one of the following two conditions: 1) providing customers with a strong incentive to switch cards (active adoption); or 2) a backend transition where customers continue using existing cards, but the actual processing occurs on the stablecoin network (passive adoption). One way to align incentives is to launch entirely new stablecoin banks: account holders can enjoy discounts at participating merchants like Amazon and Walmart, who would be happy to offer rewards because they can avoid the 2-3% swipe fees of Visa/Mastercard. Today, customer spending is increasingly concentrated on a few major platforms, so as long as the following conditions are met: 1) the rewards customers receive are sufficient to offset the hassle of switching cards, and 2) the rewards offered by merchants are lower than the 2% transaction fee they pay to Visa/Mastercard, stablecoin banks can achieve a win-win situation. Customers can still earn returns on deposits because stablecoins operate in the background, and credit issuance can also be done in stablecoins. But from a user experience perspective, customers are still just swiping their cards. By then, banks could be completely bypassed: when customers spend at retailers, they are essentially transferring from one wallet to another. Stablecoin banks can make money through processing fees (which are obviously lower than current fees), deposit interest (revenue sharing), and fees charged when users convert stablecoins to fiat currency. Some believe that stablecoin issuers are essentially shadow banks, but for mainstream adoption, a new stablecoin bank that collaborates with merchants from the top down may be the most effective choice. If the incentives are in place, customers will be eager to join. One can look to Brazil's Nubank, which has stood out in a market where banks still dominate and are notorious for charging excessive fees. Nubank successfully attracted a large number of consumers by launching a mobile-first, fully functional product and significantly reducing fees, while traditional banks in Brazil often fail to provide basic financial services in a convenient manner. In contrast, traditional banks in the U.S., while not perfect, have online and mobile functionalities sufficient to make most customers reluctant to switch easily. Nubank's success is attributed to its excellent user experience, and this model could theoretically be replicated in the U.S. However, a successful currency platform is not just about having a great interface; it must also allow users to easily transfer between deposit accounts, stablecoins, and cryptocurrencies, and even enter "buy now, pay later" (BNPL) or other credit products—without having to switch to other platforms. This is the key to Nubank's success and a gap in the U.S. market. However, regulatory issues in the U.S. cannot be ignored: challenger banks looking to replicate the Nubank model (and use stablecoins) will face overlapping regulatory requirements from multiple agencies, including the OCC, the Federal Reserve, and state governments. The feasibility of stablecoin banks ultimately depends on whether a banking license is required, what money transfer licenses (MTL) are needed, and other related regulatory issues. The last company to obtain a national banking license in the U.S. was Sofi (through the acquisition of Golden Pacific Bank), which received the license nearly three years ago in January 2022. Stablecoin banks could consider some innovative paths, such as partnering with existing banks or trust companies insured by the Federal Deposit Insurance Corporation (FDIC), rather than directly pursuing a national license. However, without the Credit Card Competition Act (CCCA), any new bank stablecoin payment network—even if licensed—will be limited to non-merchant payments (i.e., B2B and peer-to-peer payments). The bipartisan stablecoin bill recently proposed by Lummis and Gillibrand helps to advance this process. The bill's explicit goal is "to create a clear regulatory framework for payment stablecoins that protects consumers, supports innovation, and promotes the dominance of the dollar." While the bill is undoubtedly an important step in the right direction, its specificity is far less than that of the CCCA, which provides a more detailed action plan for enforcing compliance among banks. One potential obstacle to the success of stablecoin banks is the immense influence of the banking industry in Washington, which is one of the most powerful lobbying forces in the U.S. Therefore, pushing the necessary legislation through Congress will be a hard-fought battle. In 2023, lobbying expenditures for banks, large and small, totaled about $85 million. It is worth noting that considering lobbyists' use of complex entities and methods, the publicly reported lobbying expenditure figures may actually be much higher. The establishment of stablecoin banks first requires a clear regulatory strategy and sufficient funding support to counter the strong lobbying pressure from existing banks. Nevertheless, the potential rewards are enormous. A successful challenger bank could fill the missing comprehensive financial model in the U.S. market, entirely built on stablecoins. If executed properly, this would be the biggest transformation in how consumers, merchants, and banks interact since the internet. Even though this is a trillion-dollar potential market and technically entirely feasible, stablecoin banks still rely on the CCCA, which currently seems difficult to pass. Existing banking powers will fight back with full force, as naturally, the old always opposes the new. But the new will eventually come—at least in some form.

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