Is Stripe's New Stablecoin Card a Major Threat to XRP?

On Oct. 15, payment juggernaut Stripe and its partner Plasma announced plans to develop payment cards for spending stablecoins across five currencies, offering them in more than 100 countries in 2027. By using stablecoins as the vehicle for the transfers underpinning payments, users can avoid currency exchange fees and the inconvenience of waiting for traditional international transfers to clear before spending.

That highlights an awkward problem with XRP's (CRYPTO: XRP) original purpose: to be a bridge currency intended to work around those exact issues. Is Stripe's new card therefore a major threat to XRP?

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Does the Stripe stablecoin card compete with XRP?

XRP's founding pitch to investors is that it would be a bridge currency, which, in the parlance of its issuer, Ripple, is a go-between asset used to move money between currencies without anyone needing to park cash in a separate account abroad first. For instance, the XRP Ledger (XRPL) documentation suggests that a dollars-to-pesos payment from the U.S. to Mexico can be automatically routed through XRP when it would be cheaper than a direct currency swap.

Currency exchange fees are typically charged as a percentage of the transfer amount. The World Bank estimates that the global average cost of sending $200 abroad, including fees and exchange-rate markups, is 6.3%. The XRPL's minuscule fees mean users could save significantly, especially for larger transfers, such as those handled by banks, financial institutions, and even currency exchange houses. But that's far less of a consideration for individuals, who usually aren't transferring such large sums.

Stripe's card will be attacking the same pain point from the other direction. Someone holding pesos will spend those pesos directly, with no conversion to dollars required. And with no conversion needed, there's nothing to bridge and fewer questions to ask users before proceeding.

XRP's biggest remaining niche as a bridge currency is in very large transfers between thinly traded currency pairs, where a big stablecoin swap would lose some (or even a lot) of its value to slippage, or the price moving against a large order as it's executed. In those situations, it's the small, circulating supply of stablecoins for less-commonly traded currencies that is causing the problem that XRP is capable of solving, as XRP itself, with a market cap of about $83 billion, could be far more liquid. But again, that's mostly a concern for financial institutions, not individuals, as most people don't have enough money to spend to affect even fairly small stablecoin markets on their own.

Thus, the target customers differ significantly between Stripe's vision and XRP's original intent. Stripe's product is aimed at people and the businesses that issue them cards, and XRP will remain a niche instrument for institutions; they probably won't compete directly unless one player decides to try to encroach on the other's turf with new systems and features.

This calls XRP's thesis into question

The deeper question here is whether XRP can ever became a bridge currency in the way its developers envisioned.

For banks, it usually doesn't make sense to settle large transfers in an asset like XRP, whose price can swing significantly, even in mid-payment. Stablecoins or traditional money-transfer rails are the better options.

What's more, Ripple's own pitch has moved on.

As of October, its cross-border payment options list describes settlement in its stablecoins RLUSD, USDC, and USDT, as well as fiat currencies; it doesn't mention XRP. And when RLUSD is used or held, it's Ripple, not XRP holders, that earns the reserve interest on the Treasuries and other yield-bearing instruments that back RLUSD. So it doesn't make much sense for an XRP investment thesis to discuss its potential utility as a bridge currency anymore, and there isn't much evidence that it's in widespread use for that purpose.

The XRPL also doesn't earn much, and its only mechanism for passing fee value to holders is weak. The network collected only $1.6 million in fees during the 30 days ended Oct. 21.

In closing, Stripe's new card is the least of the problems facing XRP. I won't buy the coin, although it could still be worth holding on to in case Ripple comes up with a solution to these problems.

Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends XRP. The Motley Fool has a disclosure policy.