The five things payment service providers need to know about stablecoins

Amid the rising hype surrounding stablecoins, Moonwell founder Luke Youngblood breaks down five essential insights for payment service providers.

 

Over the past year, stablecoins have become more integrated into the modern payments infrastructure. Onchain transaction volumes surpassed USD 1 trillion in September, and the GENIUS Act has given American stablecoin issuers regulatory clarity. For payment service providers (PSPs), it’s more important than ever to become familiar with stablecoins. These are the five most important things for PSPs to understand about stablecoins right now. 

1. Regulatory clarity changes everything 

For years, the biggest obstacle to institutional stablecoin adoption was regulatory uncertainty. The GENIUS Act uprooted this, as the legislation established the first federal framework for payment stablecoins in the United States. The law mandates that stablecoin companies maintain one-to-one reserve equivalents, pass mandatory independent audits, and submit to federal oversight. The GENIUS Act also resolved the longstanding confusion between the SEC and CFTC by explicitly excluding qualifying payment stablecoins from the definitions of either a security or a commodity. 

Across the Atlantic, the EU has the MiCA framework, which has brought a comparable structure to European markets. The OCC conditionally granted national trust bank charters to Circle, Paxos, and others at the end of 2025. Major banks in the US and EU are now exploring proprietary stablecoin issuances for settlement and trade finance.

The practical implications of stablecoin legislation for PSPs are that compliance conversations can now move forward. Boards, risk committees, and legal teams can now sign off on stablecoin programs that work within their local regulatory frameworks.  

2. Settlement speed is the new competitive battleground 

Traditionally, SWIFT-based cross-border settlements could take anywhere from two to five business days, passing through multiple intermediary banks, and carrying fees that can reach upwards of seven percent on remittances. Stablecoin rails, on the other hand, settle in seconds, operate 24/7 without breaks, and have much lower costs. 

For a logistics client, a payment might take multiple days to clear, inventory and working capital are frozen, and FX risks compound when dealing with volatile markets. PSPs that can offer them T+0 settlement are able to offer something that banks cannot match with their current infrastructure. Visa launched USDC settlement in the United States at the end of last year, and they achieved an annualised run rate of over USD 3.5 billion within a few weeks. 

All of this signals that PSPs need to take settlement speed more seriously than ever before. PSPs that utilise stablecoins are going to win more B2B clients by curing a major headache that clients have tolerated for decades. A 24/7 settlement will make operating on banking hours a thing of the past. 

3. Programmability is the feature the industry has been waiting for 

While speed and cost are the major pain points for many businesses, programmability is an undervalued advantage that stablecoins provide. Stablecoins have the unique trait of operating on smart contract platforms, which can code payment conditions directly into the transaction logic. This means that funds can be released automatically when a delivery is confirmed, or an idle treasury balance can be used to generate yield between settlement cycles. Other use cases include payroll being automatically distributed globally on a fixed schedule or reconciliation workflows that can be automated end-to-end, rather than depending on multiple banks communicating with each other. 

From the PSP perspective, programmability offers a value unlock on the traditional model of moving money and charging a fee. Programmable treasury management, automated compliance triggers, or onchain yield on idle balances become strategic infrastructure for clients. 

PSPs that integrate deeper than the settlement layer into the programmable layer will be building a system with inherent advantages that clients will rely on. 

4. Choosing the right stablecoin and chain is imperative 

Not all stablecoins are created equal, and neither are the chains that stablecoins are on. PSPs need to look at stablecoin issuers, like Circle and Tether, to gain an understanding of their specific needs and which stablecoins meet those needs. Even further, it’s important to make these decisions based on how they operate under the GENIUS Act. PSPs that operate in regulated environments need to be deliberate in their choices. 

The GENIUS Act insisted on one-to-one reserves and mandatory audits because there were previous failures in the sector, namely, from algorithmic stablecoins. PSPs need to be aware of each stablecoin’s reserve composition, audit frequency, jurisdiction, and regulatory status. Issuers need to have a good relationship with regulators in order for clients to feel secure in using these rails. 

Chains matter as well, and there are plenty of advantages across the entire onchain ecosystem. Base, where Moonwell operates, is an example of an Ethereum Layer 2 network with seconds-level finality, deep liquidity, and a growing institutional ecosystem. 

5. DeFi integration is a massive opportunity 

Decentralised Finance (DeFi) has historically been parallel to institutional and mainstream conversations, especially in payments circles. Stablecoins are among the first use cases that pierced the veil and entered the mainstream, and stablecoin legislation has kick-started the unification of DeFi and traditional finance. 

There are many points where PSPs can integrate with DeFi right now. Many onchain lending protocols, for example, allow PSPs to earn yield on stablecoins, which can turn idle settlement balances into productive assets. Decentralised liquidity pools mean FX conversions can happen 24x7, at lower fees. Smart contract-based escrow eliminates the need for trusted intermediaries in multi-party transactions. These capabilities are offering real advantages for PSPs today, and can give them an edge that they’re looking for. 

PSPs that build DeFi integrations will have meaningful advantages over those who don’t. Stablecoin legislation has already brought significant inflows of institutional capital into DeFi ecosystems. PSPs need to start building infrastructure to take advantage of this revenue opportunity, as it increasingly becomes a competitive necessity. 

About the author

Luke Youngblood is the founder of Moonwell, one of the leading DeFi lending protocols on Base, and the creator of Mamo, the personal finance AI agent. Luke comes from leadership roles at AWS and Coinbase, and those experiences inform his leadership at Moonwell. Since launching in 2022, Moonwell has grown to be one of the largest DeFi lenders on Base, while Mamo revolutionized personal finance by providing responsible financial advice tailored to user needs. 

 

About Moonwell

Moonwell is a leading open lending and borrowing protocol operating across Base and Optimism. Designed for both seasoned DeFi users and newcomers, Moonwell combines security, scalability, and intuitive design to help users unlock the full potential of their digital assets.