Bullet Thesis: The year that enterprise adopts stablecoins

21 Jan 2025

Hi, it’s Michael from firstminute capital. Along with my colleagues Sam, Lorcan and Adriana, I am investing in European pre-seed and seed B2B software & fintech companies like this, this and this. In a previous life I was a foreign correspondent for the Financial Times and the founding editor of Sifted. Here is our latest thesis.

In a recent update from our portfolio company Stitch Money, something caught our attention. Their stablecoin unit, CrissCross, wasn't just growing—it was experiencing explosive demand from an exciting market segment quarter: large multinationals.

The reason was compelling yet simple. These companies faced a common problem in South Africa: without local entities or bank accounts, they struggled to move their earned Rand into dollars or euros.

CrissCross offered an elegant fix for African companies who need to programatically trade stable coins for treasury management. The result was instant, cheap, and automatic reconciliation into a central wallet in Europe or the US.

This isn't just an isolated success story (another of our portfolio companies, Mural, which does cross border payments, is also seeing exciting growth as well - alongside as many others).

All this is a herald of full blown enterprise adoption of stablecoins, and a as a result a huge shift in the global financial and monetary system.

The inflection point is here

Stablecoins have been around for more than a decade (the first fiat-backed coin, Tether, has started in 2014). But you can see here how volumes have taken off since 2020 and have reached what appears to be another inflection point in 2024.

While we are still early, big payments companies are already responding in bold fashion. Stripe's $1.1 billion acquisition of Bridge in October 2024 signals strong institutional conviction, and Bridge's growth in 2024 points to the beginning of a major shift.

Announcing the deal, Zach Abrams, CEO and co-founder of Bridge, said: “Our business has grown more than 10 times this year.”

Elsewhere, major financial institutions including Visa and SWIFT have begun supporting stablecoins natively. PayPal launched its USD stablecoin in 2023. Revolut is considering a stablecoin launch to compete in a market that is dominated by Tether and Circle.

Why is this happening now?

Several forces are converging here.

First, infrastructure has matured significantly. USDC transactions on Ethereum now cost just $1, down from $12 in 2021, while Layer 2 solutions like Base offer transactions for less than a cent. Compare this to international wire transfers, which still average $44 per transaction, and the value is clear.

Along with more awareness, the building blocks are also becoming stronger than ever, with more robust custody solutions, enhanced identity management and streamlined on and off-ramps making the ecosystem more accessible.

Perhaps most importantly, regulatory clarity is emerging. Europe's MiCA framework, set to be fully implemented in January 2025, provides clear rules for stablecoin issuers.

The US regulatory landscape is also improving with the movement of the FIT 21 bill, while banks are gaining much-needed clarity on custody services. This regulatory foundation is crucial for institutional adoption.

Regulation here is unlikely to be linear, to be clear. Many use stablecoins to, in effect, bypass capital controls in emerging market countries, which will spook some nations if volumes get large enough. But it seems the 10 year trend is towards the embracing of stablecoins.

The exciting trend: consumer to enterprise

Stablecoins were originally created by exchanges to serve the need of people who wanted to “park” their crypto assets in a safe non-volatile haven without going through the pain of moving their crypto back into fiat.

The next wave of adoption quickly came from consumers in emerging markets.

It’s easy to imagine why a freelancer in Turkey might not want to hold his or her money in his unstable local currency, the Lira, but instead hold the money in USDT, which is backed by US Treasuries, in effect a “digital dollar”.

Four of the top five countries in Chainalysis’ 2024 Global Crypto Adoption Index are in emerging markets, and 15 of the top 20 are non-high income countries. This consumer adoptions has been growing.

There have been many companies working on remittances, the enormous $857bn a year market where people send money home from abroad - companies like Wirex, Metal Pay, Stably, Wyre, wamo, Ping, Everex and Valora.

But what is exciting about 2025 and onwards is that, as we can see from the CrissCross example, we are starting to see signs of serious enterprise adoption of stablecoins. We are still early here, but it heralds something huge in the global financial system.

Where we want to invest

It’s a truism in seed investing that by the time everyone is talking about an idea it’s too late. Having said that, there is likely a 10 year fintech mega trend here. As Brad Flora, a Group Partner at YC, said “utility is so straightforward it seems inevitable traditional finance will follow suit.”

There are lots of spaces that are compelling. Some of the main existing categories are:

The on-and-off ramps themselves e.g our portfolio company Ramp, or indeed all the exchanges like Coinbase
The creators of new stablecoins like Tether, Paypal, Circle.
Stablecoin card issuers like Cypher, Rain and Reap (e.g a debit card where you can pay in stablecoin)
Stablecoin wallets like our portfolio company Argent (or Metamask or Coinbase Wallet)
Cross border payments companies like our portfolio company Mural (or Conduit or Orbital)
B2B payments like Loop Crypto and Sphere
Remittance like Afriex, Dolarapp and LemonCash
Payroll like Request Finance, Toku, LlamaPay
Microloans like Goldfinch and Haraka

A nice market map from Artemis is here.

At firstminute though, we are taking the closest look at these areas that are particularly focused on the enterprise, asking ourselves what might happen if companies really embrace stablecoins in parts of their businesses.

Infrastructure with a Twist

While basic infrastructure plays are becoming crowded, we see specific gaps:

Cross-border Trade Finance 2.0: Companies building specialized lending and working capital solutions for businesses using stablecoins for international commerce. The opportunity lies in combining traditional trade finance expertise with crypto-native capabilities.
Enterprise-grade Security Solutions: As more corporations hold stablecoins, there's a need for institutional-grade custody and treasury management solutions built specifically for European regulatory requirements.
Payment Rail Abstraction Layers: Tools that allow enterprises to seamlessly switch between traditional and stablecoin payment rails based on optimal cost and speed. This is particularly relevant for European companies dealing with both EU and non-EU transactions.

2. Vertical-Specific Solutions

Rather than building horizontal platforms, we're excited about focused solutions for specific industries:

Luxury Retail Settlement: High-value transactions in luxury retail suffer from significant fees and settlement times. A specialized solution for this industry could maybe provide wedge into the broader retail market?
Real Estate Operations: Property management companies dealing with multiple jurisdictions could benefit from stablecoin-based solutions for rent collection, maintenance payments, and escrow services. Although maybe too early?
Gaming and Digital Content: European gaming companies dealing with global microtransactions could save significantly through stablecoin integration.
Compliance and Risk Management. While compliance tools exist, we see opportunities in:

a) Dynamic Risk Scoring: Solutions that can provide real-time risk assessment for stablecoin transactions, particularly important for European banks beginning to embrace digital assets.
b) Automated Regulatory Reporting: With MiCA implementation approaching, tools that help companies automatically generate compliant reports will be crucial.
c) Cross-border Tax Management: Solutions helping enterprises navigate the complex tax implications of stablecoin usage across different European jurisdictions.

4. User Experience Layer

The missing piece might be in making stablecoins more accessible:

White-label Enterprise Solutions: Enabling traditional financial institutions to offer stablecoin services to their corporate clients without building internal expertise.
Banking-as-a-Service for Stablecoins: API-first platforms that allow any company to embed stablecoin functionality into their existing financial workflows.
Corporate Identity and Access Management: Solutions that bridge traditional corporate banking controls with stablecoin operations.

Our Investment Approach

As said above, we're particularly interested the B2B angle here, given our CrissCross (and Mural) experience.

We want to back founders who have deep domain expertise in either traditional finance or crypto infrastructure; are building solutions that can start with a specific customer pain point but have platform potential; understand European regulatory nuances and can navigate both traditional and crypto ecosystems

While many players will attempt to build broad infrastructure, we believe the winners in this space will find specific wedges into the market - solving a pain points for particular customer segments before expanding their offering.

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If you are building a stablecoin based company with a big vision, a clear initial product and are interested in pre seed or seed financing, we’d love to hear from you and do reach out at [email protected], [email protected], [email protected], or [email protected].