SoK: Stablecoins in Retail Payments

Imagine the world of money as a giant, bustling city. For decades, the main roads for buying coffee, shoes, or concert tickets have been the Card Networks (like Visa and Mastercard). These are like well-paved, heavily patrolled highways with toll booths, traffic lights, and a very strict rulebook. Recently, a new kind of vehicle has zoomed onto the scene: Stablecoins. These are digital tokens that promise to stay worth the same amount as a dollar, built on the "blockchain," which is like a massive, public, unchangeable digital ledger.

A new study by Yuquan Li and colleagues asks a big question: Can these new digital tokens replace the old card highways for everyday shopping?

After mapping out exactly how both systems work, the researchers built a scoreboard called CLEAR (Cost, Legality, Experience, Architecture, Reach) to see who wins. Here is the verdict, served with a side of analogies.

The Main Finding: The "Safety Wrapper" Problem

The paper's biggest discovery is that while stablecoins are incredibly fast and efficient at moving money, they are missing the "Safety Wrapper" that card networks have.

Think of a card transaction like ordering a pizza with a guaranteed delivery service. If the pizza arrives burnt, or the driver steals your money, the pizza company (the card network) steps in, refunds you, and fixes the mess. The merchant takes the risk, not you.

Stablecoin transactions are more like handing cash directly to a stranger on the street. The money moves instantly and cannot be taken back. If you hand over the cash by mistake, or if the stranger runs away with it, there is no "pizza company" to call. You have to go to court or hope the stranger is nice enough to return it. The study suggests that for mass-market shopping, this lack of a safety net is a huge deal.

The CLEAR Scorecard

1. Cost: The Price Tag Flip

• Cards: The merchant pays a fee (like a toll) to use the highway. This fee is high, but it covers the cost of protecting you. You, the shopper, usually pay nothing at the register. The system is subsidized for you.
• Stablecoins: The "toll" on the blockchain is often lower or zero for the merchant. However, the cost flips to you, the shopper. You might have to pay "gas fees" (transaction fees) to move your money, and you have to manage your own digital wallet.
• The Catch: The paper notes that stablecoins are great in closed loops (like a video game where you buy items with the game's currency and never leave the game). But in the real world, if you need to turn your stablecoins back into regular cash to pay rent, you hit a "boundary cost" (fees to convert). The study suggests stablecoins are currently better for moving money between countries or in high-inflation countries, but not necessarily for buying groceries at a local store.

2. Legality: The "Undo" Button

• Cards: If you get scammed, the law and the card rules give you an "Undo" button. You can dispute the charge, and the money comes back. The system is designed to protect the user after the transaction.
• Stablecoins: Once the transaction is on the blockchain, it is final. There is no "Undo" button. If you send money to the wrong address or get tricked, the money is gone. The law protects the coin (making sure the issuer has enough cash to back it up), but it doesn't protect the transfer. The paper argues this makes stablecoins risky for everyday shopping where mistakes happen.

3. Experience: The "Cognitive Load"

• Cards: You tap a card or phone. It takes a second. You don't think about it. It's easy.
• Stablecoins: To use them, you have to manage private keys (like a super-secret password), worry about network congestion (traffic jams on the blockchain), and make sure you have the right "gas" to pay for the trip. The study suggests this is too much mental work for the average person. Even if the technology is fast, the feeling of using it is stressful and confusing.

4. Architecture: The "Honeypot" vs. The "Key"

• Cards: The banks hold your data in big, secure vaults. If a hacker breaks in, the bank is responsible for fixing it.
• Stablecoins: You hold your own keys. The blockchain itself is super secure and hard to hack, but you are the weak link. If you lose your key or get tricked into giving it away, there is no one to help you. The paper points out that this shifts all the security risk from the bank to you.

5. Reach: The "Chicken and Egg" Problem

• Cards: Almost every store accepts them. You can go anywhere.
• Stablecoins: Very few stores accept them. Why? Because not many people use them. And people don't use them because stores don't accept them. The study suggests that without a central boss to force everyone to agree on one standard (like the card networks have), stablecoins will stay stuck in small, specific groups (like crypto exchanges or remittance corridors) rather than becoming a global shopping tool.

What the Paper Rules Out

The authors are very clear about what doesn't work:

• Algorithmic Stablecoins: They explicitly rule these out. These are coins that try to stay stable through math formulas rather than holding real cash reserves. The paper points to the collapse of one such coin (UST) as proof that they are too risky for shopping.
• A Full Replacement: The paper does not suggest that stablecoins will replace credit cards for everyday shopping soon. It argues they are structurally disadvantaged for this specific job.

How Sure Are They?

The authors are very confident in their structural analysis. They didn't just guess; they mapped out the entire lifecycle of a transaction for both systems, comparing how money moves, who is responsible, and how laws apply.

• They suggest that stablecoins have a "conditional comparative advantage." This means they are great for specific jobs (like sending money across borders or in countries with bad banks) but are not ready to be the main way we buy things in a normal store.
• They propose that for stablecoins to ever compete with cards, they would need to change. They would need to hide the complex fees from users, create new legal rules for "undoing" mistakes, and get everyone to agree on one standard. Without these changes, they will likely remain a specialized tool rather than a general one.

The Bottom Line

Stablecoins are like a high-speed, self-driving rocket ship. It's amazing technology. But right now, it doesn't have a seatbelt, a driver, or a map for the neighborhood grocery store. Credit cards are like a reliable, slightly slower bus. It's not as flashy, but it has a driver, a schedule, and a guarantee that if you miss your stop, the driver will help you get back on.

For now, the study concludes that while the rocket ship is cool, the bus is still the better choice for getting the whole city to the store.