The conflict between stablecoins and the banking industry probably does not exist.

Author: Noah Levine

Translation | Odaily Planet Daily (@OdailyChina)

Translator | Wenser (@wenser2010)

Editor’s Note: For a long time, the crypto industry and traditional banking in financial markets have been in a tense standoff. The proposed and advancing stability coin regulation bill, the GENIUS ACT, and the crypto structure bill, the CLARITY ACT, have faced obstacles, largely related to their opposing stances. For traditional banks, they worry that stablecoins will eat into their deposit shares and large user bases, threatening their industry position and survival; for the crypto industry, finding a harmonious coexistence with traditional banking and attracting massive liquidity from traditional financial markets has become one of the few “lifelines.”

The truth is, the conflict between the two may not actually exist. As a16z Crypto partner Noah Levine states: “Just as ATM machines once posed a ‘Javon’s Paradox’ to bank tellers, the development of crypto may help traditional banking find new growth paths.” Odaily Planet Daily has compiled his lengthy article below, offering readers a perspective from both supply and demand sides to re-examine this industry contradiction.

The Javon’s Paradox Sweeping the Financial Industry: That “Job-Stealing” Machine Ultimately Creates More Employment

(As previously imagined), bank tellers were expected to be replaced by ATMs.

But in reality? ATMs significantly lowered the operating costs of bank branches, prompting banks to open more branches. Over forty years, the number of bank tellers doubled.

In 1865, William Stanley Jevons discovered a similar pattern in the coal economy in Britain—higher efficiency of the steam engine led to increased coal consumption, because the applications for coal expanded. This phenomenon is now named after him. Today, it is reshaping the financial services industry from both supply and demand sides simultaneously.

Supply Side: Infrastructure Collapse and Reconstruction

To operate in the U.S., Venmo needs five banking partners, licenses in 49 states, and middleware connecting over 12,000 financial institutions—and it can only operate within one country.

Each major market requires its own system: some rely on government-led channels like PIX and UPI; others depend on private internet platforms like M-Pesa and Alipay. Currently, about 80 countries worldwide have real-time payment systems, but they are almost entirely disconnected from each other.

The regionalization dilemma in fintech stems from each independent market having its own payment channels, banking APIs, and compliance barriers.

Blockchain replaces this fragmented puzzle with an open ledger, and self-custody wallets eliminate the hassle of finding banking compliance partners in each market. As a result, companies like Sling Money can build a global payment product with a team of 23 people and three licenses—though currently limited to about 70 countries with fiat on-ramps. Sling CEO Mike Hudack succinctly states: “Stablecoins have shifted payments from ‘pre-funding and reconciliation issues’ to ‘interoperability issues.’”

Not only startups are betting on this wave of reform.

Stripe acquired stablecoin issuance platform Bridge and wallet provider Privy for $1.1 billion, then launched stablecoin financial accounts in 101 countries, far surpassing its previous coverage of 46 countries. Notably, the same Bridge infrastructure supports Sling’s virtual accounts and operates within this giant ecosystem processing $1.4 trillion annually.

A merchant in Nairobi exemplifies this infrastructure: she receives payments from U.S. importers via virtual USD accounts, uses stablecoins linked to bank cards to spend at over 150 million merchants, and earns 4% to 7% returns through on-chain lending protocols on idle balances.

No bank account, no bank.

Three years ago, this was just a PPT vision; today, it’s fully realized, built by different teams, and increasingly composable.

According to World Bank data, about 1.3 billion adults lack bank accounts—not because they don’t need financial services, but because the cost of serving them exceeds the revenue they generate. (Odaily Planet Daily note: the input-output ratio is low; the cost to serve one person far exceeds the profit they can provide.) For example, a $200 remittance to Sub-Saharan Africa can incur fees as high as 8.45%, nearly $17—enough to cover a family’s weekly groceries, children’s tuition, or life-saving medicines.

What happens when transfer costs plummet?

History offers examples: M-Pesa reduced mobile payment costs in Kenya to near zero, increasing financial inclusion from 27% to 85%. IMF studies show this is incremental growth, not a zero-sum game; India’s UPI started near zero fees, and digital payment transactions soared from 18 million to 228 billion in less than a decade.

This means more service providers, broader markets, and more mature products—because entry costs are pushed to the limit.

This is the supply-side Javon’s Paradox.

Cost Side: Compliance Burdens and the Solution of Shared Ledgers

Now, look inside banks.

In North America alone, the financial industry spends up to $61 billion annually on anti-financial crime compliance.

42% of senior executives at large banks spend their time on regulatory compliance, and from 2016 to 2023, compliance-related employee hours increased by 61%.

In other words, the data shows that banks are no longer “financial institutions that do compliance on the side,” but rather “compliance institutions that also provide financial services.”

Most of these expenses—whether compliance or technology—are used to restore or preserve information that “should never have been lost.”

Visit a bank audit, and you’ll see auditors doing real work: reconciling accounts, verifying that agent bank balances match; navigating opaque bilateral relationships among three or four intermediary banks, tracing transactions that no single party can end-to-end identify clearly.

(The blockchain industry’s) shared ledger directly solves this problem.

When all parties (the ledger entries) are written into the same ledger, reconciliation steps disappear—not because compliance requirements are lowered, but because the information is already there.

JPMorgan’s Kinexys platform processes over $2 billion daily and has settled over $2 trillion since launch. Its core scenario involves a multinational company using JPMorgan’s services in more than ten markets, needing real-time internal fund transfers. Traditional core banking ledgers operate in silos and only process in batches; Kinexys overlays programmable money, enabling settlement in seconds instead of end-of-day batch processing, freeing idle funds previously trapped in batch gaps. JPMorgan has begun deploying JPM Coin on the Canton Network, with Goldman Sachs, DTCC, Broadridge, and others participating. Banks may prefer tokenized deposits over stablecoins, but the underlying logic is the same: shared infrastructure eliminates reconciliation layers.

On the demand side, lower compliance costs mean institutions can serve more clients and reach more markets economically.

Convergence: Two forces, one direction

For banks, external entrants are increasing because the original cost barriers are collapsing; meanwhile, for many crypto platforms and native players, internal operational costs are decreasing as infrastructure upgrades continue.

As regulatory frameworks like GENIUS Act and MiCA clarify rules, these two forces point toward the same outcome: more people will access more financial services at lower costs. (Odaily Planet Daily: what’s called “financial inclusion.”)

In the real world, cloud computing hasn’t (as previously imagined) eliminated data centers; instead, anyone with an API key can invoke its computing power. Now, stablecoins are doing the same to banking: this mature system won’t disappear; instead, it will become part of the infrastructure, enabling others to build more products on top.

During the steam revolution, Jevons observed that increased efficiency of steam engines and rising coal consumption was a “paradox.” In fact, it’s not a paradox but a pattern: when the unit cost of a fundamental service drops enough, the market not only doesn’t shrink but reaches everyone previously excluded by the high costs of old structures.

In 2026, we will see clearly: behind that vast, boundless market, how many people are truly there.