Amazon and Walmart might make their own crypto

Amazon and Walmart are reportedly exploring the issuance of their own stablecoins for U.S. customer transactions, potentially saving billions in credit card processing fees. This move, also considered by other large companies like Expedia and some airlines, could significantly impact financial institutions, as evidenced by a 2% to 6% dip in the stock prices of Visa, Mastercard, American Express, Capital One, PayPal, and Block. The potential adoption of company-specific stablecoins is further facilitated by the upcoming Congressional vote on the GENIUS Act, which provides a framework for private companies to issue their own stablecoins.

Analysis

Major retailers, including Amazon (AMZN) and Walmart (WMT), are reportedly exploring the issuance of proprietary stablecoins for U.S. customer transactions, a move aimed at circumventing substantial credit card swipe fees, which totaled $172 billion for U.S. merchants in 2023—a near 50% increase since pre-pandemic levels. This development, potentially emulated by other large entities like Expedia (EXPE) and various airlines, leverages stablecoins' ability to process payments rapidly and cost-effectively. The market reacted swiftly to this prospect, with shares of established payment processors and fintech companies, including Visa (V), Mastercard (MA), American Express (AXP), Capital One (COF), PayPal (PYPL), and Block (SQ), declining by 2% to 6%. This negative sentiment is reflected in per-ticker scores (ranging from -0.6 to -0.7 for these financial institutions), contrasting with positive sentiment for potential issuers like AMZN and WMT (both +0.7). The overall market impact score of 0.7 underscores the significance of this potential shift. Legislative developments, specifically the upcoming Congressional vote on the GENIUS Act, could provide a regulatory framework further enabling private companies to issue their own stablecoins, thereby accelerating this disruptive trend in the payments sector.

Key Decisions for Investors

• Investors should monitor the progress of retailers like Amazon and Walmart in developing proprietary stablecoins, as successful implementation could significantly reduce their operating expenses and enhance profitability, reflected in their positive sentiment scores.
• Holders of shares in traditional payment processors and fintech companies (Visa, Mastercard, Amex, PayPal, Block, Toast) should re-evaluate their positions given the material risk posed by merchant-issued stablecoins, as evidenced by recent stock price declines and negative sentiment signals.
• Closely track the legislative outcome of the GENIUS Act, as its passage could lower barriers to entry for company-specific stablecoins, potentially increasing competitive pressures on existing financial intermediaries and creating new investment opportunities or risks.
• Consider the heightened volatility in the payments and retail sectors, as indicated by the high market impact score, and adjust risk management strategies accordingly, particularly around news related to stablecoin adoption or regulation.