Amazon and Walmart might get their own cryptocurrencies

Retail giants like Walmart, Amazon, and Expedia hope that you will one day make your purchases using stablecoins, according to a report from the Wall Street Journal.

If the Genius Act passes the Senate, then a new regulatory framework for stablecoins would make it easier for merchants to save billions of dollars in fees that they now pay to credit-card companies and other middlemen, by issuing their own stablecoins.

Stablecoins are cryptocurrencies backed by cash reserves, intended to be at parity with government fiats, i.e. the U.S. dollar. They are generally used by crypto traders who want to keep their money invested on a crypto exchange and easily go in and out of different crypto investments without paying high fees to cash out. They are also used for cash transactions between crypto businesses, and as a way to hold on to cryptocurrencies without the same risk of volatility.

In the hands of retailers issuing their own stablecoins, such tokens would effectively be in-house currencies, which would also allow for quicker transactions, especially across borders. If retailers’ stablecoins take hold, and see a bigger uptick than their experiments with in-house credit cards, the result could be catastrophic for the banking industry.

Unregulated, the coins carry an inherent risk. Almost all are backed by companies or other organizations that claim to have every invested dollar backed by fiat currency or assets with the equivalent value, yet there is no way to know for sure what the companies are actually holding.

Tether, the leading stablecoin operator, was fined $41 million in October 2021 for misstating its reserves; the Commodity Futures Trading Commission found that Tether only held 27.6% of what it claimed in fiat currency reserves.

In February, Consumer Reports and other groups asked lawmakers to vote against the Genius Act and a related bill, saying they “represent a crypto industry wish list, not an adequate regulatory regime that provides necessary oversight, customer protection, and stability.”

According to the Wall Street Journal, major retailers have also considered how to use others’ stablecoins, perhaps through a consortium. Megabanks like Bank of America are also considering such a move. Current Commerce Secretary Howard Lutnick was a big proponent of stablecoins when he was CEO of Cantor Fitzgerald. 

—Scott Nover and Harri Weber contributed to this article.