The biggest acquisition in crypto was announced this week. Bridge, which provides stablecoin issuance and orchestration APIs, was bought by Stripe, a payments processing infrastructure company, for $1.1 billion. The deal is a sorely needed reputation buff for an industry under persistent regulatory attack and plagued by memecoins, pump-and-dumps, and endemic boom and bust cycles.

Together, Bridge and Stripe make up the best of both (onchain and offchain) worlds: while Bridge creates the infrastructure to move between any form of digital dollar, Stripe powers fiat payment processing for millions of businesses. And importantly, a successful Bridge and Stripe partnership means that Stripe could own more B2B payment flows — which banks currently control — via transacting with stablecoins using Bridge’s infrastructure.

To understand why Stripe’s acquisition of Bridge is important, we need to first understand the way the global financial system works. In its current state, there’s an intricate web of intermediaries (banks, payment processors, financial institutions) each taking a cut from when a business moves money from point A to point B. Transacting with stablecoins — or onchain, tokenized dollars — requires far fewer middlemen, and as a result, is much cheaper.

Stripe has always been crypto-curious. In 2014, it rolled out support for Bitcoin payments before subsequently discontinuing it — something other major payments providers never experimented with. This was a prescient and radical move, considering Bitcoin was just five years old, Coinbase had barely been around for two years, and stablecoins as we know them today didn’t exist. And over the next decade, Stripe launched a dedicated crypto team to build fiat-to-crypto infrastructure — enabling easy conversion between onchain and offchain assets — and partnered with crypto exchanges, allowing users to easily get money from their bank accounts into these platforms. For Stripe, a player that has already been strategically building out its crypto arsenal for the last 10 years, marrying its existing infrastructure with Bridge’s was a natural evolution.

Bridge ironically started during one of the all-time worst periods for crypto: FTX had just collapsed, Terra/LUNA had imploded, and industry sentiment was terrible. But just two and a half years later, Bridge now serves as the critical infrastructure behind stablecoins: issuing them, moving them around, handling compliance and regulatory requirements, and more. With Bridge’s issuance APIs, companies can create their own stablecoins which automatically earn T-bill yields during settlement, regardless of what currency users pay in.

In retrospect, the acquisition shouldn’t come as a surprise. Bridge basically flew under the radar as it built its business during the FTX crypto winter, and Stripe’s been quietly adding to its crypto arsenal for years. Thanks to Bridge, Stripe’s customers will be able to natively and programmably own the underlying yield from T-bills (obviously, a yield-bearing dollar is better than a dollar). Buying Bridge also means Stripe now has a formidable in-house cryptonative team — hyperfocused on stablecoin infrastructure — that understands the many nuances of building onchain systems.

And if, long-term, stablecoins become mainstream for online payments, Stripe’s economics would be transformed. Structurally, Stripe’s cost of payments in their terminal state would be lowered due to stablecoins’ cheap and fast settlement and transfer properties, eliminating Visa and Mastercard’s 2% transaction volume fee, which is essentially lost value for both Stripe and their customers. With Bridge’s infrastructure integrated into its systems, Stripe can charge its customers less, helping the company win against competitors. But critically, Stripe’s cost to process each transaction is lower as well, boosting their margins and enabling both parties to make more money.

But the real prize for Stripe — uniquely enabled by Bridge — could be something orders of magnitude larger: winning the B2B payments market, which is currently controlled by banks. Businesses pay businesses much, much more than consumers pay businesses. Globally, B2B payments volume is roughly $120 trillion per year (compared with Stripe’s $1 trillion annual volume), with banks extracting fees at every step of the way. Businesses ultimately bear these fees, while also losing time and working capital to settlement delays.

Stablecoins offer a different way: namely, a higher velocity of money via instant and 24/7 settlement — a meaningful contrast from SWIFT and wire transfers, which take up to a week (!) and are limited to business hours. Here, Bridge’s infrastructure is a natural solution – helping businesses save on fees and freeing up capital that just sits in the ether for days at a time. In short, the Bridge acquisition potentially enables Stripe to both process smaller-scale Internet payments (what they do today) as well as handle massive flows of global trade via stablecoins, putting them in a position to compete with the banks that process B2B payments.

In an industry that many people deem unserious, Stripe’s billion-dollar vote of confidence shifts the vibe. The industry at large is celebrating the acquisition because of the precedent it sets — showing that crypto can be used to solve real-world problems and make global money movement more efficient. What gives this acquisition its gravitas is not just the stamp of credibility by Stripe, but the fact that stablecoins will now become a de facto part of more and more peoples’ lives — whether they know it or not.

— Bridget Harris

Bridget is an Associate at Founders Fund, which is an investor in Stripe.