The passage of the landmark GENIUS Act has sent shockwaves through the traditional payments industry, with Visa and Mastercard facing their most significant competitive threat in decades. According to Reuters’ Breakingviews analysis, the regulatory clarity provided by the new stablecoin legislation could fundamentally disrupt the cozy duopoly that has long dominated global payment processing, potentially reshaping how money moves through the digital economy.

For years, Visa and Mastercard have operated what critics describe as an impenetrable fortress, collecting and sharing approximately $95 billion in fees annually while maintaining their dominant market position. The card payment titans have long shrugged off political pressure or potential rivals, the $95 bln in fees they collect and share cementing a cozy duopoly. Yet swipes are becoming less lucrative, as crypto upstart Circle’s soaring valuation implies better odds for new disruption.

This comfortable arrangement now faces its greatest challenge as the GENIUS Act creates a regulatory framework that legitimizes stablecoin payments and potentially opens the door for new competitors to bypass traditional payment rails entirely. Visa stock (NYSE: V) and Mastercard stock (NYSE:MA) fell about 5% apiece on Wednesday, June 18th, as investors reacted to growing concerns that stablecoins could threaten traditional payment networks following the U.S. Senate’s passage of landmark stablecoin legislation.

The market reaction reflects deeper concerns about the sustainability of the traditional payment processing model. This regulatory-driven disruption could upend decades-old fee models, reshape transaction flows, and redefine investor sentiment toward legacy payment networks. The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act is the catalyst for this upheaval.

The threat posed by stablecoins extends far beyond theoretical competition. As of July 2025, the stablecoin market exceeds $260 billion. Previously, regulatory uncertainty created friction, dampened growth, and raised ongoing fears of sudden enforcement actions. The GENIUS Act’s clear regulatory framework now removes many of these barriers.

The fundamental advantages that stablecoins offer over traditional payment processing are becoming increasingly difficult to ignore. Unlike conventional payment systems that can take days to settle transactions and involve multiple intermediaries collecting fees, stablecoins enable near-instantaneous settlement with significantly lower costs. This technological superiority has already demonstrated its potential to capture market share from established players.

The scale of this disruption becomes apparent when examining transaction volumes. Stablecoin transfer volumes have already surpassed the combined volumes of Visa and Mastercard in 2024, highlighting the growing preference for digital asset-based payments among both individuals and businesses seeking faster, cheaper alternatives to traditional payment rails.

The GENIUS Act represents more than just regulatory housekeeping—it fundamentally changes the competitive landscape for payment processing. The bill sets rules for stablecoin issuers, including a mandate that firms hold a reserve of assets underlying the cryptocurrency. That stipulation aims to protect consumers, who otherwise risk a failure to cash out their holdings in the event of a rapid, widespread offloading of coins.

This regulatory framework addresses one of the primary concerns that had previously limited institutional adoption of stablecoin payments: uncertainty about legal status and consumer protection. With clear rules now in place, businesses and financial institutions can confidently integrate stablecoin payments into their operations without fear of regulatory backlash.

The U.S. GENIUS Act, signed into law, represents a transformative moment for the digital asset landscape. The legislation mandates stricter reserve requirements for stablecoin issuers, shifting the focus from yield-based models to utility-driven payment systems. This move aims to enhance transparency, reduce risk, and foster mainstream adoption.

The shift toward utility-driven payment systems particularly threatens traditional payment processors, as it legitimizes stablecoins as a practical alternative for everyday transactions rather than merely speculative investment vehicles.

Recognizing the existential nature of this threat, both Visa and Mastercard have launched strategic initiatives to maintain relevance in a stablecoin-dominated future. Visa is letting banks issue digital tokens and pilot stablecoin settlement directly on its network. Mastercard, meanwhile, just teamed up with Paxos to mint and redeem USDG, its fiat-backed stablecoin. The goal? Keep one foot in every transaction—whether it’s dollars, crypto, or something in between.

These strategic pivots represent a fundamental acknowledgment that the traditional payment processing model may no longer be sustainable in its current form. Rather than fighting the transition to digital assets, both companies are attempting to position themselves as essential infrastructure providers in the new paradigm.

However, this strategy faces significant challenges. The very advantages that make stablecoins attractive—lower costs, faster settlement, reduced intermediation—directly conflict with the high-fee model that has historically driven profitability for traditional payment processors.

Not all market observers believe the stablecoin threat is as severe as recent market reactions suggest. “Stablecoins have the potential to disrupt traditional financial systems over time by reducing settlement times, and allowing for potentially cheaper transactions,” Dolve wrote in a report last month to his clients. “However, worries about incumbent networks are overblown as those are well-positioned to adapt and integrate these new technologies.”

According to Barclays, a recent Wall Street Journal article concerns that stablecoins upending Visa and Mastercard Incorporated are overblown. The firm maintained its $650 price objective for Mastercard Incorporated and $396 price goal for Visa.

This more optimistic perspective suggests that established payment networks have sufficient resources, infrastructure, and institutional relationships to successfully navigate the transition to digital asset-based payments. Proponents of this view argue that the complexity of global payment processing creates natural barriers to entry that protect incumbent players.

The potential disruption extends beyond just Visa and Mastercard to encompass the entire traditional financial infrastructure. The potential entry of major retailers into the payment processing space with their own digital currencies could significantly disrupt the business model of traditional payment networks, which generate substantial revenue from transaction fees charged to merchants.

This scenario envisions a future where major retailers and technology companies bypass traditional payment processors entirely, using their own stablecoins to facilitate transactions directly with customers. Such a development would eliminate the need for traditional payment processing fees and could fundamentally reshape the economics of commerce.

The GENIUS Act’s provisions regarding who can issue stablecoins become particularly relevant in this context. The GENIUS Act restricts non-financial large tech companies from directly issuing stablecoins unless they establish or partner with regulated financial entities — a provision meant to blunt monopoly concerns.

The regulatory clarity provided by the GENIUS Act sets the stage for an unprecedented period of competition in the payments industry. “Eventually, payment networks like Visa and Mastercard will have to do so as well, which will lead to lower fees. The CCCA proposals are an inevitable evolution of the GENIUS Act. It will just take a little longer if it isn’t written into law.”

This prediction suggests that the current competitive pressure represents just the beginning of a longer-term transformation that will ultimately result in significantly lower fees across the payment processing industry. Such a development would benefit merchants and consumers while potentially devastating the profitability of traditional payment processors.

The timeline for this transformation remains uncertain, but the regulatory foundation is now in place for accelerated change. As more businesses and consumers experience the benefits of stablecoin payments—faster settlement, lower costs, greater transparency—the pressure on traditional payment processors will only intensify.

The passage of the GENIUS Act represents more than regulatory housekeeping—it marks the beginning of a fundamental shift in how payment processing operates in the digital economy. While Visa and Mastercard have dominated this space for decades, the emergence of regulated stablecoin payments creates the first viable alternative to their high-fee, slow-settlement model.

Whether this threat proves existential or merely evolutionary remains to be seen. The adaptability and resources of established payment processors should not be underestimated, but neither should the disruptive potential of technologies that offer genuine improvements in speed, cost, and efficiency.

A turf war is breaking out in the vast world of digital payments — and the incumbents are suddenly on defense. The outcome of this battle will determine not just the future of Visa and Mastercard, but the entire structure of global payment processing in the digital age.