Stablecoins: Disruptive or Sustaining Innovation?

Application of Prof. Clayton Christensen’s Research and Writings

Tether, the leading global stablecoin issuer, is activating as many new wallets per month as babies being born worldwide (about 12 million each).

Visa Onchain Analytics reports that stablecoin transaction volume in the latest 12 months (ending July 2025) had reached USD$35.7T - more than the combined volume of Visa and MasterCard.

Do stablecoins earn the title of being a “disruptive innovation” as defined by the late Prof Clayton Christensen? If so, can we look to his body of work to understand the implications to traditional legacy payment players.

In The Innovator’s Dilemma, Professor Christensen introduced the concept of disruptive innovation, where technologies initially serving overlooked markets eventually upend established industries.

The theory is robust and has been used to explain how disruptive innovation has upended industries like computer hardware, construction equipment, steel manufacturing, retail, telecommunications, education and healthcare.

Companies that failed to respond to disruptive innovation, as Christensen defined the term, include Digital Equipment (no longer exists independently), Bethlehen Steel (dissolved in 2003), Woolworths (US retailer, closed in the 1990s) and Memorex (acquired, no longer operates independently). His theories have also been used to explain the demise of Kodak, Blockbuster and many others relics of the past.

Stablecoins—cryptocurrencies pegged to stable assets like the U.S. dollar—are a textbook case of this phenomenon and represent a strategic challenge to legacy payment giants like Visa and Mastercard.

What follows is an attempt to apply the concept of disruption to stablecoins and the application to the financial technology industry:

• Stablecoins as Disruptive Innovation

• An Accurate Use of the Term “Disruptive”

• Strategies for Incumbents in the face of Disruption

• Stablecoin Growth as a Disruptive Innovation

• Strategies for Innovators - the “Disruptors”

Stablecoins as Disruptive Innovation

Christensen defines disruptive innovations as “technologically straightforward” solutions that target low-end or new markets, eventually improving to displace incumbents (The Innovator’s Dilemma, Chapter 2). They often take hold in segments of the market that are unprofitable and ignored by incumbents.

Stablecoins, such as USDC (Circle) and USDT (Tether), embody this model. They serve underserved segments—unbanked populations, crypto traders, and cross-border remittance users—particularly in regions like Latin America and Southeast Asia, where weak currencies, high inflation or limited banking access hampers traditional systems.

Paolo Ardoino, the CEO of Tether, recently posted on X.com that small community bodegas in Bolivia are listing prices for everyday items in USDT. A community bodega in Bolivia fits the definition of a niche, unprofitable segment of the market not currently served by incumbent global payment networks.

Stablecoins offer simpler, cheaper alternatives to incumbent payment methods. In many cases, stablecoins are being employed before Visa or MasterCard can establish a strong position. This is similar to the way that cellphone payments were able to take root in Africa before ATMs became available, making ATMs obsolete before they were even installed.

Blockchain-based stablecoins provide instant settlement, 24x7 availability and cost cents compared to Visa and MasterCard’s fee-heavy model. While stablecoins lack widespread merchant acceptance, their performance trajectory is steep as evidenced by their volume now surpassing the combined volume of Visa and MasterCard in only their first decade of existence.

An accurate use of the term “disruptive”

When was the last time someone claimed a new fintech company was a “disruptor”?

It seems every neo-bank and next gen processor is attempting to wear the moniker “disruptor” when what they mean is that they’re innovative. But most of these models are improvements to traditional models and are more accurately described as “sustaining innovations”. Christensen lamented the misuse of “disruption” to describe any innovation, noting that “not every new technology is disruptive” (The Innovator’s Solution, Chapter 1).

Take contactless payments as an example of a sustaining innovation. Contactless payments enhance incumbent models, they don’t reshape markets. Soon after the launch of Google Wallet, the first scaled example of contactless payments in 2011, the team (of which the author was a part) aimed to disrupt Visa and Mastercard by leveraging the Discover Network as an alternative rail during one of the initial “pivots” to find product-market fit. This particular pivot that would have enabled issuers to enable contactless payments for their customers for free was met with fierce resistance by incumbents.

Later, when Apple Pay debuted in 2014, fully compliant with Visa and Mastercard’s tokenization standards, the threat of disruptive innovation was co-opted as a sustaining innovation that served to strengthen incumbent networks. Ironically, the issuers who could have delivered the same service at no cost to them ended up having to pay Apple for their innovation. Google ultimately achieved “disruptive scale” but with an unrelated product to Google Wallet called Tez (now Google Pay) in India, targeting unbanked users with UPI-based payments—a true disruption.

Stablecoins, by contrast, are genuinely disruptive. They bypass intermediaries via blockchain, serving new markets like decentralized finance (DeFi) and remittances in Southeast Asia.

Fintech professionals need to have a clear-eyed view of what’s happening with stablecoins to be able to prioritize the strategic actions that they need to follow and that Prof Christensen laid out in his research, notably in The Innovators Solution.

Lessons for Incumbents: Avoiding the Creosote Bush Effect

Christensen’s frameworks offer incumbents a survival guide. He advises creating autonomous units to explore disruptions and aligning with their value propositions (The Innovator’s Dilemma, Chapter 7). Visa’s USDC settlement pilot (2021, expanded 2023) and Mastercard’s Paxos partnership (2024) are steps, but they fall short of the bold action needed.

An autonomous unit could involve the establishment of a new brand, headquartered in a far away location out from under the auspices and controls from executives whose compensation is tied to the growth of assessment revenue or issuer performance. An early example of this appears to be the progress you can see from PayPal who has made a major commitment to and series of partnerships from their office in Dubai serving 80 countries in the Middle East and Africa.

Christensen’s “creosote bush effect” explains this hesitation by established players: incumbents innovate “close to headquarters,” prioritizing core customers (e.g., Visa’s issuers and their high-spending cardholders) and stifling disruptions that threaten revenue (The Innovator’s Solution, Chapter 4).

Like the creosote bush poisoning nearby soil to block competing growth, Visa and Mastercard run the risk of unknowingly suppressing or mis-directing their blockchain initiatives to protect their fee-based models.

To avoid this fate, incumbents should focus their firepower in underserved markets like Southeast Asia, the Middle East, Africa and Latin America where they can develop low-cost, blockchain-based rails and redefine value around instant, low-fee settlements without running the risk of alienating the large issuers who have much to lose in developed markets like N America and Europe. Mismanaging the strategic response to stablecoin adoption could be Visa and MasterCard’s Blockbuster v Netflix moment.

Stablecoin Adoption: An S-Curve Trajectory

Christensen’s S-curve model predicts that disruptions start in niche markets, improve, and then surge into mainstream adoption (The Innovator’s Solution, Chapter 3). Stablecoins follow this path. They gained traction in crypto trading (e.g., USDT on Binance) and DeFi, markets ignored by incumbents. Their market cap (CRCL at $40B+ July 2025) and transaction volume reflect exponential growth expectations.

Integrations like Stripe’s acquisition of Bridge, PayPal’s PYUSD and Shopify’s USDC support signal a crossing of the chasm to mainstream markets, particularly in LatAm and Southeast Asia, where mobile penetration outpaces banking infrastructure.

Incumbents’ Imperative: Act or Lose

Christensen warns that incumbents ignoring disruptions face “crushing losses” (The Innovator’s Dilemma, Chapter 9). Visa and Mastercard must invest both aggressively and strategically in stablecoins, even if it cannibalizes fees.

Hybrid solutions—cards linked to stablecoin wallets—given the reliance on traditional interchange economics will fall short. Defensive postures are futile. And announcing the launch of a traditional payment card capable of accessing stablecoin balances targeted to mainstream credit card users is woefully inadequate and worse, a distraction from where incumbents firepower should be focused.

Stablecoins are replacements for Visa and MasterCard’s most profitable transactions - cross-border. An unwillingness to “disrupt” or cannibalize this economic stream will be Visa and MasterCard’s biggest weakness unless they have the courage to become the innovator by introducing solutions in those under-served markets that lack traditional banking infrastructure and have relatively weak currency regimes. Both Visa and MasterCard have made commitments to developing markets - directing a meaningful amount of those commitments to initiatives or partnerships that represent disruptive innovation will allow them to buy “options” for future growth.

Innovators’ Choice: Co-Opt or Capitalize?

For stablecoin innovators like Circle and Tether, Christensen offers strategic clarity. Incumbents often co-opt disruptions to sustain their models, as Apple Pay did with contactless payments (The Innovator’s Solution, Chapter 6). Partnering with Visa or Mastercard offers innovators access to infrastructure and regulatory credibility, as seen in Circle’s Visa collaboration. However, this risks diluting disruption, as Google Wallet’s early alignment with incumbents showed.

Alternatively, innovators can capitalize on disruption by targeting non-consumers and building new ecosystems. Tether’s $100 billion+ market cap (2025, CoinMarketCap), driven by crypto trading without incumbent reliance, exemplifies this. Christensen suggests that innovators with strong resources should pursue independence to maximize value, as Ethereum’s DeFi ecosystem is attempting to do but is also running the risk of being co-opted as they apply Ethereum to the tokenization of real-world assets that is not possible without some level of collaboration with incumbents who have incredibly powerful interests at stake.

Stablecoin innovators should focus on unbanked markets in LatAm and Southeast Asia, invest in scalability, and use strategic partnerships to enhance reach without surrendering control.

The incumbents like Visa, MasterCard, Deutsche Bank, JPMorgan Chase will be a tempting partner for many of these disruptive challengers. If history offers any lessons the legacy players will bend the innovation to their favor and avoid any significant changes to traditional economic models.

Conclusion: Navigating the Stablecoin Disruption

Stablecoins are a disruptive force, fitting Christensen’s model and threatening legacy incumbents. Fintech professionals must heed Christensen’s insights: incumbents like Visa and Mastercard should embrace blockchain to avoid obsolescence, while innovators must weigh co-opting versus capitalizing on disruption.

As Christensen noted, “Disruption is a process, not an event” (Seeing What’s Next, Chapter 1). The stablecoin revolution is underway, and its outcome depends on how incumbents and innovators act today and in the near future.

A more interesting question than “Are stablecoins disruptive?” is “Who will emerge as the winners in the next chapter of digital payments?” The incumbents who will try to co-opt the innovation or the innovators who stand to upend the legacy interchange regime that dominates global digital commerce?