MIT Prof Says Success of Stablecoins Rests on Interoperability

Watch more: TechReg Talks: MIT Sloan School, Christian Catalini

When Congress passed the GENIUS Act, few outside the FinTech community realized its implications. For the first time, U.S. dollar-backed stablecoins, a cornerstone of crypto markets, received a clear legal identity.

After years in a regulatory gray zone, they have become legitimate, supervised financial instruments. In essence, Washington has just authorized a dollar for the internet: a programmable, blockchain-native digital version of the U.S. currency, backed by real reserves and enforceable claims.

“When you’re receiving one of these stablecoin dollars, you can trust that the reserves are sound, you can trust that you have a legal claim against those reserves in case of receivership or something even worse, and you can start using them for mainstream applications,” Christian Catalini, the founder of the MIT Cryptoeconomics Lab, research scientist at the MIT Sloan School, and co-founder and chief strategy officer of crypto payments company Lightspark, told Competition Policy International (CPI), a PYMNTS company, in an interview.

Stablecoins, in Catalini’s telling, are not abstract crypto exotica. They are “a dollar for the internet,” a bearer-like digital cash unit that moves natively across blockchains but anchors to the conventional financial system through fully backed reserves.

That duality is the point. The chain-native movement enables programmable, always-on payments; the reserve backing and legal claim enable trust. Put together, you get digital dollars that can travel at the speed of software while remaining spendable in the analog world of cards, bank deposits and payroll.

 

 

Interoperability Is Critical Infrastructure Test

Legal clarity solves one problem but exposes another. For stablecoins to become the foundation of digital commerce, they must work across networks as seamlessly as email or web data. Today, they do not.

“From an economics perspective, the benefit of crypto … is interoperability,” Catalini explained.

Tokens are issued on multiple blockchains like Ethereum, Solana, Bitcoin and others, often with incompatible protocols. A digital dollar on one network cannot automatically move to another. The result is friction, fragmentation, and the risk of re-creating the very inefficiencies blockchain was meant to eliminate.

Catalini warned that without interoperability, the U.S. could stumble into a system of “corp chains”: closed, proprietary payment networks reminiscent of the 19th-century railroad gauge wars, when incompatible tracks crippled trade. In the 1840s in the U.K. and later in the U.S., private railways built tracks of different widths. Freight and passengers would pile up at “break of gauge” stations, unloaded and reloaded solely because one company’s standard couldn’t meet another’s.

“Railways were kind of the modern blockchain of the time,” Catalini said, hyped, speculative, messy and eventually indispensable. The lesson for digital money is straightforward. “If we don’t get those rules now right,” he said, today’s payment networks could harden into incompatible rails: “Money, a digital dollar on one network, will not move seamlessly to the other.”

Catalini is not a bystander to this story. He was an architect of the Libra initiative at Facebook, a watershed moment that galvanized central banks, technologists and policymakers into thinking seriously about money’s next rails. That vantage point gives him an unusually cross-cutting view of how policy choices translate into market structure, and how market structure, in turn, determines whether innovation expands access or calcifies power.                                                                        

Platform Realignment: Who Controls the Rails?

While walled gardens can feel safe, openness can win when it scales creativity and competition. With stablecoins, the same building blocks that could unwind today’s closed-loop oligopolies could just as easily entrench new ones. FinTechs with distribution as well as large issuers have the ingredients to assemble end-to-end stacks: embedded wallets, orchestration across chains, the assets themselves, and the yield those assets generate in the back end.

In practice, Catalini argued, issuance is not the choke point, distribution is. “Platforms with massive distribution … will be able to benefit from stablecoins whether they’re the issuer of it or not,” he said.

If those platforms integrate rails and wallets tightly, the industry could “switch from the card networks to a FinTech network,” trading one gatekeeper for another.

Libra itself confronted this dilemma, he noted: a technologically advanced network whose ultimate independence from Facebook was hard to prove to skeptical observers. 

What would mandatory interoperability look like in the messy real world?

“If a stablecoin has a certain market cap, if the volume is above a certain level,” Catalini said, that player should face nondiscrimination rules: no preferential arrangements that degrade competitors’ connectivity, no selective interfaces that make it impractical to move value between networks. The harder challenge is the rails layer, where incentives often nudge big actors to narrow or throttle connections under the guise of compliance, risk or technical complexity.

“If that’s allowed to happen, we’re unraveling the benefits of the technology,” said Catalini. “If I’m a FinTech, I need to know that my competitor or anyone else cannot influence the rules of those rails, otherwise I’m building on somebody else’s platform.”

The open internet prevailed because its foundational layer was permissionless and nonproprietary. Payments will need the same equilibrium if stablecoins are to deliver on their promise rather than replicate today’s closed loops with shinier branding.

Catalini offered a final historical note to capture the urgency. In 1886, after years of friction from incompatible gauges, the U.S. rail industry executed an audacious synchronized switch: “In 36 hours … workers … converted 13,000 miles of tracks,” he said. “On Monday the trains started rolling.” The productivity boost was immediate.

Stablecoins will not be standardized with crowbars and spike hammers. But the principle holds. Make the dollars fungible, mandate the rails interoperable, and let the market compete where it should: on service, features and price. Skimp on any of that, and the United States risks birthing an infrastructure that automates yesterday’s bottlenecks at digital scale.

 

Christian Catalini is the founder of the MIT Cryptoeconomics Lab and a research scientist at the MIT Sloan School, where he focuses on blockchain technology and cryptocurrencies. He is co-founder and chief strategy officer of crypto payments company Lightspark and a co-creator of Diem (formerly Libra), and the chief economist of the Diem Association.

 

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