OPINION: Is Walmart’s Stablecoin DOA?

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Earlier this month, global retailer Walmart announced that had dipped its toe into the digital currency waters when it received a US patent for a proposed stablecoin. 

Unlike the social media giant Facebook, the uber retailer has not taken its first steps to launch its stablecoin. All it has done has been to seek patent protection for a digital coin that would be pegged to a “real” currency and would be accepted at selected retailers as well as possessing features similar to retailers’ loyalty programs.

According to Walmart’s filing, it does not plan to set up a version of Facebook’s Libra Association nor back the coin via a security-token offering. The global retailer did note that the coin might bear interest, which would make it a token-based security rather than a digital currency according to the Howey Test.

Despite its announcement, Walmart’s stable coin probably will not see the virtual light of day.

While not Facebook, Americans have a love-hate relationship with Walmart, which does bode well for the eventual hearings on Capitol Hill. David Marcus, the head of Calibra at Facebook, found this out during his two-day grilling in front of the Senate banking and House financial services committees in July.

The retail giant has not been dinged regarding its invasion of user privacy like Facebook, but it has concerned many over its employment practices and the effects it has had on local economies, which is not lost on their elected officials who share the same concerns.

Since Walmart likely would be self-financing its stablecoin, it would eventually need to establish a bank or trust company to meet the banking requirements of various states. Such a process would bring the Wall Street lobbyists out of the woodwork to work against the move. The financial services industry has always feared Walmart’s move into the retail banking space due to the company’s deep balance sheet and a tremendous footprint.

The most significant hurdle would be to get the average Walmart customer to adopt such a coin.

For any new technology to thrive, it has to outperform the legacy technology. With Walmart’s offering, it would have to provide something its loyalty program does not offer. 

Only a very select subset of users care what happens between when they swipe their loyalty cards, and they receive the discount for their purchases. They could enjoy spending their accrued points with other retailers, but such a relationship would not need to rely on crypto tokens or blockchains.

Walmart’s stablecoin might be a useful way to break into new markets where customers are unbanked or underserved by banking institutions, but it is hard to envision it gaining traction with its existing customer base.