What if I told you the money in your Venmo account isn’t really yours?

That might sound strange—maybe even a little alarming. After all, when you check your Venmo (or PayPal or Cash App) balance, there’s a number sitting there, ready to be spent. You trust that when you hit “send,” your friend will get paid. And you probably assume that your money is safe—just like it would be in a traditional bank.

But here’s the truth: that balance you see in your Venmo (or PayPal or Cash App) is less like a bank account and more like a digital IOU. Your money is not sitting in a vault with your name on it: it’s in their banking system–not yours–and likely earning interest for them–not you. When you want to spend or transfer it, the app reliably does as told - but make no mistake: they have your money.

Let’s pause. Because at this point, you might be wondering: If they have my money, and all I have is a ‘digital IOU’... what do I have? Is it real money?

Well, yes. But not in the way you might think.

If you use apps like Venmo, PayPal, or Cash App, then knowingly or not, you’ve already stepped into the world of electronic money. Congratulations—and welcome! And don’t be afraid! You have actually been in the world of digital money for a while without realizing it, if you have ever used your banking app to transfer money, used an ATM, or have received a direct deposit, you have been "electronically" transferring your funds. Your asset is safe, and not subject to the whims, volatility, and all other scary things you might be picturing related to digital currency.

But now that you’re here, it’s worth asking a better question: Is there a better version of digital money—one that gives you more control? (After all, if they decide to freeze your account, delay a transaction, or impose withdrawal limits, you’re at their mercy.)

Yes. Enter stablecoins.

No, they’re not “crypto” in the way you might think. You’re not buying Bitcoin, betting on Dogecoin, or going down a DeFi rabbit hole. You’re simply using digital dollars that are fully yours—spendable, transferable, and usable without a gatekeeper. (In case you're wondering - yes, this does mean you'll need a crypto wallet - but hang with us, that's not as confusing as it may sound.)

Let’s dive in.

First Things First

So the first question you’re probably asking yourself is… what is a stablecoin? We’ll try to keep the answer simple and straightforward for those not too deep or comfortable with the cryptosphere.

A stablecoin is a cryptocurrency which is pegged to a stable asset to stabilize its value. Crypto is known for its volatility, due largely to the fact that nearly all cryptocurrencies don’t link their value to stable assets or valued utility. (Read more simply: their value isn’t linked to anything reliable and they themselves don’t really do anything.) Stablecoins, by being pegged to something solid, predictable, and reliable - like the US Dollar (USDC is one example of a coin pegged to the dollar) - do not suffer the whiplashing effects of other cryptos because their value is identical to their backing asset. So, one USDC is worth… you guessed it, one US dollar.

And with that USDC, or other stablecoins like it, you can do the same things you do with regular dollars. Send it, store it, or spend it, and all without needing permission from a third party. You can earn interest on it. You can move it across borders in minutes. And if the future of finance is digital—and it is—then stablecoins are the digital dollars that put you in control.

Whether they stay independent or get absorbed into traditional finance (which is already happening), stablecoins are gaining momentum. And as they scale, you’ll see more platforms offering stablecoin payment options alongside traditional apps.

Which leads to the other question you might be asking yourself: why are we talking about stablecoins and Venmo/PayPal/Cash App in the same breath?

The use of digital payment apps has come to rival cash, credit, and debit cards in terms of public trust and engagement, with millions upon millions of users holding, transferring, and spending billions daily. Many are skittish in regards to crypto, but the functional boundary between the type of digital money they hold and a safe, easy, convenient stablecoin (which, yes, is a cryptocurrency) is so narrow as to be pointless. Yes, there is a need to expand one’s comfort zone and knowledge base. But at the same time, there are real, tangible benefits to operating with a stablecoin (while also getting your toes a little wet in the cryptosphere) over a digital payment app that - if you were to know about them - might make you rethink your loyalty to those apps… and your caution-only policy around crypto.

Come on, let’s take a look.

Digital Dollars, Different Rules

Venmo is wonderfully convenient. It’s connected to your bank. It works. It’s familiar. But there’s a catch: the money sitting in your Venmo app isn’t technically “in your possession” until it hits your bank account.

As Investopedia puts it:

“Venmo is essentially a virtual ledger that represents funds changing hands within the Venmo platform. Until Venmo transfers the money into the recipient’s bank account, it isn’t technically in that user’s possession.”

That $1,000 balance you see? It’s a number on a screen. Venmo holds it in their corporate account, earning interest on your funds—while you don’t.

Now compare that to holding $1,000 worth of a stablecoin like USDC in a crypto wallet. In this case, you own those dollars outright. You don’t need Venmo. You don’t need a bank. You can send, store, or spend it however you want.

With Venmo: They control your money. With Stablecoins: You do.

And while you do need a crypto wallet to hold and use stablecoins, that’s getting easier by the day. (We’ll cover wallet setup in a future post.)

How Venmo Makes Money—And Why Stablecoins Change the Game

Venmo isn’t offering a free service out of generosity. It makes money by:

• Charging fees for instant transfers

• Taking a cut from merchant payments

• Earning interest on your idle balance

Stablecoin issuers operate differently. Most are backed by cash or U.S. Treasuries, and while they may invest those reserves conservatively, you’re free to move your funds instantly—no permission, no delays. You hold your funds yourself, might earn interest yourself, and are as free to manage, spend, hold, or give away your money as if it was a physical dollar in your pocket.

Under a stablecoin paradigm, you take back the leverage and power that the digital payment apps hold over you. We’re not intending to make any kind of negative statement about these apps: we’re saying what’s yours is yours, and you ought to be in control of it.

Borderless Payments, Real-Time Remittances

Can stablecoins replace Venmo? Absolutely—and then some.

Venmo works well within the U.S., but try sending money abroad and you’ll run into a wall of fees, delays, and restrictions. Banks are even worse, charging 5–10% (sometimes more) for cross-border transfers, which can take days to settle.

Stablecoins solve this. They allow instant, global money transfers for a fraction of the cost. Coinbase estimates stablecoin remittance fees at 0.5–3%—often just pennies.

If you send money to family overseas, this is more than a tech upgrade. It’s a financial lifeline.

What Happens If a Stablecoin Fails?

It’s a scary question and a fair question, but to be clear, the risk of failure isn’t significantly higher than what you accept every time you deposit money at a traditional bank or use a fintech app like Venmo. If Paxos or Circle were to collapse, the impact would mirror that of a bank failure—which is why calls for regulation are growing louder.

That said, no system is risk-free, and stablecoins have had their moments. In 2023, when Silicon Valley Bank collapsed, Circle (issuer of USDC) had $3.3 billion in reserves tied up there. USDC briefly dropped to 87 cents before recovering when the government stabilized the bank.

The takeaway? Even dollar-backed stablecoins are only as secure as the institutions holding their reserves. And since most stablecoins aren’t FDIC insured (currently), you should always be mindful of who you’re trusting, as you are taking on the risk of the stable coin issuer, not the asset behind the coin. Things may change for the better as the GENIUS Act and STABLE Act are expected to bring clarity this year.

So, Why Should You Care?

Stablecoins offer you something Venmo, PayPal, Cash App, and the rest never will: real ownership of digital money.

We aren’t telling you to dive into crypto headfirst. (We’ve stated this before and we’ll state it again: we are not financial advisors, and you should make all financial moves carefully, cautiously, and with the support of the experts you trust.) But you do owe it to yourself to understand what stablecoins offer—because they’re already shaping the future of money.

Yes, you will need a crypto wallet in order to hold stablecoins, therefore, yes, it will add another layer of digital complexity to your life. But that process is smoothing out and simplifying all the time. (And future content will walk you through that process, so you won’t be on your own with this.)

Our hope with this article is to introduce you to an exciting and important component of the web3 space–one that may prove to be the gateway to a major boost in adoption and engagement with cryptocurrencies. If you’re curious to learn more (and we hope you are!), below you will find the resources to help you do that.

Appendix: A Quick Guide to Stablecoins and How They Work

🪙 What Are Stablecoins?

Stablecoins are digital currencies designed to maintain a stable value—typically pegged to the U.S. dollar. Unlike volatile cryptocurrencies like Bitcoin or Ethereum, they are built for stability and everyday use.

🔒 Three Types of Stablecoins

Fiat-Collateralized (Centralized) Backed 1:1 by U.S. dollars or equivalents (e.g. Treasuries)

• Examples: USDC (Circle), USDT (Tether), BUSD

• Risk: Rely on the issuer to actually hold and manage reserves properly

Crypto-Collateralized (Decentralized) Backed by crypto assets like Ethereum, usually overcollateralized

• Examples: DAI, LUSD

• Risk: Volatility of underlying assets; liquidation mechanisms must work properly

Algorithmic (Experimental and Risky) Maintain value through supply-and-demand algorithms

• Examples: USDe (Ethena’s dollar stablecoin)

• Risk: Can completely fail if the algorithm breaks or confidence is lost

🌍 Use Cases in the Real World

• Remittances: Send money globally in seconds for a fraction of the cost of banks

• Trading: Most crypto is traded against stablecoins, not dollars

• DeFi Lending: Borrow, lend, and earn yield using stablecoins in decentralized protocols

• Savings: Earn interest in crypto-native platforms, higher than many traditional banks

📉 What About Risks?

• Not all stablecoins are equal, look for transparent audits and reputable issuers

• No FDIC insurance, so some issuer risk remains

• Regulation is catching up, which may bring greater protections soon