Sphere Labs founder argues stablecoin on/off-ramp margins are collapsing to single-digit basis points, forcing payment providers to compete on user acquisition and ancillary products like yield and lending.
DeFi & Yields ·
The founder of Sphere Labs argues that on-and-off-ramp margins for stablecoin payments have collapsed toward zero, making traditional payment processing economically unviable for venture-backed businesses. According to the analysis, converting major stablecoins like those from Circle or Tether into fiat currencies now yields only single-digit basis points or lower when accounting for third-party delivery costs, leaving no sustainable margin for profitability. Spherepay, the Sphere Labs product operating across 160+ markets on Solana, Ethereum, Base, and Tron, exemplifies the scale at which this compression occurs.
This margin collapse mirrors what happened earlier with USD stablecoin on-ramps, and the same pattern is now extending to conversion pairs for other fiat currencies in single-hop transactions. With the core payment function no longer generating sufficient revenue, competition in the sector has shifted entirely. Payment providers must now focus on user acquisition and retention as their primary lever, with stablecoins themselves relegated to a secondary role.
The path forward depends on whether providers can build defensible positions through ancillary services—treasury products, yield mechanisms, and lending offerings—rather than the payment rails themselves. What remains unclear is whether these additional products can generate margins sufficient to justify the customer acquisition costs in a market where the primary function offers minimal returns.