Noah LevineNoah Levine Original Author:Noah Levine
Compiled | Odaily Planet Daily(@OdailyChina)
Translator | Wenser(@wenser2010)
Editor's Note: For a long time, the cryptocurrency industry and traditional financial market banks have been in a state of tense confrontation. The proposal and stalled progress of the stablecoin regulation bill "GENIUS ACT" and the crypto structure bill "CLARITY ACT" are, to some extent, highly related to this adversarial state. For traditional banks, they worry that stablecoins will erode their deposit share and massive user base, thereby endangering their industry position and survival space; for the cryptocurrency industry, finding a path of harmonious coexistence with traditional banking, thereby introducing the massive liquidity of traditional financial markets, has become one of the few "lifelines."
The reality is that the war of opposition between the two may not exist. As a16z Crypto partner Noah Levine said: "Just like the 'Javon's Paradox' that once existed between ATMs and bank tellers, the development of the cryptocurrency industry may help traditional banking find a new path of development." Odaily Planet Daily specially compiles his long article as follows, providing readers with supply-side, demand-side, and other perspectives to re-examine this industry contradiction.
The "Jevons Paradox" Sweeping the Financial Industry:That Machine That "Took Jobs" Ultimately Created More Employment
(According to previous assumptions), bank tellers should have been replaced by ATMs.
In reality? ATMs drastically reduced the operating costs of bank branches, and banks instead opened more branches. Over forty years, the number of bank teller positions doubled.
In 1865, William Stanley Jevons discovered the same pattern in the British coal economy—the more efficient steam engines became, the more coal was consumed, because the application scenarios for coal were expanded. This phenomenon is named after him. And now, it is reshaping the financial services industry from both the supply and demand sides simultaneously.
Supply Side: The Collapse and Rebuilding of Infrastructure
To operate its business in the United States, Venmo needed five banking partners, licenses in 49 states, and middleware connecting over 12,000 financial institutions—and it could only be used in one country.
Each major market requires its own self-built system: some rely on government-led channels like PIX, UPI; others leverage private internet platforms like M-Pesa, Alipay. Currently, about 80 countries worldwide have real-time payment systems, but they are almost entirely disconnected from each other.
The root of the fintech industry's regionalization dilemma lies in the fact that each independent market has its own payment channels, bank APIs, and compliance license barriers.
Blockchain replaces this fragmented puzzle with an open ledger, and self-custody wallets eliminate the trouble of finding banking compliance partners market by market. It is for this reason that companies like Sling Money can build a global payment product with a team of 23 people and 3 compliance licenses—although it is currently still confined to about 70 countries with fiat on-ramps. Sling CEO Mike Hudack pointedly stated: "Stablecoins transform payments from a problem of 'pre-funding and reconciliation' to a problem of 'interoperability.'"
It's not just startups betting on this wave of reform.
Stripe acquired the stablecoin issuance platform Bridge and wallet service provider Privy for $1.1 billion, subsequently launching stablecoin financial accounts in 101 countries, far exceeding its previous market coverage of 46 countries. It is worth mentioning that the same Bridge infrastructure is supporting Sling's virtual accounts and operating within the ecosystem of this giant that processes $1.4 trillion in payments annually.
An exporter in Nairobi is an epitome of this infrastructure: she receives payments from US importers through a virtual dollar account, uses stablecoins linked to a bank card to spend at over 150 million merchants, and earns 4% to 7% returns on idle balances through on-chain lending protocols.
No bank account, no bank.
Three years ago, this was just a written vision in a PowerPoint; today, every single thing has been implemented, built by different teams, and the composability is increasingly impressive.
World Bank statistics show that about 1.3 billion adults are unbanked—this doesn't mean they don't need financial services, but because the cost of serving them exceeds the fee revenue service providers can collect. (Odaily Planet Daily Note: i.e., the input-output ratio is low, meaning the cost of serving one person far exceeds the revenue and profit that person can provide) The average fee for a $200 remittance to Sub-Saharan Africa can soar to as high as 8.45%, nearly $17—for a family with a monthly income of just $150, this represents a week's worth of food for the family, a child's school fees, or life-saving medicine.
What happens when the cost of transfers plummets?
The answer has precedents: M-Pesa drove mobile payment costs in Kenya to near zero, the country's financial inclusion rate jumped from 27% to 85%, and IMF research found this was incremental growth, not a zero-sum game; India's UPI started with near-zero fees, and digital payment transaction volume exploded from 18 million to 228 billion transactions in less than a decade.
This means more service providers, broader markets, and more mature products, because the entry cost has been compressed to the limit.
This is the supply-side Jevons Paradox.
Cost Side: The Burden of Compliance and the Solution of Shared Ledgers
Now look inside banks.
In North America alone, the financial industry spends $61 billion annually on financial crime compliance.
42% of the time of C-level executives at large banks is spent dealing with regulatory affairs, and compliance-related employee hours grew by 61% between 2016 and 2023.
In other words, the reality reflected at the data level is—banks are no longer "financial institutions that also do compliance," but rather "compliance institutions that also provide financial services."
These expenditures, whether compliance costs or technology costs, are mostly used to restore or preserve information that "should never have been lost in the first place."
Walk into a bank audit scene, and you'll see what the auditors are really doing: reconciling accounts, verifying whether correspondent bank account balances match; navigating the opaque bilateral relationships of three or four intermediary banks, tracing a transaction that no single party can clearly identify end-to-end.
The (blockchain industry's) shared ledger directly solves this problem.
When all transacting parties write to the same ledger, the reconciliation step disappears—not because compliance requirements are lower, but because that accounting information is already there.
JPMorgan's Kinexys platform handles over $2 billion daily and has settled more than $2 trillion since its launch. Its core use case is a multinational corporation using JPMorgan in over a dozen markets needing to transfer funds between internal accounts in real-time. Traditional core bank ledgers are siloed and can only process in batches. Kinexys is layered on top, making funds programmable, compressing settlement from end-of-day to seconds, and releasing idle funds previously trapped in batch processing gaps. Currently, JPMorgan has begun launching JPM Coin on the Canton Network, and institutions like Goldman Sachs, DTCC, and Broadridge have announced their involvement. Banks might prefer tokenized deposits over stablecoins, but the underlying logic is the same: shared infrastructure, eliminating the reconciliation layer.
For the demand side, as the unit cost of compliance decreases, institutions can serve more customers and cover more markets in an economically viable way.
Convergence: Two Forces, One Direction
For the banking industry, external entrants are increasing because the original cost barriers are collapsing; at the same time, for the many platforms and native forces in the crypto market, internal operating costs are also decreasing because the infrastructure is constantly upgrading.
As regulatory frameworks like the GENIUS Act, MiCA, etc., gradually clarify the rules, the two forces point to the same result: more people will have access to more financial services at lower costs. (Odaily Planet Daily: i.e., so-called "financial inclusion")
In the real world, cloud computing did not (as people previously assumed) destroy data centers, but rather allowed anyone with an API key to call upon its computing power. Now, stablecoins are doing the same thing to banking: this mature system will not disappear; on the contrary, it will become part of the infrastructure, allowing others to build more products on top of it.
In the steam revolution era, Jevons watched steam engine efficiency improve and coal consumption subsequently rise, calling it a "paradox." Actually, that was not a paradox, but a pattern: when the unit cost of a basic service drops low enough, the market not only does not shrink, but instead reaches all those who were previously excluded by the structural costs of the old system.
Being in 2026, we are about to see just how many people are behind that boundless market.
