Stablecoin 101 · 2 min read

Stablecoins compared with payment apps like Venmo and Cash App

Closed-loop app ledgers versus open tokens: who holds the money, insurance versus a claim on reserves, settlement, hours, cross-border reach, programmability, freezes and fees.

Facts current as of October 19, 2026

Closed loop versus open network

When you pay a friend in Venmo or Cash App, no money leaves the system. The app updates its own internal ledger, and the dollars sit in bank accounts the app company holds for its users. A stablecoin is recorded on a public blockchain that anyone's wallet or app can read and write to, so a token can move between unrelated apps, exchanges and institutions without going through any one company.

Closed-loop payment app compared with an open stablecoin network. On the left, users of one payment app are entries on that company's private ledger, and the company holds pooled funds at partner banks. On the right, wallets at many different apps and institutions all read and write the same public blockchain, so tokens can move between them directly.

Side by side

Payment apps compared with stablecoins
Item	Payment apps (Venmo, Cash App)	Fiat-backed stablecoin
Ledger	The company's private ledger; transfers between users are book entries	A public blockchain shared by all wallets and apps
Who holds the funds	The app company, which places customer dollars at partner banks ("Program Banks" for Venmo; Wells Fargo and Sutton Bank for Cash App)^[1]^[2]	The holder controls the token; the issuer holds the reserve assets backing it^[3]
Insurance or claim	May be eligible for FDIC pass-through insurance only if conditions are met. Venmo: if you have used direct deposit or cash-a-check, or bought or received crypto. Cash App: if you have a Cash App card or a sponsored account. Coverage protects against the bank's failure, not the app company's^[1]^[2]^[4]	Not FDIC- or NCUSIF-insured. Under GENIUS, holders have a priority claim on the issuer's required reserves if the issuer fails^[3]
Settlement and finality	Instant inside the app; cashing out to a bank takes 1–3 business days (standard) or minutes for a fee^[1]^[2]	Final on the blockchain in seconds to minutes; redemption for dollars depends on the issuer or platform^[5]
Operating hours	24/7 inside the app; bank cash-outs follow banking days^[2]	24/7/365
Cross-border reach	Mainly domestic. Venmo can send to eligible non-US PayPal accounts for a 5% fee (minimum $0.99, maximum $4.99)^[1]	Global, to any compatible wallet, subject to sanctions and local law
Programmability	Limited to features the company builds	Tokens can be used in software (smart contracts) that runs automatically on the blockchain^[6]
Freezes and reversals	Apps can freeze, hold or reverse transactions under their terms and in response to legal orders^[2]	Transfers can't be reversed by the network; issuers must be able to block and freeze tokens to comply with law^[3]
Fees	Free between users in most cases; instant cash-out: Venmo 1.75% (minimum $0.25, maximum $25), Cash App 0.5%–2.5% (maximum $75)^[1]^[2]	Network fee per transfer, plus any conversion or redemption fees^[3]

Payment apps compared with stablecoins

Ledger

Payment apps (Venmo, Cash App): The company's private ledger; transfers between users are book entries
Fiat-backed stablecoin: A public blockchain shared by all wallets and apps

Who holds the funds

Payment apps (Venmo, Cash App): The app company, which places customer dollars at partner banks ("Program Banks" for Venmo; Wells Fargo and Sutton Bank for Cash App)^[1]^[2]
Fiat-backed stablecoin: The holder controls the token; the issuer holds the reserve assets backing it^[3]

Insurance or claim

Payment apps (Venmo, Cash App): May be eligible for FDIC pass-through insurance only if conditions are met. Venmo: if you have used direct deposit or cash-a-check, or bought or received crypto. Cash App: if you have a Cash App card or a sponsored account. Coverage protects against the bank's failure, not the app company's^[1]^[2]^[4]
Fiat-backed stablecoin: Not FDIC- or NCUSIF-insured. Under GENIUS, holders have a priority claim on the issuer's required reserves if the issuer fails^[3]

Settlement and finality

Payment apps (Venmo, Cash App): Instant inside the app; cashing out to a bank takes 1–3 business days (standard) or minutes for a fee^[1]^[2]
Fiat-backed stablecoin: Final on the blockchain in seconds to minutes; redemption for dollars depends on the issuer or platform^[5]

Operating hours

Payment apps (Venmo, Cash App): 24/7 inside the app; bank cash-outs follow banking days^[2]
Fiat-backed stablecoin: 24/7/365

Cross-border reach

Payment apps (Venmo, Cash App): Mainly domestic. Venmo can send to eligible non-US PayPal accounts for a 5% fee (minimum $0.99, maximum $4.99)^[1]
Fiat-backed stablecoin: Global, to any compatible wallet, subject to sanctions and local law

Programmability

Payment apps (Venmo, Cash App): Limited to features the company builds
Fiat-backed stablecoin: Tokens can be used in software (smart contracts) that runs automatically on the blockchain^[6]

Freezes and reversals

Payment apps (Venmo, Cash App): Apps can freeze, hold or reverse transactions under their terms and in response to legal orders^[2]
Fiat-backed stablecoin: Transfers can't be reversed by the network; issuers must be able to block and freeze tokens to comply with law^[3]

Fees

Payment apps (Venmo, Cash App): Free between users in most cases; instant cash-out: Venmo 1.75% (minimum $0.25, maximum $25), Cash App 0.5%–2.5% (maximum $75)^[1]^[2]
Fiat-backed stablecoin: Network fee per transfer, plus any conversion or redemption fees^[3]

The two worlds are starting to connect

Venmo lets users buy, sell, hold and send PayPal USD (PYUSD), including to external wallets that support PYUSD. Network fees apply to external transfers, and Venmo says users "may also be able to earn rewards" on PYUSD they hold.^[7] Those rewards come from the platform. The GENIUS interest ban is written to apply to issuers, so how it treats platform rewards is an open point to watch in the final rules.^[3]

Cash App began offering USDC send and receive to all eligible customers on May 27, 2026. Incoming USDC converts automatically to dollars in the customer's Cash App balance, and the feature is not available to New York residents.^[8]

Sources

[1]Venmo (PayPal, Inc.), About Venmo Fees (opens in a new tab).
[2]Block, Inc., Cash App Terms of Service (last updated September 11, 2026) (opens in a new tab).
[3]U.S. Congress / GPO, GENIUS Act, Public Law 119-27 (statute text) (opens in a new tab), July 18, 2025.
[4]FDIC, Banking With Third-Party Apps (opens in a new tab).
[5]ethereum.org, Proof-of-stake (finality) (opens in a new tab).
[6]ethereum.org, Introduction to smart contracts (opens in a new tab).
[7]Venmo Help Center, Understanding PayPal USD (opens in a new tab).
[8]Cash App, Stablecoins are now available on Cash App (opens in a new tab), May 27, 2026.

Educational material only. Not legal, investment, tax or accounting advice, and not a recommendation about any asset, issuer or vendor. Laws and agency rules are changing; check the cited primary sources and consult counsel before acting.