Coinbase is writing a protocol for agentic AI

• Key insight: Coinbase is writing a protocol for agentic AI. 
• Look forward: Other firms such as Google are making similar moves. 
• What's at stake: Banks and payment firms are investing in agentic commerce, creating demand for efficient payment processing. 
  

As more companies embrace agentic commerce, technology firms are attempting to make it easier for bots to communicate with and pay each other. 
Cryptocurrency company Coinbase and security firm CloudFare have launched the x402 Foundation, an initiative that will create standards for digital agents and AI systems to make payments through a shared format. 

Coinbase is joining a growing number of firms that are building tools to support agentic AI, which enables transactions and other tasks with little or no human intervention; and stablecoins and other digital assets, which are expected to become a larger part of the payments market in coming years as banks ramp up support.  

"A digital economy needs digital money, and stablecoins are the backbone. They need to be  programmable, always-on, and built to work the way AI agents do," Shan Aggarwal, chief business officer of Coinbase, told American Banker. "And as AI and blockchain technology advance at incredible speeds, we're seeing the rise of agentic commerce."

What is x402?

Coinbase and CloudFare's collaboration will use the existing HTTP "402 payment required" code to power a system for automated fund transfers. 

"For agentic commerce to scale, we need a standard for how these transactions work," Aggarwal said. Parties using the x402 Foundation will receive a "402" message when an AI agent, AI tool or web crawler search engine accesses a site or service with a paywall. The message includes information about the payment, such as the size of the transaction, terms and the recipient. This process also includes steps to authorize the parties, and an automated trigger to provide the service once the recipient verifies the transaction. 

Read more about stablecoins. Stablecoins | American Banker

CloudFlare has added x402 to its servers, where it is available for developers to build AI agents. It also has a testing venue using a trial version of the USDC stablecoin. Coinbase's AgentKit and the x402 standard are designed to give AI agents tools to make payments, manage treasuries, and transact seamlessly, Aggarwal said. "When the x402 Foundation launches, it will bring developers and businesses together to scale this open, neutral standard," Aggarwal said. 

Coinbase and CloudFlare will need to add partners to scale the protocol and to make it interoperable with other attempts to write standards for agentic commerce. Coinbase has experience building technology networks. It recently partnered with Meta, Kraken, Ripple, Gemini, and other technology firms on scam prevention. It is also expanding uses for stablecoins.

Coinbase recently enabled users to lend their USDC stablecoins and access yields of up to 10.7% through an onchain integration. The move signals an expansion deeper into payments and financial services, which Aggarwal said attributes to broad momentum for stablecoins that followed passage of the GENIUS Act. The act is expected to draw more banks to the stablecoin market, pushing stablecoins into the mainstream. As a cryptocurrency company that has long supported stablecoins, Coinbase is attempting to expand its existing relationships while attracting new users.

"We're focusing on people who are using Coinbase to manage their financial lives and grow and store their wealth," he said. 

AI tools for AI agents 

Other firms are also writing standards and protocols to enable AI agents to perform payments. Google recently announced an agentic AI partnership with PayPal that is designed to boost adoption of Google's Agent Payments Protocol. Google's agentic AI protocol supports debit, credit, stablecoin and real-time transfers involving AI agents. Google recruited more than 60 companies to write the protocol, including Adyen, Alipay, American Express, Mastercard, PayPal and Worldpay."AI has changed consumer behavior with their search preferences and shopping habits, which makes agentic commerce a natural step forward for AI-assisted purchases,"

Zachary Aron, principal at Deloitte Deloitte Consulting LLP, and U.S. and Global Payments Leader for Deloitte, told American Banker. "However, this shift clearly impacts payments, pricing models, checkout flows, and back-end processing, all of which require reinvention in the world of AI."

In another move, a group of investors, including Primary Venture Partners, ParaFi Capital, Stripe, Coinbase Ventures, Solana Ventures, Samsung Next and Polygon Labs, have invested $19 million in Circuit & Chisel, a startup that is developing a protocol for agent-to-agent commerce.

Two former Stripe executives founded Circuit & Chisel. The startup plans to release ATXP, a standard to streamline payments between AI agents. Stripe and rivals Block and PayPal have also invested in agentic payments. 

"All banks will need to look at how they support this emerging channel for payments," Aron said.