Cloudflare and Coinbase Launch x402 Foundation for AI Payments

Cloudflare and Coinbase have announced the launch of the x402 Foundation, a joint effort to build a global standard for machine-to-machine payments. The initiative is designed to enable AI agents, bots, and automated software to pay for digital services and online resources without human intervention.

The project centers on the x402 protocol, which turns the unused HTTP error code “402 Payment Required” into a functional payment system. Instead of blocking automated requests with an error, websites will now be able to request and receive payments directly from machines.

Coinbase CEO Brian Armstrong described the move as a step that allows AI to “transact value, not just exchange information,” marking a fundamental shift in how automated systems interact with the web.

Why a New Payment Protocol Is Needed

Traditional payment methods—credit cards, bank transfers, or subscription models—were designed for people, not machines. They involve manual clicks, confirmations, and billing cycles that do not fit the fast, automated nature of AI systems.

Currently, websites generate over one billion “402 Payment Required” responses every day when bots attempt to access restricted content. Because no protocol exists for bots to respond with a payment, these requests are rejected.

The x402 protocol provides a solution by creating a shared language for transactions between servers and machines. This standard opens the door for per-request billing, enabling machines to pay small amounts instantly rather than relying on monthly subscription models.

How the x402 Payment Process Works

The x402 protocol introduces a four-step process that integrates payments directly into web requests:

1. A bot or AI system requests access to protected content or services.

2. The server responds with payment details, such as the required amount and recipient.

3. The AI agent resends the request, attaching an authorization header that includes proof of payment.

4. The transaction is verified, and the requested content or service is delivered instantly.

Cloudflare has also suggested a deferred settlement system, allowing crawlers and data bots to access thousands of pages in a day and pay later in one batch. This flexibility accommodates both real-time blockchain settlements and traditional banking payments, keeping the system compatible with existing infrastructure.

Stablecoins at the Core of the System

The timing of x402’s launch comes as stablecoins are seeing record growth in global finance, particularly for automated payments:

• 70% of all stablecoin transfers are already generated by bots and automated systems.

• The market grew from $4 billion in 2020 to over $280 billion by 2025.

• Settlement volumes hit $1.39 trillion in the first half of 2025 alone.

• Some stablecoin issuers now rank among the largest holders of U.S. Treasuries worldwide.

Stablecoins are especially suited for machine payments because they offer instant settlement, low transaction costs, and programmable features. Unlike traditional methods, which struggle with microtransactions, stablecoins can handle tiny, frequent, and automated transfers.

To demonstrate the protocol, Cloudflare has launched the x402 Playground, where developers can test automated payments using USDC on Coinbase’s Base blockchain.

New Business Models for AI and Web Services

The x402 system creates opportunities for new revenue streams and business models:

• AI assistants could purchase products, services, or data across multiple websites automatically.

• Trading bots could buy real-time financial data per request rather than subscribing to monthly plans.

• Cloud services could charge per compute cycle, storage file, or API call.

Industry adoption is already underway:

• Amazon Web Services is testing x402 for cloud billing, in a market projected to reach $1.9 trillion by 2030.

• Pinata, a decentralized storage provider, is using it for pay-per-file storage access.

• Heurist, an AI research platform, has integrated x402 for on-demand research payments.

• Catena Labs, co-founded by Circle’s Sean Neville, raised $18 million to build a regulated AI-native financial institution powered by stablecoin payments.

Regulatory Review of Stablecoin Growth

The rapid increase in stablecoin usage is under review by regulators and banking organizations. Some industry groups warn that if stablecoins continue to grow, up to $6.6 trillion in deposits could move from traditional banks, creating potential risks for financial stability.

According to Coinbase Research, most stablecoin transactions occur outside the United States. The report states that this international activity supports the global use of the U.S. dollar while having minimal effect on domestic bank deposits.

How x402 Could Change Online Payments

The x402 Foundation allows machines to handle payments automatically when accessing paid web content or services. The protocol converts the HTTP 402 error code into a standard that enables automated systems to authorize and complete transactions without human input.

This standard may lead platforms to adopt per-request or usage-based payment models instead of traditional subscription systems. For example, cloud services could charge for exact compute time used, and data providers could bill for individual dataset access.

Cloudflare and Coinbase have made the protocol available for testing. Amazon Web Services is conducting trials of automated billing for compute usage, allowing clients to pay for the exact processing time they consume. Pinata, a Web3 storage platform, charges per file uploaded using x402, while Heurist, an AI research service, applies the protocol to handle payments for individual dataset requests.

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