Short Blog

The x402 Foundation was publicly announced last week on September 23, 2025, as a joint initiative between Coinbase and Cloudflare. This effort aims to solve the governance issue in agentic. The design COULD SOLVE the governance issues outlined in Governance in Payments as well as last month’s Agentic Commerce Economics and Governance. As a refresh, my position is that monetization/governance is the Gordian knot preventing AI from moving to next stage of growth. 

While Google’s AP2 suffers from a dependency on settlement governance and the inability to expand trust beyond their own domain (see AP2 blog), x402 is just a standard that handles payment terms negotiations between two APIs (both price and method). The foundation turns x402 into a “network) with an operational model, active governance and economics. My example is that an existing customer would have payment managed with a current card on file and the merchant owning risk, whereas a new customer (or new machine request) could agree on a non-refundable stablecoin payment.  

I see this foundation as a slam-dunk success in certain areas, like micropayments for AI requests. Consumers and merchants will continue to use card rails for the majority of purchases. In my view, the primary problem that x402 solves (not addressed by others) is AI platforms paying for content. Merchants and content providers are screaming at the increase in AI bots. X402 will allow any website to put up a paywall for requests/screen scraping (akin to what JPM did to 1033/open banking requests).  Google, FB and Amazon have enormous advantages here as they all have data feeds with retailers that are independent of AI modelling (see Data Games).

The X402 foundation becomes even more relevant with the adevent of Cloudflare’s Net Dollar and Cloudflare’s Pay Per Crawl Pilot

Tech Overview

The foundation’s work is based on the HTTP 402 Payment Required` status code, which has existed since the early days of the web. However, it was never implemented or standardized for widespread use, essentially remaining dormant. The core idea behind the modern x402 protocol using this status code for machine-to-machine payments was developed to solve the friction of traditional payments in an automated, AI-driven world.

The Founders’ goal for the foundation is to serve as a neutral steward (ie, Governance, standardization, and certification) for the x402 protocol. By creating a non-profit organization, they aim to ensure that the protocol remains an open, vendor-agnostic standard, preventing any single company from controlling its future. 

• Coinbase brings expertise in stablecoin exchange, tech infrastructure and consumer issuance as well as initial development of the x402 transaction flow. The company has been exploring internet payment standards since at least 2015, recognizing that the technology for “agentic commerce” was finally mature enough.
• Cloudflare contributes its infrastructure and a unique perspective on enabling this protocol at a global scale. They are integrating a “deferred payments” scheme into the protocol, which is critical for use cases like their “pay-per-crawl” service, where a single bot might make a massive number of micro-requests that are better settled in batches. Cloudflare’s CEO has a number of must read articles on how AI is “breaking the internet”, pay for service will right this ship.