Stablecoins have long been heralded as a revolutionary force in the world of finance, offering a faster and more cost-effective way to transfer money. Their potential has attracted attention from a wide range of stakeholders, including consumers, banks, regulators, merchants, and even central banks. Whether it’s for real-time settlement or cross-border transactions, stablecoins are being explored as a viable alternative to traditional financial systems.
However, despite the excitement surrounding them, stablecoins have yet to deliver significant benefits on a large scale. This is largely due to the challenges posed by compliance, regulation, and the integration of these digital assets into existing financial frameworks.
The issue is not that stablecoins themselves are flawed. Rather, the problem lies deeper, rooted in the very structure of our current financial and payment systems. These systems were never designed to support real-time, always-on money, which is exactly what stablecoins promise. As a result, they are exposing the limitations of outdated banking infrastructure.
Tokenisation Is Not a Workaround for Legacy Architecture
Stablecoins aim to provide instant payments, but the legacy platforms they interact with are built for batch processing and limited operating hours. This mismatch is particularly evident in the United States, where much of the banking system still relies on infrastructure that was developed decades ago.
The consequence of this gap is a growing disconnect between what stablecoins can offer and what the existing systems can handle. This leads to issues such as reconciliation delays, liquidity constraints, and increased operational strain. Some institutions may attempt to layer new technology on top of their existing platforms to accommodate stablecoins, but this approach often introduces additional complexity rather than simplifying the process.
This is because real-time payments cannot be treated as an afterthought. The nature of always-on money requires platforms that can continuously process, monitor, and reconcile transactions. Without this capability, the full potential of stablecoins remains unrealized.
Recent Initiatives Offer Hope
Recent efforts like Project Agora, led by the International Bank for International Settlements and the Institute of International Finance, represent a step forward in addressing these challenges. The initiative aims to revolutionize cross-border payments through tokenization, while also recognizing the need for upgrades to banking infrastructure and rigorous testing to make this possible.
Money at Scale Comes with Non-Negotiables
As stablecoins gain traction, the expectations around consumer protection, fraud prevention, and regulatory oversight increase significantly. Money at scale brings with it a set of non-negotiable responsibilities. Anti-money laundering (AML), liquidity management, and counter-terrorism financing obligations do not disappear simply because an asset is tokenized.
The speed at which tokenized money moves increases both safety and fraud risks. It removes the margin for error, requiring interventions to happen instantly. Traditional safety controls, which were designed for delayed settlements and post-transaction reviews, struggle in always-on environments because they are not equipped for continuous monitoring and prevention.
Regulatory frameworks are beginning to evolve in response to these challenges. For example, the Markets in Crypto-Assets (MiCA) regulation in Europe and the Genius Act in the United States show a clear intent to integrate stablecoins into the broader payments landscape. However, these regulations apply the same operational and regulatory expectations to stablecoins as they do to other forms of money.
The Widening Gap Between Fintechs and Banks
These pressures are already reshaping the competitive landscape between banks and fintechs. Fintechs and non-bank providers are better positioned to handle the next wave of tokenized payments because they are built on modern, cloud-native architectures. These platforms allow for rapid innovation and continuous operation.
In contrast, many banks are still constrained by legacy, batch-based systems and complex point-to-point integrations. These systems slow down change and increase operational risk. As a result, payments have become a key battleground for competition among banks.
The Future of Payments
Instant payments are already transforming the payments landscape, as customer expectations continue to rise. For banks to meet these expectations and remain operationally ready for the next wave of payments modernization through tokenization, they must rebuild their payments infrastructure. This means adopting cloud-native, API-first platforms that support real-time processing and high availability.
Only then can stablecoins fulfill their potential and truly reshape the financial ecosystem.