Banking revolution: will stablecoins destroy financial giants?

The adoption of the US legislation on stablecoins, known as GENIUS Acthas made many countries think twice. Tokens backed by the US dollar will strengthen its dominance in international payments and may even replace some payment systems over time Circle and Stripe, Visa and Mastercard are already nervous. The European Central Bank has even warned about the loss of monetary autonomy and growing geopolitical dependence on the United States. Some countries have rushed to update or add regulations to stimulating the issuance of their own stablecoins pegged to national currencies resorted to restricting the use of foreign stablecoins.

Are stablecoins really evil?

At the very least, stablecoins have emphasized the widespread shortcomings of modern financial systems and shown how new technologies can fix them. They are becoming increasingly popular as they allow for fast and cheap transfers and payments, even abroad. This is evidenced by the fact that stablecoin turnover has doubled over the past 18 months. Daily transactions already amount to about $20-30 billion. But this is still less than 1% of global cash flows. By the end of the first quarter of 2025, the volume of remittances reached 3% of $200 trillion of total global cross-border payments. The volume of capital market transactions (mainly exchanged for treasury bills, as well as settlements for the purchase of bonds, funds, and other securities) amounted to just under 1% of global capital market transactions. The volume used for cryptocurrency purchases amounted to almost $20 trillion.

Traditional payments infrastructure processes $5 to $7 trillion globally daily (including institutional, commercial, and consumer remittances), according to data Swift and the Bank for International Settlements.

According to analysts, at the current growth rate, the volume of transactions with stablecoins could exceed the volume of traditional payments in less than 10 years. And even faster, depending on the pace of implementation.

The growing popularity of stablecoins also shows a lack of trust in the central banks and currencies of many countries. Governments, regulators, and central banks need to address the following shortcomings.

• Speed. Delays in payments of one to three business days when using traditional payment systems, especially when sending payments abroad.
• Cost. Traditional payment processing usually involves several intermediaries (e.g., correspondent banks and clearing houses). Therefore, this process may result in several fees being charged.
• Transparency. Complex, legacy infrastructure can hide the routing and status of payments, especially for international transfers.
• Accessibility. Payment systems that depend on the traditional banking system usually operate only during standard business hours.
• Inclusiveness. Since much of the traditional payment infrastructure is dependent on banks, many people are not covered or excluded from KYC rules and face other obstacles, such as the need for a government-issued ID or multiple proofs of residence.

There is also a growing need for trade payments, business-to-business payments, cross-border payments, retail money transfers, and automated payments (e.g., from governments). As a result, the demand for more adaptable, responsive, low-cost, secure, and inclusive global payment solutions has grown over the past decade. And so far, only stablecoins have met most of these needs.

Eurozone vs. the USA

The Eurozone has a common currency — the euro — and highly regulated financial markets, but no single payment system. The European Central Bank is in the process of creating a digital euro. Countries that lack economic and financial clout and whose currencies are not trusted by their own citizens have even greater fears of being overrun by dollar-backed stablecoins.

In 2023, the first large-scale regulatory frameworks were introduced, including the Crypto Asset Markets Regulation (MiCA) for stablecoins in the European Union, the Financial Services and Markets Act in the UK, and similar licensing measures in Hong Kong, Japan, and Singapore. В Ukraine is still considering a draft law on regulationwhich will also take into account MiCA standards.

China and India have excellent domestic payment systems. However, both countries have suffered from a weakening of foreign investor confidence in their currencies and central banks from time to time, and both still have currency restrictions. In these countries, stablecoins not only threaten the appreciation of national currencies, but could eventually replace bank deposits and undermine commercial banks.

Many advantages, but not without risks

Many banks are already taking steps to “tokenize” their deposits, allowing them to be easily used for blockchain transactions, and reducing fees for international payments. In other words, the new competitor is pushing traditional systems to improve efficiency in order to retain customers. But governments and banks are not yet keeping up. The total value of issued stablecoins doubled in 18 months: from $120 billion to $250 billion. According to forecasts, this figure will reach more than $400 billion by the end of 2025, and $2 trillion by 2028.

In parallel, a number of cash-equivalent tokens have been issued, typically representing investments in underlying short-term government securities, including the BlackRock USD Institutional Digital Liquidity Fund ($2.9 billion); Franklin OnChain US Government Money Fund (whose shares are represented by the BENJI token) ($0.8 billion); and Ondo Short-Term US Treasuries Fund ($0.7 billion).

At their core, these tokens are not stablecoins, but are denominated in dollars, which creates the potential for a new payment instrument that can be used at points of sale and generate real-time revenue.

Commercial banks will find it difficult to survive if they cede their role in payment intermediation. They will have to find ways to compete. Stablecoins are playing a valuable role in catalyzing improvements in financial markets and forcing commercial and central banks to raise their game.

Large financial institutions are already taking an active part in cash tokenization. For example, JPMorgan’s JPM Coin, which uses tokenized bank deposits for real-time online payments between institutional clients (totaling more than $1 billion daily). A blockchain-based asset platform called the Canton Network is experimenting with tokenized deposits and cash (Citibank, Goldman Sachs, and UBS). Some banks are tokenizing commercial bank money to move value in real time between internal ledgers and regions, especially for intraday liquidity positioning (Partior).

Interbank and central bank experiments are also underway, including the following: Project Guardian, which is exploring tokenized cash for cross-border FX and securities trading (Monetary Authority of Singapore with DBS, HSBC, and Standard Chartered). Project mBridge uses central bank tokenized money for cross-border payments (central banks of China, Hong Kong, Thailand, and the United Arab Emirates). The Helvetia project is exploring the use of central bank tokenized money for settlements on tokenized financial assets (Bank for International Settlements, SIX, and the Swiss National Bank).

However, the use of stablecoins is still risky. There is a possibility of decoupling from the currency unit, mainly due to uncertainty about reserves. In addition, like any digital currency, safe storage requires careful protection of keys from theft.

Holders of stablecoins do not own or have legal claims to the underlying assets, despite the issuers’ redemption guarantees. Although the stablecoin itself can remain safely in the blockchain, in the event of a bankruptcy, holders may be treated as unsecured creditors and may not have full access to reserves. Without legal protection, holders of stablecoins are forced to rely only on the trust and integrity of the private issuer without the guarantee of protection from a central bank or government.

Sources: FT, McKinsey