Moving money across borders has long meant navigating a maze of intermediaries, delays, fees, and limited visibility. Stablecoins offer a fundamentally different model: transparent, real-time, low-cost payments with global reach. As a result, these digital assets have evolved from a niche crypto innovation into an important part of the global payments landscape.
Many banks have spent the past several years watching this evolution from the sidelines. This is becoming an increasingly difficult position to maintain. Stablecoins are emerging as regulated financial infrastructure and are beginning to reshape how money moves around the world.
In a recent PaymentsJournal webinar, Simon Griffin, Business Lead for Crypto Distribution at SoFiUSD, and Chris Kennedy, SVP and Head of Enterprise Payments at Regions Bank, along with moderator Ritesh Rihani, VP of Global Banking at SoFi Tech Solutions, discussed how stablecoins intersect with banking infrastructure, the roles banks can play in this ecosystem, and how institutions can approach payments modernization.
The key takeaway: the rise of stablecoins means banks can no longer afford to stay on the sidelines. Instead, institutions face a decision point where they must determine how to participate in the emerging digital ecosystem while maintaining customer relationships, regulatory compliance, and profitability.
Keeping Deposits in the Ecosystem
By definition, a stablecoin is a digital asset issued on a blockchain that is designed to maintain a stable value. However, the vast majority of stablecoins are pegged to a traditional fiat currency—most commonly the U.S. dollar.
Digital dollars have a wide range of use cases, one of the most promising being cross-border payments. The traditional correspondent banking model has long been characterized by complexity, with transactions often involving multiple banks, payment rails, regulatory requirements, and currency conversions.
By contrast, stablecoins can eliminate many of these pain points. However, when customers use stablecoins today, for both cross-border and domestic payments, they typically do so outside of their primary financial institution.
“In this situation, banks have a deep, valid concern,” Kennedy said. “They don’t want their clients to leave and go to a different competitor network, for one. Two, if those deposits leave and go to a coin, they aren’t getting yield, they aren’t getting reserves, and they can’t transact—they lose all those capabilities.”
“They want to keep the money in the ecosystem,” he said. “The natural defense mechanism you see is banks developing their own network.”
This has prompted growing interest in tokenized deposits. Like stablecoins, tokenized deposits are digital assets that represent real money. The real difference is that tokenized deposits represent funds held within the regulated banking system.
This compliance-friendly model is an attractive option for banks, and a growing number of platforms have emerged to support tokenized deposits, including solutions launched by industry consortiums and leading financial institutions.
However, these networks are not a one-to-one replacement for stablecoins.
“Fundamentally, the bug with all of those networks is the fact that they are permissioned by nature,” Griffin said. “There’s a walled garden fencing in who can send and receive those digital assets, and which finance institutions can participate. One of the features of blockchain technology is that some networks are permissionless by nature. What that enables you to do is move this money 24/7 to basically anyone in the world.”
“On one hand, you’ve got this permissionless, near-free-of-charge service that I can use to move dollars anywhere in the world,” he said. “On the flip side, I have a permissioned walled garden approach which only allows me to move between kind of participants within the network. If I want to send to someone who’s not a participant in the network, immediately those solutions fall down.”
The Direction of Travel
Although stablecoins offer greater flexibility across many use cases, barriers to broader adoption remain.
This is reflected in the approximately $18 trillion held in U.S. bank deposits, compared with upper-end estimates that value the global stablecoin market at roughly $3 trillion. Much of this gap exists because stablecoin use cases have remained relatively narrow.
Today, one of the primary applications for stablecoins is crypto trading, where they serve as a medium of exchange for buying and selling other digital assets.
Another major use case is decentralized finance (DeFi), where users pledge assets—often cryptocurrencies such as bitcoin—as collateral to borrow and lend, with stablecoins serving as the unit of account.
While stablecoin adoption has surged in these areas, payments activity outside of crypto trading has been estimated at just $390 billion—a fraction of the payment volumes seen across consumer and commercial markets.
“Despite that, we can see the direction of travel here, and the total amount of activity conducted on-chain is already in multiples of the card networks combined,” Griffin said. “The direction of travel is clear, but the utility for someone just making payments today hasn’t necessarily been adopted more broadly.”
One reason for this relatively gradual adoption has been the lack of a clear regulatory framework for stablecoins in the U.S. However, the recent passage of the GENIUS Act and the potential passage of the CLARITY Act are rapidly changing that perspective.
Banks have also expressed concerns about instances in which stablecoins have temporarily lost their peg to the underlying currency they were designed to track.
“Working with risk functions, anyone in a U.S. bank looking at this as an asset type will say, ‘Despite the labeling of a stablecoin, what we’ve seen if we run our stress var is we’ve seen a decouple from 1:1, so how do I have confidence that the thing I’m buying at exchange rate of 1:1 for my traditional U.S. dollars will hold up in the event of a stress scenario?’” Griffin said.
Making a Bet on Stablecoins
These concerns have slowed broader adoption, but many of these barriers are beginning to erode. One catalyst is the substantial investment in stablecoin initiatives by leading financial institutions, alongside support from major industry organizations such as Swift and DTCC.
Another driver is customer demand. While customers may not explicitly ask for stablecoins, they frequently express frustration with payment delays, high fees, and a lack of visibility into transaction status.
“This is a trap we run into all the time in the banks,” Kennedy said. “We know our products and services and payments, but in general, clients are going to ask for it differently. What I typically recommend, and where I see a lot of folks leaning in, is that you need your relationship managers or your banking partners to understand the client’s needs in the business, hear what they’re trying to do, and then from there you can help guide them to the product.”
“Often, when we release new products and services, they don’t know what it is,” he said. “They don’t know they need it until we hear what their challenges are. When they hear what it does to solve it, suddenly they’re very excited.”
Beyond addressing challenges such as delayed settlement and regulatory friction, one of the less-discussed advantages of stablecoins is their programmability. As customers become more familiar with the automation and customization capabilities these digital assets enable, demand for stablecoin-based solutions is likely to grow.
This shift is bringing banks to an inflection point, where they must determine how best to integrate stablecoin infrastructure into their payments strategies.
“That’s the interesting question banks face today,” Kennedy said. “If you do nothing, your deposits are going to leave. But if you take a bet now and you take the wrong bet, you’ve wasted a lot of money. How do you get your board and your leadership team and make a decision?”
Taking a Hybrid Approach
Given the importance of these decisions, many institutions are pursuing a hybrid approach that incorporates both stablecoins and tokenized deposits across multiple platforms. Consumers may prioritize the flexibility that stablecoins provide, while commercial clients may prefer the protections and regulatory assurances associated with tokenized deposits.
This evolving landscape has also led to the development of stablecoins purpose-built for the financial services industry. Notably, SoFiUSD is the first stablecoin issued by a U.S. bank and was designed to provide a one-to-one U.S. dollar backing through a bank-grade token.
Combined with tokenized deposits capabilities, solutions like these can equip institutions to meet a range of customer needs. Given that stablecoins remain in the early stages of adoption and the global regulatory landscape is still taking shape, a multi-rail, multi-platform strategy is likely to offer banks the greatest flexibility.
“There is a lot that we are learning as we go along and I’m looking forward to seeing where we end up in this,” Rihani said. “What I do know is that all financial institutions need to be thinking about this platform approach. You can’t have one approach, you need to have multiple approaches, and how do you consolidate them?”
“Players like SoFiUSD are important as they are experts bringing out the technology, looking at the regulation, making sure that that stablecoin is guaranteed the way it’s supposed to on a one-to-one basis,” he said. “Those are all critical parts of it.”
