Bank Guide to Stablecoins

Banks aren't the victims of this disruption—in fact, they could be its biggest beneficiaries.

 

Stablecoins represent the most significant infrastructure opportunity for banks since the emergence of credit card networks. An over $200 billion stablecoin market has built a completely parallel settlement infrastructure processing $7 trillion in adjusted transaction volume across 233 million unique wallet addresses over the last twelve months. This represents real economic demand (Visa's on-chain analytics, for instance, exclude bot and trading volumes from the measurements).

This growth is increasingly driven by real-world payment applications. According to Michael Shaulov from Fireblocks, stablecoin usage on their platform has more than doubled, rising from approximately 25% in 2021 to over 50% of transaction volume today. On Fireblocks alone, over $520 billion in stablecoin transactions were processed in just the last 90 days. The shift is unmistakable: stablecoin payment companies represent just 10% of Fireblocks users but generate 50% of transaction volume

Banks aren't the victims of this disruption—in fact, they could be its biggest beneficiaries. Instead of viewing this as a competitive threat, banks should be asking: "How do we become the essential infrastructure layer for enterprise adoption of stablecoins?" The window is now - regulatory frameworks are crystallizing, enterprise adoption is accelerating, and technical infrastructure is maturing.

If you believe:

  • Payment and settlement infrastructure is shifting to blockchain rails

  • Orchestration captures more value than issuance

  • Banks' advantages are sustainable in this new paradigm

  • New business models will emerge

Then you must:

  • Act within 6–12 months (competitive window)

  • Commit sizable investment (table stakes)

  • Focus on orchestration layer (highest value)

  • Partner on commoditized layers (more efficient)

  • Build for the future

Or you risk:

  • Losing enterprise payment flows

  • Missing new revenue opportunities

  • Becoming dependent on others' infrastructure

Disclaimer: The views and opinions expressed are solely those of the author and do not necessarily reflect those of the author's current employer. This material is for informational purposes only and is not intended to provide legal, tax, financial, or investment advice. Recipients should consult their own advisors before making these types of decisions. The author is not responsible for errors, inaccuracies, or omissions of information; nor for the accuracy or authenticity of the information upon which it relies.

Investment Thesis: Stablecoins

Every major financial innovation follows a predictable sequence: new infrastructure emerges, early adopters capture initial value, regulations develop, and then—critically—established players leverage their existing advantages to dominate the market. Just as e-commerce drove credit card online acceptance in the 1990s, cross-border payments needs are driving stablecoin adoption today. The involvement of established players like Stripe, Visa, and Mastercard provides credibility.

The companies positioned to capture this value are infrastructure providers (at least initially). The winning strategy could include creating abstraction layers that turn complex stablecoin infrastructure into “Lego blocks” that any business can use.

Value Stack

The natural question is: where should banks participate?

The stablecoin value chain consists of five distinct layers, each with different competitive dynamics, profit margins, and strategic implications. While Layer 1 (issuance) captures headlines with its impressive unit economics—$1 billion in reserves generates $40-50 million annually—the real opportunity lies in Layer 3 (orchestration), where banks can leverage their existing advantages without competing directly against entrenched issuers.

Here's how value is distributed across the stack, and where banks should focus their efforts:​​​​​​​​​​​​​​​​

Layer 1: Issuance (Partner opportunity)

Layer 1 represents the core stablecoin creation and reserve management function. This layer involves minting stablecoins backed by fiat currency reserves and capturing value through interest income on reserves. Stablecoin issuers generate significant revenue from interest on reserve assets and commission fees from stablecoin minting and burning. The unit economics are favorable: $1 billion in stablecoin issuance generates $40–$50 million in annual revenue at current 4–5% Treasury rates, with superior returns on equity compared to traditional banking. However the revenue model will be challenged as interest rates come down.

  • Market Players:

    • Tether (USDT): Largest stablecoin issuer with >150 billion market cap

    • Circle (USDC): The second-largest stablecoin issuer, with a USDC market cap of over $60 billion.

    • Paxos: New York-regulated issuer of USDP and PYUSD (PayPal's stablecoin). Strong enterprise focus with institutional-grade custody and compliance infrastructure.

  • Competitive Dynamics: Winner-take-all with massive capital requirements

  • Regulatory Positioning: The GENIUS Act creates an environment that favors incumbent financial institutions. Requirements include federal banking charters, established banking relationships for reserve custody, and comprehensive AML/KYC infrastructure—all areas where traditional banks have an 18- to 24-month advantage over new entrants.

  • Bank Opportunity: While highly profitable, Layer 1 presents the highest competitive barriers and regulatory complexity. Circle's reported sharing of reserve income with Coinbase and Binance for distribution, which indicates that even established players are experiencing margin pressure.

Layer 2: Banking Services (Entry point for higher-value services)

Layer 2 encompasses the traditional banking services required to support stablecoin operations, generating revenue through fee income, spread capture, and specialized financial services. This layer serves as the natural entry point for banks, leveraging existing capabilities while building relationships that enable expansion into higher-value activities.

Market Players:

  • BNY Mellon: Digital Asset Custody Platform launched in October 2022, providing institutional-grade custody for digital assets including Bitcoin and Ethereum with plans to expand stablecoin services

  • Standard Chartered: Through Zodia Markets, offers institutional crypto trading and launched stablecoin solutions targeting corporate cross-border payments

Competitive Dynamics: Every stablecoin issuer requires banking partnerships, creating universal demand with multiple winner opportunities across different service specializations and geographic markets.

Bank Opportunity: Use Layer 2 as the strategic entry point for higher-value orchestration activities. Banks can capture significant revenue streams without competing directly against established issuers while leveraging existing regulatory relationships and compliance infrastructure.

Core Banking Services Revenue Streams:

Account and Service Fees:

  • Account maintenance fees for stablecoin issuer operating accounts

  • Transaction processing fees for reserve movements and settlements

  • Compliance and regulatory reporting service charges

  • Wire transfer and ACH fees for treasury operations

  • Monthly service fees for specialized stablecoin banking packages

Custody and Asset Management:

  • Custody fees for cash and high-quality liquid asset (HQLA) reserves

  • Safekeeping charges for Treasury securities and other backing assets

  • Asset management fees for optimized reserve portfolios

  • Subcustody services for multi-jurisdictional reserve requirements

Treasury and Liquidity Services:

  • Brokerage services for Treasury securities that back stablecoin reserves

  • Repo and reverse repo facilities for reserve asset optimization

  • Float income optimization: Generate lending income from temporary cash positions during mint/burn timing differences, using brief settlement delays as a funding source

  • Liquidity provision during high-volume periods

Specialized Financial Products:

  • White-label stablecoin-to-fiat debit cards as off-ramp solutions

  • Letters of credit and trade finance products for stablecoin-enabled commerce

  • Foreign exchange services for multi-currency stablecoin operations

  • Insurance and risk management products for digital asset operations

Strategic Value: Layer 2 services generate immediate fee income while positioning banks to capture the higher-margin orchestration opportunities in Layer 3. The key is using these traditional banking relationships as the foundation for expanding into more complex and profitable stablecoin infrastructure services.​​​​​​​​​​​​​​​​

Layer 3: Infrastructure & Orchestration (Primary opportunity)

Layer 3 represents the critical middleware that connects stablecoin issuers with end-user applications, handling cross-border flow orchestration and capturing the highest margins in the value chain. This layer generates revenue through transaction fees, foreign exchange spreads, and service charges while building defensible network effects.

Market Players:

Infrastructure Providers:

  • Bridge: Stablecoin infrastructure specialist acquired by Stripe for $1.1 billion, enabling businesses to mint branded stablecoins and integrate seamless transactions

  • BVNK: Provides unified API connecting banks and blockchains, recently partnering with Worldpay to enable stablecoin payouts across 180+ markets

  • Mesh: Abstracts blockchain complexity, allowing seamless crypto payments without technical knowledge requirements

Traditional Player Extensions:

  • Visa's Tokenized Asset Platform: Enables financial institutions to issue and manage fiat-backed tokens on blockchain networks

  • Mastercard Multi-Token Network (MTN): Programmable payment services on Mastercard's private blockchain infrastructure

  • Circle's CPN (Circle Payments Network): Direct SWIFT challenger with partnerships including Standard Chartered and Deutsche Bank

Application Layer Connectors:

  • Checkout.com: Integrates stablecoin acceptance into existing merchant checkout flows

  • Coinbase x402 protocol: Repurposes HTTP 402 status code for instant stablecoin payments

Competitive Dynamics: Network effects favor early movers, but multiple winners can coexist across different verticals and geographies.

Bank Opportunity: Build or acquire aggressively to establish market position. Success requires both technical capabilities and revenue optimization across multiple streams:

Core Technical Requirements:

  • Multi-blockchain compatibility and smart contract execution

  • Real-time reserve tracking and reconciliation systems

  • Integration bridges with traditional banking infrastructure

  • Enterprise-grade APIs for business logic integration

  • Cross-border on/off-ramp infrastructure

Revenue Optimization Capabilities:

  • Foreign exchange revenue: Direct FX spreads on stablecoin-to-local currency conversions and revenue sharing agreements with exchange partners across multiple currencies

  • Payment processing fees: Transaction charges for enterprise clients moving between fiat and stablecoins

  • Cross-border settlement capture: Fee structures for international payment orchestration

  • Conversion fee optimization: Spreads and service charges on high-volume currency exchanges

The orchestration layer represents the highest-value opportunity because it combines technical complexity with revenue diversification. Banks that establish strong positions here can capture transaction fees, FX spreads, and service charges while building network effects that become increasingly difficult for competitors to challenge.​​​​​​​​​​​​​​​​

Layer 4: Applications (Selective participation)

Layer 4 represents end-user applications and business solutions built on stablecoin infrastructure, where banks can selectively participate in high-value enterprise use cases rather than competing broadly in consumer applications. Revenue comes from transaction fees, software licensing, and specialized service charges.

Market Categories:

Cross-Border Payments Applications: BCG analysis shows 5-10% of stablecoin volume ($1.3 trillion annually) represents genuine cross-border payments and corporate remittances, indicating substantial addressable market beyond speculative trading.

  • Coinbase x402 protocol: Enables instant stablecoin payments using repurposed HTTP status codes

  • MoneyGram partnerships: Facilitates stablecoin-to-cash conversion through global retail outlets

  • Corporate remittance platforms: Specialized solutions for multinational payroll and supplier payments

Corporate Treasury Applications: Major corporations including Ferrari and SpaceX utilize stablecoins for treasury management, leveraging 24/7 availability and instant liquidity characteristics for cash management optimization.

Merchant Acceptance Solutions: Rising steadily from low baseline with selective geographic success, particularly in high-inflation regions and cross-border e-commerce scenarios.

Competitive Dynamics: Application layer success depends on user experience and integration quality rather than infrastructure advantages, creating opportunities for specialized solutions targeting specific verticals.

Bank Opportunity: Focus on high-value enterprise applications rather than broad consumer adoption. Success comes from integrating stablecoins into existing business processes where banks already have relationships and expertise.

Strategic Focus Areas:

  • Enterprise treasury solutions: Multi-currency cash management platforms for corporate clients

  • Trade finance digitization: Stablecoin-enabled letters of credit and supply chain financing

  • Payroll and supplier payment systems: Automated cross-border payment solutions for multinational corporations

  • Merchant banking integration: Stablecoin acceptance capabilities integrated into existing business banking relationships

Revenue Model: Transaction-based fees, monthly software licensing, and premium service charges for enterprise-grade features and support.

Layer 5: Ecosystem Services (Emerging)

Layer 5 encompasses the specialized services that enable and enhance stablecoin ecosystem functionality, representing emerging opportunities with high margins and relationship-dependent competitive advantages.

Compliance and Regulatory Services:

  • AML/KYC automation: Real-time compliance monitoring across multiple blockchain networks

  • Multi-jurisdiction reporting: Automated regulatory filing across different international frameworks

  • Cross-border sanctions screening: Dynamic compliance checking for international transactions

  • Audit and attestation services: Third-party verification of reserve backing and operational compliance

Analytics and Intelligence Services:

  • Transaction categorization: AI-powered classification of payment flows for regulatory and business intelligence

  • Reserve transparency monitoring: Real-time tracking and verification of stablecoin backing assets

  • Network performance analytics: Blockchain reliability and cost optimization insights

  • Market making intelligence: Liquidity analysis and trading optimization services

Infrastructure Support Services:

  • Gas management optimization: Automated blockchain fee management across multiple networks

  • Enterprise custody solutions: Institutional-grade wallet infrastructure and security services

  • Cross-chain interoperability: Bridging services and multi-blockchain compatibility tools

  • Liquidity provisioning: Market making and automated market maker (AMM) services

Market Players: Early-stage specialized service providers and technology companies building infrastructure tools, with significant acquisition opportunities for established financial institutions.

Competitive Dynamics: Expertise-driven and relationship-dependent, favoring players with deep technical knowledge and established financial services credibility.

Bank Opportunity: Strategic approach balancing build-versus-buy decisions based on market timing and internal capabilities. Success requires expertise in emerging technologies combined with traditional financial services relationships.

  • Economics: Performance-based fees, success-based pricing models, and premium charges for specialized expertise. Higher margins than traditional banking services but requiring significant upfront investment in capabilities and talent.

  • Revenue Streams: Consulting fees, software-as-a-service subscriptions, transaction-based pricing, and revenue sharing arrangements with ecosystem participants.​​​​​​​​​​​​

Conclusion

The stablecoin revolution isn't coming—it's here. With $7 trillion in annual transaction volume and enterprise adoption accelerating, the infrastructure shift to blockchain rails is already underway. The question isn't whether this transformation will happen, but which banks will position themselves as essential infrastructure players.

The path forward requires three decisive moves: commit meaningful capital to capture the orchestration layer where the highest value concentrates, forge strategic partnerships for commoditized functions rather than building everything internally, and architect systems for the blockchain-native future. Your existing advantages—regulatory expertise, enterprise relationships, and operational scale—have never been more valuable. Go build, or buy companies that have already demonstrated PMF. Just don’t wait, otherwise your competitors will seize the opportunity.

APPENDIX

Exhibit A: The Stablecoin Disruption

The global payments system is breaking down. Cross-border transactions average 6.6% in fees while taking days to settle through a correspondent banking network that has shrunk by 40% since 2011. Meanwhile, 1.4 billion people live with double-digit inflation, desperate for dollar access that traditional banking can't provide at scale.

Stablecoins solve this crisis by delivering what the current system cannot: dollar-pegged digital tokens that settle in seconds, cost fractions of a penny, and operate 24/7 globally. The market has grown from $138 billion to $240 billion in just two years, with monthly volumes reaching $650-700 billion in early 2025.

Why Stablecoins Work: The Four Prices of Money

Stablecoins address each fundamental aspect of money more efficiently than traditional rails:

Par Value (Trust & Stability): Regulatory frameworks like the GENIUS Act require full backing with Treasury bills under 93 days, eliminating the fractional reserve risks that plague traditional banking.

Time Value (Speed & Availability): Clear separation between non-yielding payment tokens (USDT, USDC) for transactions and yield-bearing tokenized treasuries (BUIDL, BENJI) for investment, giving users optimal tools for each purpose.

FX Value (Cross-Border Efficiency): Dramatic cost reduction compared to traditional channels where SWIFT charges pennies but banks add $40-120 in compliance fees, while Visa takes $0.15 per transaction but merchants lose 2-3% to intermediaries.

Goods/Services Value (Global Access): Universal dollar access without correspondent banking dependencies, crucial in high-inflation regions driving Latin American adoption.

Real-World Impact

The adoption patterns reveal genuine economic need rather than speculative demand:

  • Turkey: Citizens moved $63 billion through stablecoins in 2024, representing 3.7% of GDP

  • Argentina: 30% premiums paid to access stablecoins during currency crises

  • Nigeria: $24 billion in stablecoin volume despite government resistance, ultimately forcing regulatory reversal

Exhibit B: The Convergence Moment

Five forces are converging to create unprecedented opportunity:

1. De-Banking Crisis Creates Infrastructure Gaps Correspondent banking systematically excludes emerging markets and crypto businesses, leaving only stablecoins to fill critical infrastructure gaps.

2. Dollar Digitization Becomes Strategic Imperative With 60% of global reserves in USD, countries need dollar access without expensive correspondent relationships. Stablecoins digitize America's greatest export, extending dollar utility globally.

3. Enterprise Automation Demands Programmable Money Traditional payment APIs hide bureaucratic complexity behind simple interfaces. Stablecoins enable true programmability where payment logic integrates directly into business applications.

4. Regulatory Clarity Emerges The GENIUS Act's bipartisan Senate committee approval (18-6) provides the first comprehensive US framework:

  • Defines payment stablecoins as dollar-pegged, redeemable digital assets

  • Requires full reserve backing in short-term Treasuries or Fed deposits

  • Grants federal preemption, eliminating state-by-state registration

  • Empowers Treasury to block non-compliant foreign stablecoins

Combined with the FDIC removing crypto approval requirements and Europe's MiCA implementation, banks finally have regulatory certainty.

5. Market Validation at Scale Stripe's $1.1 billion acquisition of Bridge—five times the previous valuation—signals institutional confidence in stablecoin infrastructure value.

Trade Finance Transformation The UK's Electronic Trade Documents Act enables blockchain-based bills of lading, creating legal foundation for digitizing the $14 trillion global trade market. Paired with stablecoins, this allows digital representation of both cargo and payment on shared infrastructure.

Exhibit C: Critical Success Factors

Three infrastructure challenges must be solved to achieve projected 25x growth:

1. Liquidity Infrastructure at Scale Current shallow liquidity constrains transactions above $1 million daily in most regions, with on/off-ramp costs often matching traditional rails. Success requires:

  • Proprietary liquidity networks with differentiated FX internalization

  • Deep banking partnerships across regions for local market access

  • Automated treasury operations optimizing reserves and managing liquidity flows

2. Enterprise Privacy Solutions Public blockchain transparency creates commercial confidentiality challenges. Critical needs include:

  • Zero-knowledge infrastructure maintaining regulatory compliance while protecting sensitive data

  • Cross-chain identity systems standardized across jurisdictions

  • Regulatory reporting tools streamlining compliance without compromising privacy

3. Institutional-Grade Security Enterprise adoption demands uncompromising security frameworks:

  • Multi-layer key management balancing security with operational efficiency

  • Smart contract insurance providing recourse for technical failures

  • Comprehensive audit systems meeting enterprise compliance requirements

  • End-to-end monitoring and verification capabilities

The infrastructure foundation is solidifying, but banks must act decisively to capture the orchestration layer before network effects consolidate around other players.​​​​​​​​​​​​​​​​

Disclaimer: The views and opinions expressed are solely those of the author and do not necessarily reflect those of the author's current employer. This material is for informational purposes only and is not intended to provide legal, tax, financial, or investment advice. Recipients should consult their own advisors before making these types of decisions. The author is not responsible for errors, inaccuracies, or omissions of information; nor for the accuracy or authenticity of the information upon which it relies.