The potential benefits of stablecoins are well documented. Positioned as a cheaper, faster way to move money, their use is being explored by consumers, banks, regulators, merchants and central banks, whether that’s for real-time settlement or cross border payments.
But despite the fanfare, stable coins have yet to deliver meaningful gains at scale, especially when you factor in compliance, regulation and operational integration challenges.
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The problem is not that stablecoins are fundamentally flawed. It actually runs much deeper than this into how our financial and payment systems are built and run. Stablecoins are interacting with banking systems that were never designed to support real-time, always-on money and this is exposing just how outdated much of today’s banking infrastructure really is.
Tokenisation is not a workaround for legacy architecture
Stablecoins promise always-on, instant payments, but legacy platforms cannot deliver this. The friction is especially visible in the US, where much of the US banking system still operates on infrastructure built for batch processing and limited operating hours, rather than continuous payments.
The result is a growing mismatch between what stablecoins enable and what existing systems can handle, leading to reconciliation delays, liquidity constraints and mounting operational strain.
To solve this issue, some institutions may attempt to layer new technology to handle stablecoins and other tokenised instruments on top of existing platforms, but each layer can introduce new points of reconciliation, monitoring and failure. Rather than simplifying cross-border payments, this adds complexity to systems already struggling to manage liquidity, risk and settlement across multiple rails.
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By GlobalDataThis is because real-time payments cannot be treated as a bolt-on. This kind of always-on money requires platforms that can process, monitor and reconcile transactions continuously.
Recent initiatives like Project Agora, led by the International Bank for International Settlements and the Institute of International Finance are a step in the right direction. It is aiming to revolutionise cross border payments using tokenisation but recognises the need for banking infrastructure upgrades and testing that will make this possible.
Money at scale comes with non-negotiables
Stablecoins do not operate in a vacuum. As their use expands, expectations around consumer protection, fraud prevention, liquidity management and regulatory oversight inevitably rise too.
This is the reality of money at scale. Anti-money laundering, liquidity and counter-terrorist financing obligations do not disappear just because an asset is tokenised.
The speed at which tokenised money moves increases safety and fraud risks and removes the margin for error as any intervention needs to happen instantly when funds move. As a result, the safety controls designed for delayed settlement and post-transaction review struggle in always-on environments, because they aren’t designed to support continuous monitoring and prevention.
Encouragingly, we are starting to see the regulatory landscape evolving accordingly. Frameworks such as MiCA in Europe and the Genius Act in the US show clear intent to incorporate stablecoins into the payments landscape, but with the same operational and regulatory expectations applied to other forms of money.
As tokenised payments scale, new requirements around fraud prevention, resilience and consumer protection will continue to emerge. To keep up, banks need to develop infrastructure that can adapt to these regulatory changes, through platforms that support continuous controls and real-time updates, rather than relying on periodic checks.
The widening gap between fintechs and banks
These pressures are already reshaping competition across the payment landscape between banks and fintechs.
Fintechs and non-bank providers are ready for the oncoming wave of tokenised payments because they are built on modern, cloud-native architectures that allow them to innovate quickly and operate continuously. Many banks, by contrast, are still constrained by legacy, batch-based systems and complex point-to-point integrations that slow down change and increase operational risk.
As a result, payments have become the front line of competition for banks. And as stablecoins continue to gain traction, it’s even clearer that payments are no longer a back-office function. They are a frontline competitive differentiator.
Instant payments are already completely reshaping the payments landscape, as customer expectations soar. For banks to deliver for their customers and ensure they are operationally ready for the next wave of payments modernisation through tokenisation, they need to rebuild their payments infrastructure with cloud-native, API-first platforms that support the real time processing and high availability that these assets require. This is how stablecoins will deliver on their potential.
Steve Cook, Co-Founder and Strategic Advisor at Form3
