Why banks must pay attention to stablecoins | The Paypers

Why should banks care about stablecoins? As stablecoin adoption grows worldwide, their impact on payments, compliance, and banking models can no longer be ignored.

During a live webinar, organised by The Paypers and the Acronym Foundation, Douwe Lycklama, Vice President at Oliver Wyman/INNOPAY spoke with Daniel Lee, Head of Web 3 at Banking Circle, Nicole Sandler, Chief Ecosystem Officer at Ubyx, and Varun Paul, Senior Director, Financial Markets at Fireblocks to explore how stablecoins are reshaping the global financial landscape. Mirela Ciobanu, Lead Editor at The Paypers, reports on why stablecoins matter for banks today and how the market is maturing.

Introduction

Stablecoins are rapidly reshaping global finance. In 2024 alone, stablecoin transfers reached an astonishing USD 27.6 trillion – surpassing Visa and Mastercard’s combined volumes by nearly 8%. Today, the stablecoin market stands at around USD 270 billion, with USDC projected to grow at a 40% CAGR between 2024 and 2027. From cross-border payments and remittances to real-time payouts, stablecoins unlock transformative capabilities: fast, cheap, transparent, programmable, and secure transactions that legacy payment systems struggle to match.

This shift isn’t just about fintech innovation. Traditional financial institutions are also entering the race. Several major US banks, including Bank of America and Citibank, are actively exploring their own stablecoin initiatives. Payments experts now say that ‘every business should have a stablecoin strategy’ – highlighting how quickly this technology is becoming essential. The implications are clear: banks that delay adoption risk being left behind as customers migrate to more agile, innovative providers. As one analysis put it, ‘the choice facing traditional financial institutions is stark: develop a coherent stablecoin strategy or risk being sidelined’.

The inevitability of stablecoin adoption

Nicole delivered a clear message when asked if banks can still ignore stablecoins: ‘No’. She stressed that the real shift we’ve seen is in their use cases. Stablecoins are no longer sitting at the margins; they’re moving toward the core of what banks could be doing. Take cross-border payments: the G20 has already highlighted the potential for stablecoins to play a role there, and there are also opportunities in remittances and in the settlement of tokenised assets. From her vast experience, which includes 12 years at Barclays heading up digital policy, she has observed retail, wealth, and corporate clients increasingly asking for digitally native equivalents. Overall, the question isn’t whether banks should participate, but how quickly they can adapt.

The panel highlighted a crucial shift in perspective. As Varun Paul from Fireblocks noted, when Tether began generating massive profits from its reserve management (achieved by a team of just 50 people), banks worldwide took notice. This wasn’t just about a new technology; it was about a fundamental disruption to traditional revenue models in financial services.

David Lee, from Banking Circle, emphasised that stablecoins are still in their infancy, mainly used in exchanges and DeFi today. But looking ahead, as trillions of dollars in assets become tokenized, they will require tokenized money to enable instant, atomic settlement on blockchain rails. In this sense, stablecoins will evolve into the digital rails of future finance and banks, as part of the ecosystem, will need to grow with them.

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ience questions and concluding remarks

During the audience Q&A, questions ranged from practical implementations of stablecoins in corporate treasury to broader geopolitical considerations, underlining the complexity of this topic.

In conclusion, the panel reiterated that stablecoins and tokenized deposits represent just the beginning of a broader shift towards programmable money and digital assets. While challenges remain, the potential benefits in terms of efficiency, security, and financial inclusion are too important to ignore. As banks and regulators navigate this evolving landscape, collaboration and innovation will be key to shaping the future of finance.

Audience engagement

The audience of our webinar was highly engaged and eager to explore the opportunities ahead in the stablecoin market. Some participants asked whether there could be a battle over who keeps the profits generated by the billions of dollars sitting in stablecoin reserves. Others were curious about how new stablecoins might differentiate themselves. Our speakers explained that, at present, issuers like Tether and Circle retain most of these profits. But competition is intensifying, with challengers already sharing revenue with exchanges and distributors in what looks like a profit-sharing price war. At the same time, not every new entrant is trying to win that same fight. Instead of competing for the existing slice of the pie in crypto trading, some are ‘baking new pies’ altogether, using stablecoins for entirely new financial functions such as payments, commodity financing, or margin management. This expansion could make the stablecoin market far bigger and more diverse than it appears today.

Conclusion

The message from the panel was unequivocal: the time for debate about whether banks should engage with stablecoins has passed. As Varun emphasised in his closing advice, ‘This is happening. Blockchains are transforming financial systems, and therefore, you need to get up to speed quickly.’ The transformation ahead mirrors the internet revolution of two decades ago – a backend infrastructure change that ultimately delivered faster, cheaper, and better services to end users. Banks that recognise this parallel and act decisively will position themselves to capture new revenue streams, defend existing business lines, and meet evolving customer expectations in an increasingly digital financial ecosystem.

For bank leadership teams, the path forward requires clear long-term strategy, strategic partnerships with technology providers, and the courage to innovate within regulatory frameworks. The stablecoin revolution isn’t coming; it’s already here, and banks that fail to adapt risk becoming obsolete in the digital economy.