In Part 1 of this series, we uncovered the foundations of stablecoin, their design, mechanics, and why they matter far beyond speculation. In Part 2, we examined the forces shaping them: regulation, risks, and the resilience needed to operate at scale.
Now in Part 3, we move from what stablecoins are to what they can become. This final chapter explores the future: their role in powering decentralized finance, transforming cross-border payments, and even shaping central bank digital currencies (CBDCs). We’ll also compare leading stablecoins, highlighting how their unique approaches signal the direction of the industry. They are at the center of a financial transformation - one that could redefine how money moves, who controls it, and how accessible it becomes.
I. Stablecoins in Banking: Use Cases, Risks, and the Road Ahead
Stablecoins are no longer a niche experiment confined to crypto exchanges. In just a few years, they have grown into one of the most important building blocks of programmable finance. With more than $150 billion in circulation and transaction volumes surpassing those of major card networks, stablecoins are moving into the strategic spotlight for banks and capital markets leaders.
For the BFSI sector, stablecoins represent more than just another form of digital asset. They are a new settlement layer, one that combines the finality of money with the flexibility of programmability. This is a fundamental shift from the decades-old model of messaging and delayed settlement that underpins global payments today. The question is no longer whether stablecoins will play a role in banking. The question is how, and under what conditions, they will be integrated into the infrastructure of financial services.
Institutional Use Cases
Stablecoins and tokenized deposits are already being applied across a wide spectrum of institutional finance. Each application offers meaningful improvements in cost, speed, and risk management, but some use cases deliver incremental gains while others promise transformative, order-of-magnitude change.
In cross-border payments, stablecoins eliminate the need for long correspondent banking chains by collapsing messaging and settlement into a single atomic transfer. Instead of waiting several days for funds to clear, corporates and banks can move money globally in seconds, 24/7. This not only reduces costs but also frees working capital that would otherwise be tied up in transit.
For treasury management, stablecoins and tokenized deposits allow corporates to move liquidity across subsidiaries, business units, or jurisdictions instantly. Instead of depending on credit lines or daylight overdrafts, treasurers can rebalance liquidity continuously, improving efficiency and reducing reliance on costly short-term funding.
In trade finance, programmable payments powered by stablecoins can be tied to delivery events. Once IoT devices or digital ledgers confirm shipment, payment can be released automatically, reducing fraud risk and accelerating supplier payments. Similarly, in supply chain finance, tokenized payments can be distributed automatically to a network of suppliers once contractual conditions are met, ensuring transparency and efficiency across complex value chains.
Consumer and merchant payments also benefit. Card networks today charge merchants 2–3% in fees and settle with delays of several days. Stablecoin payments can match the instant authorization experience consumers expect, while also providing merchants with real-time settlement at a fraction of the cost.
In syndicated loans, tokenized deposits or stablecoins can streamline repayment flows by enabling programmable distribution to multiple lenders, eliminating reconciliation burdens and reducing operational errors.
All of these use cases are meaningful. They demonstrate the breadth of scenarios where stablecoins and tokenized deposits can improve efficiency. But it is essential to highlight where the largest strategic and balance sheet benefits lie in securities settlement.
Every securities transaction, whether in bonds, equities, mutual funds, or money market funds, requires an exchange of cash for assets. In today’s system, these trades can take T+2 or longer to settle. During this time, banks and counterparties face the risk of non-delivery. To manage this risk, they hold capital buffers and reserves on their balance sheet that could otherwise be deployed into productive activities.
When stablecoins and tokenized deposits serve as the cash leg in Delivery-versus-Payment (DvP) transactions, this dynamic changes completely. Smart contracts enforce atomic settlement, meaning the securities and cash legs move together or not at all. Counterparty risk effectively disappears.
The certainty of on-chain settlement allows banks to release capital previously tied up as a hedge against settlement failure. This has profound implications:
- Fee up trapped liquidity
- Leaner balance sheets
- More capital available for lending and investment
On top of this, reducing settlement times from days to seconds cuts exposure windows dramatically. Risk that had to be covered by reserves shrinks, freeing even more capital. And because settlement can occur around the clock, not just within market hours, banks can optimize liquidity continuously.
The implications go beyond operational convenience. A system where both legs of securities settlement are programmable, atomic, and instantaneous represents a structural transformation in how financial markets operate. It enables capital to flow more freely, reduces systemic risk, and increases trust in market infrastructure.
This is why, while BFSI institutions will explore multiple use cases for stablecoins and tokenized deposits, their strategic priority must be enabling them as the cash leg in securities settlement. The efficiency, risk reduction, and capital benefits here dwarf those available in payments, treasury, or trade finance alone.
Complement or Replace Traditional Rails?
It would be a mistake to assume that stablecoins will immediately replace legacy payment systems. Instead, their adoption will likely follow a model of complementarity, where they coexist with and gradually displace certain functions of existing rails.
Take SWIFT. For decades, SWIFT has been the backbone of international banking, but it is fundamentally a messaging system. Settlement depends on a chain of correspondent banks, each introducing delays and risks. Stablecoins collapse these functions, providing both the instruction and the transfer of value in a single transaction. The more banks adopt tokenized money, the less compelling SWIFT’s message-only model becomes.
The same logic applies to credit card networks. Cards offer a trusted and convenient consumer experience, but behind the scenes they are costly and slow. Merchants bear the cost of delayed settlement and high fees, which erodes margins. Stablecoin-based payments could provide near-zero-cost settlement that clears instantly, making them a credible alternative for merchant services.
Systems like ACH and SEPA, which operate in batches and only during specific windows, also stand in stark contrast to stablecoins, which operate continuously. While these traditional rails will not disappear overnight, their limitations will become more apparent as programmable settlement becomes the norm.
II. Risks and Regulatory Guardrails
Despite their promise, stablecoins introduce risks that cannot be ignored. The first is reserve transparency and depegging risk. If issuers fail to hold sufficient or appropriate reserves, confidence can collapse quickly. This is why regulatory frameworks like the GENIUS Act in the U.S. and the Hong Kong Stablecoin Bill require strict oversight, audited reserves, and redemption rights.
Operational risks are another concern. Integrating stablecoins into banking infrastructure requires secure custody, robust compliance workflows, and interoperability with core systems. The Monetary Authority of Singapore’s Project Guardian pilots emphasize the importance of embedding compliance and operational resilience into tokenized money systems from the outset.
Finally, there is the issue of regulatory fragmentation. Different jurisdictions are moving at different speeds, from the EU’s MiCA framework to the UK’s FMI sandbox and Dubai’s VARA regime. Without interoperability and coordination, tokenized money could fragment into siloed pools, undermining its global potential. Encouragingly, institutions like the IMF and the BIS are already stressing the need for cross-border frameworks to avoid precisely this outcome.
The Critical Role of Compliance Up Front and by Design
For BFSI leaders, perhaps the most important lesson is that compliance cannot be bolted on later. Compliance up front is a feature not a flaw. Stablecoins, by definition, are money-like instruments. That means they are subject to the full spectrum of KYC, AML, and CFT obligations.
Next-generation stablecoin designs must therefore include compliance hooks directly in their smart contracts. Whitelisting ensures only verified addresses can transact. Jurisdictional restrictions can be encoded to prevent transfers where they are not permitted. Real-time monitoring tools can flag suspicious transactions for further investigation.
This approach aligns with the compliance-by-design philosophy articulated in MAS Project Guardian pilots and BIS experimentation. It also aligns with supervisory expectations from the IMF, which stresses that tokenized money must uphold the same anti-financial-crime standards as traditional payment systems.
The advantage of tokenization is that compliance can be made programmable. Instead of relying solely on after-the-fact monitoring, rules can be enforced automatically at the point of transaction. At the same time, the immutable nature of distributed ledgers ensures that regulators have an auditable record of every transfer. Combining the inherent immutability of information recorded on chain with upgradeable smart contracts to accommodate for new or modified compliance requirements in the future provides the assurance, efficiency and flexibility needed for financial markets to operate and infrastructure choices today to stand the test of time.
III. PvP and DvP: Future-Proofing Infrastructure
Beyond individual use cases, banks must think about the settlement models that define financial markets. Two stand out: Payment versus Payment (PvP) and Delivery versus Payment (DvP).
PvP is essential for FX and cross-currency payments. It ensures that two currency legs settle simultaneously, eliminating Herstatt risk. DvP underpins securities settlement, ensuring that cash (in the form of stablecoins or tokenized deposits) and securities (such as tokenized bonds, MMFs, or equities) are exchanged atomically.
Recent IMF policy research emphasizes that while tokenization holds immense promise for improving efficiency, fragmentation is the central risk. To avoid this, infrastructures must be designed to support PvP and DvP across chains and interoperable with other payment rails. Industry pilots such as the Regulated Settlement Network in the U.S., the Canton Network in Europe, and Project Guardian in Singapore underscore this trajectory and are all actively testing PvP and DvP models for real-world assets.
The strategic implication is clear. Banks should adopt an infrastructure-first, use case-second approach. Building infrastructure that can handle multiple settlement models, and that is interoperable with both tokenized assets and legacy systems, is the only way to be future-proof. Decisions made today will determine whether institutions can scale tokenization efficiently or whether they will be forced into costly retrofits later. A two- to three-year planning horizon is essential for avoiding costly technical debt and ensuring long-term ROI.
IV. SettleMint's Role
SettleMint helps banks meet this challenge by providing a platform designed to support multi-asset, compliance-ready tokenization. With its Asset Tokenization Kit, institutions can issue both fiat-backed stablecoins and tokenized deposits, embedding compliance features such as KYC/AML integration and role-based permissions directly into the smart contract layer.
SettleMint’s enhanced implementation of ERC-3643 provides the flexibility and auditability regulators demand. Pre-audited contracts reduce time to deployment, while enterprise dashboards provide real-time visibility for issuers, regulators, and auditors. Most importantly, the platform supports multiple chains and interoperability with existing systems, allowing banks to deploy assets across Ethereum, Polygon, Avalanche, and other EVM-compatible networks without sacrificing the control or compliance that existing systems provide.
In practice, this means BFSI leaders can build infrastructure today that supports both PvP and DvP, integrates seamlessly with existing rails, and positions their institutions to lead rather than follow as tokenization scales.
Across this series, we’ve seen stablecoins evolve from a simple concept into one of the most consequential innovations in modern finance. Part 1 showed us the mechanics and purpose behind stablecoins. Part 2 explored the regulatory, risk, and trust frameworks that determine their resilience. Part 3 has revealed how they may reshape payments, empower DeFi, and inspire global experiments like CBDCs.
Taken together, one truth emerges: stablecoins are not just “crypto tools.” They are becoming a bridge between traditional and digital finance, between local economies and global systems, between innovation and regulation. The story of stablecoins is still being written - they will not replace SWIFT, Visa or ACH overnight - but their trajectory points toward a world of value-based financial systems through immense programmability.
Stablecoins can cut costs, unlock liquidity, and open new business models. But capturing that value requires building infrastructure that is compliance-first, interoperable, and designed for multiple settlement models. BFSIs who act now will not only realize near-term efficiency gains but also establish themselves as leaders in the next era of programmable finance. The future of financial services will be defined not by those who waited for certainty, but by those who invested in the infrastructure of tomorrow.
Book a complimentary call with our team to discuss how our Asset Tokenization Kit can establish stablecoin infrastructure for your company.