Stablecoins are moving beyond experimentation and into the financial services mainstream. Fiserv launched its FIUSD stablecoin in July, Mastercard recently acquired BVNK for up to $1.8 billion, and Visa has started offering stablecoin advisory services. These actions are driven by customer demand for faster, more efficient cross-border payments, along with increased interest in programmable payments and automated settlement capabilities that traditional payments cannot provide.
But while stablecoins offer noticeable strengths over traditional payment rails, those systems aren’t going away. Instead, the rise of stablecoins is causing them to adapt and modernise. Real-time payment systems continue to expand globally, card networks are investing heavily in digital asset capabilities, and SWIFT is pursuing modernisation initiatives designed to improve the speed and efficiency of cross-border payments.
Stablecoins are also driving innovation in traditional payment rails. While the industry continues to embrace these new forms of digital currency, it must also be prepared to integrate with and evolve traditional payment rails. Indeed, one of the biggest challenges facing financial institutions will be building the infrastructure needed to support a multi-rail payments environment.
Stablecoin’s Biggest Infrastructure Challenges
Traditional payment systems may be built on complex, cumbersome legacy technology, but they do have some inherent advantages. Organisations have spent years refining legacy payment platforms to meet throughput, high-reliability, business-continuity, and security requirements. They may not be designed to meet the speed and responsiveness requirements of modern business, but they are generally very good for resilience, scalability, compliance, and data protection.
In comparison, the underlying infrastructure for stablecoins is, at this point, more of a concept than a practical reality. That’s good news in one respect: organisations essentially have a blank slate upon which to build their stablecoin technology. However, it poses a couple of major challenges.
First, the infrastructure must be as robust as that already in place and in operation in traditional payment systems, with the same service-level agreements and security controls. However, organisations must also account for the unique demands of distributed ledger technologies (DLTs). Compared with traditional payment environments, DLT systems add further layers of operational complexity that can quickly become difficult to manage at scale. As a result, automation becomes a critical requirement rather than an optional feature. Financial institutions must consider how they will automate the processes required to deploy, maintain, monitor, and operate these environments.
Interoperability is Critical to Success
Building an automated, secure, and resilient stablecoin platform is only part of the challenge. Since stablecoins and traditional payment systems will operate side by side for the foreseeable future, organisations must configure their new networks to effectively integrate with and communicate with the wider payments ecosystem that customers already rely on.
Financial institutions are increasingly wary of creating new technology silos. So, while it’s possible to deploy a standalone stablecoin platform with its own features and safeguards, that creates a disconnected island that operates independently from the systems banks use every day.
Platforms for digital assets management and custody cannot remain isolated islands, but have to be integrated into the existing business-, compliance- and IT-landscapes of the organisation. Tightly integrating stablecoin capabilities with existing account management platforms, payment systems, fraud controls, and compliance processes addresses this issue. Stablecoins must be able to interact with traditional payment rails as well as with other stablecoins, tokenised deposits, and emerging digital currency frameworks across regions worldwide.
Why Open Hybrid Architectures Matter
Achieving this level of interoperability requires a technology architecture that connects emerging digital asset classes to existing payment rails while retaining high levels of flexibility, resilience, and security. This is where open hybrid architectures come into play.
Hybrid environments give financial institutions an edge in resilience and business continuity across borders and systems. For instance, many stablecoin networks span multiple jurisdictions and cloud environments. Open hybrid architectures enable organisations to easily move workloads across disparate locations without downtime or interference.
This level of flexibility will become increasingly important as the payments landscape evolves. An open infrastructure is essentially platform-agnostic. It allows organisations to respond to changing requirements without rebuilding their underlying technology at the whim of every new regulation or system update. A massive benefit in a world where the regulatory and technological landscape is continually changing.
A commitment to openness, however, provides more value than just flexibility and portability. Many of the distributed ledger technologies that underpin stablecoin ecosystems were developed within open source communities, creating a natural alignment between open source innovation and open hybrid architectures. By embracing this community, organisations can leverage innovation from the broader technology ecosystem while maintaining the security, transparency, governance, and operational controls required for modern-day financial services.
An Infrastructure for Today and Tomorrow
The financial market is at an inflection point. Traditional payment networks are no longer the only option for moving money across borders and businesses. Today, a growing number of organisations are turning to stablecoins to leverage a currency that offers the stability of fiat and the speed of bitcoin.
However, as financial institutions navigate this exciting opportunity, it’s important to remember that although stablecoins offer significant benefits over traditional payment rails, those rails remain vital to the global economy. Therefore, financial institutions should not choose between rail systems. Instead, they should focus on building an open infrastructure capable of supporting both—an approach that will set them up well now and in the future.
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