Stablecoins are undergoing a fundamental shift in their role within the global financial ecosystem, moving…

Lede

Stablecoins are undergoing a fundamental shift in their role within the global financial ecosystem, moving from specialized crypto-native tools to a core component of institutional market plumbing. According to recent industry assessments, stablecoins processed approximately 87% more settlement volume in 2025 than in the previous year. This growth resulted in an estimated $9 trillion in activity, a figure based on on-chain transaction data rather than traditional bank-to-bank flows. This massive increase in volume highlights the growing reliance on these assets for high-value financial operations across the digital economy.

The transformation is characterized by the evolution of fiat-backed stablecoins and tokenized deposits into a functional form of “digital cash.” This digital cash is being utilized for liquidity management, collateral movements, and settlements across a financial system that is becoming increasingly tokenized. By serving as a bridge between traditional finance and blockchain technology, these assets are providing the necessary infrastructure for modernizing financial interactions. The scale of transaction activity indicates that these tools are no longer niche instruments but are instead becoming integrated into the broader settlement layer of global markets, facilitating a new era of institutional efficiency and on-chain liquidity.

Context

The rise of stablecoins is part of a broader convergence between traditional and digital finance. Analytical reports have placed stablecoins alongside other tokenized financial products, including bonds, funds, and various credit instruments. This trend was particularly evident throughout 2025, as a diverse range of market participants—including banks, asset managers, and market infrastructure providers—engaged in extensive pilots. These trials were focused on blockchain-based settlement networks, tokenization platforms, and digital custody solutions designed to streamline issuance, improve post-trade processes, and enhance intraday liquidity management.

• Major financial institutions, such as Citigroup and Société Générale, have actively participated in trials utilizing stablecoins to explore their utility in modern banking.
• The deposit token model is gaining traction, with JPM Coin serving as a prominent example of how programmable payments and liquidity management can be integrated into existing banking infrastructure.

These initiatives demonstrate how digital cash layers can be implemented on top of traditional core systems, allowing institutions to modernize their operations without completely abandoning their existing infrastructure. The focus on digital custody and tokenization platforms reflects an industry-wide effort to build the technical foundation necessary for a more efficient and programmable financial environment. This development suggests that the boundaries between traditional market systems and digital asset networks are becoming increasingly blurred as institutions seek the advantages of blockchain technology.

Impact

Regulated institutions are increasingly adopting stablecoins and tokenized deposits as the primary settlement assets for complex financial transactions. In 2025, institutions utilized cash and US Treasury-backed stablecoins to facilitate the movement of value between funds, credit pools, and various trading venues. This adoption is particularly notable in the areas of cross-border payments, repo markets, and collateral transfers. In the repo market—where short-term secured loans involve the sale and subsequent repurchase of securities—stablecoins provide an efficient mechanism for handling the underlying value transfers and securing liquidity.

The regulatory landscape is also adapting to accommodate these changes and provide necessary oversight. The European Union’s Markets in Crypto-Assets Regulation (MiCA) framework provides a leading example of the emerging regulatory structures governing these assets. Under such frameworks, bank-issued products have begun to emerge, with Société Générale‑Forge’s EURCV serving as a notable example of a product developed within the EU’s stablecoin guidelines. These regulations are essential for providing the legal clarity needed for large-scale institutional adoption, ensuring that tokenized assets can be used for redemption and custody with a clear understanding of the governing rules. As these digital assets become more embedded in the settlement layer, they provide a mechanism for more rapid and programmable financial flows, moving beyond the limitations of traditional messaging systems and into the realm of real-time on-chain settlements.

Outlook

The future of digital finance suggests a significant expansion of the infrastructure supporting tokenized assets. It is estimated that more than $300 billion could be invested in digital finance and infrastructure by the year 2030. This investment will likely focus on building the necessary rails for large-scale tokenization and programmable settlement, further cementing the role of stablecoins in the institutional landscape. As firms continue to develop these systems, the emphasis will shift toward creating highly scalable and interoperable networks that can support the demands of global finance and real-time transaction processing.

However, the transition to these “digital rails” introduces a unique set of operational and counterparty risks that must be carefully managed. The reliance on complex code and decentralized systems brings the potential for smart contract bugs and failures in oracle systems, which provide external data to the blockchain. Additionally, cyberattacks on custody systems remain a significant concern for institutions holding large volumes of digital assets. For stablecoins to function as reliable institutional settlement assets, the industry must prioritize security, interoperability, and governance alongside regulatory compliance. Without addressing these technical vulnerabilities, the integration of stablecoins into market plumbing could introduce new forms of systemic risk into the financial environment. The long-term success of this transition will depend on the ability of the sector to balance innovation with robust security standards.