Stablecoins are quickly becoming an essential part of the global financial system. With over $150 billion in average daily transfer volume across public blockchains, digital dollars are already powering payments, settlements and trading activity worldwide. For banks, the question is no longer if clients will demand stablecoin services, but how to provide them safely.

At the heart of this challenge is custody. Just as banks have historically safeguarded deposits, securities and other client assets, they must now determine the right approach for securing stablecoins. The custody model a bank adopts will determine its ability to manage risk, remain compliant and capture new opportunities in digital finance.

Custody Is Critical for Stablecoins

Unlike traditional bank deposits, stablecoins are bearer assets: whoever controls the cryptographic keys controls the money. This creates both a technological and a fiduciary responsibility. Banks must ensure stablecoins are stored in a way that balances security, regulatory compliance and operational efficiency.

Strategic Considerations for Banks

1. Regulatory Alignment
   Global regulators are setting standards for digital asset custody. In the U.S., the OCC and SEC have offered guidance; in Europe, MiCA introduces requirements for safeguarding client digital assets; Singapore’s MAS upcoming stablecoin framework is establishing global best practices. Custody models must anticipate and align with these frameworks to build trust and avoid regulatory friction.

2. Choosing the Right Custody Model
   Banks can either:

• Build Direct Custody: Create in-house wallet infrastructure and controls.

• Leverage Third-Party Custody: Partner with a regulated trust company or qualified custodian.

Many global banks will likely adopt a hybrid strategy—retaining direct custody for certain strategic use cases while relying on a regulated infrastructure provider like Paxos for scale and risk management.

3. Infrastructure & Risk Management
   Institutional-grade custody requires robust wallet technology (multi-signature or multi-party computation), redundant systems and rigorous disaster recovery. Beyond technology, governance is key: segregation of assets, approval workflows and independent audits are essential. Insurance coverage and capital buffers will also become increasingly important as the regulatory environment matures.

The Strategic Opportunity

Getting custody right is not just a compliance exercise—it’s a competitive differentiator. By offering trusted custody solutions for stablecoins, banks can:

• Enable faster and cheaper cross-border payments

• Provide clients with digital settlement options for securities and funds

• Establish a foundation for future tokenized deposits and assets

Custody is the gateway for banks to participate in—and lead—the digital transformation of financial markets.

Conclusion

Stablecoin custody is a strategic priority for banks. The right model combines regulatory alignment, secure infrastructure and trusted partnerships. Banks that move decisively will not only safeguard client assets but also position themselves at the center of the next wave of financial innovation.

This post is provided for informational purposes only and does not constitute legal advice. Readers should consult their own legal counsel regarding any legal matters or requirements relevant to their specific situation. Paxos makes no representations or warranties regarding the legal accuracy, completeness, or suitability of the information contained herein.