The global financial system is at a crossroads. Rapid advances in tokenization and blockchain infrastructure are reshaping how value moves across borders and markets. For banks, the most immediate question is how to respond. Stablecoins— dollar-backed digital assets—are already gaining traction as a new settlement layer for global finance. But many bank leaders are asking: How important are stablecoins compared to other priorities, and what role should my institution play?

Paxos is the leading regulated issuer and blockchain infrastructure provider globally. Our partners include enterprises like PayPal, Mercado Libre, Interactive Brokers and many more. We’re regulated across key global markets and maintain the highest quality network of banking partners. We know the challenges and opportunities this space offers. Here’s what you need to know.

Do I need to have a stablecoin strategy for my business?

Yes. Stablecoins are no longer theoretical—they represent tens of billions in daily transaction volume and are used by leading fintechs, payment platforms and trading venues worldwide. While the initial use cases for stablecoins were limited to crypto trading, we are now seeing material volume related to stablecoins for payments, especially in the cross border space.* Without a strategy, banks risk losing relevance in core activities such as payments, custody, clearing and settlement. The right plan depends on your risk appetite and regulatory posture, but standing still is not an option.

* Data from Artemis cites nearly $100B in payments settled in stablecoins from 2023 - 2024. 

Will stablecoins eat away at my deposit base?

This is a common concern—and the answer depends on your strategy. Today, most regulated stablecoins are backed 1:1 by high-quality liquid assets such as Treasury bills and cash held at insured banks. Rather than draining deposits, stablecoins can actually deepen relationships with current clients and attract new clients by embedding web3 payment flows, trading venues and cross-border settlements into your products. Banks that ignore stablecoins risk losing transactional deposits to fintechs and payment companies that are already integrating them. Engaging with stablecoins allows banks to capture that activity, rather than see it migrate elsewhere. This provides banks with the opportunity to reclaim a share of clients’ funds by being an all-in-one provider for both traditional and digital assets. 

Should I issue my own stablecoin, support an existing stablecoin or join a stablecoin network?

The options for banks are threefold:

• Issue your own: Offers full control, but comes with the highest technical, regulatory and liquidity hurdles. Scale is difficult to achieve without widespread adoption, but you stand to retain the full economic benefit of interest earned on reserve holdings.

• Support an existing regulated stablecoin: Enables rapid market entry, access to established liquidity and lower operational risk. However, in most cases, the central stablecoin issuer (like Circle and Tether) retains most, if not all, of the economic benefit while the bank does the hard work of growing distribution channels.

• Join a network: Collaborating on shared infrastructure—such as the Global Dollar Network by Paxos—offers interoperability, regulatory compliance and the potential to shape the future rails of digital finance. You retain the economics of your contribution to growing the network.

For most banks, joining an existing regulated stablecoin network offers the most efficient path forward that balances investment needs with economic upside.

Should I wait for tokenized deposits?

Tokenized deposits are digital representations of commercial bank deposits issued on a blockchain. They are liabilities of a specific bank, backed by the bank’s balance sheet, and function like traditional deposits but with the added benefit of blockchain-based settlement and programmability. Stablecoins, by contrast, are digital tokens backed 1:1 by reserves—typically cash and Treasury bills—held by non-bank issuers. They circulate broadly across platforms and are designed to be universally transferable, liquid and interoperable.

Tokenized deposits will be an important evolution, but they are not yet here at scale. Regulatory frameworks are still emerging, and cross-border interoperability remains uncertain. Meanwhile, stablecoins are already live, widely adopted and liquid across global markets. Waiting for tokenized deposits could leave banks sidelined as competitors and fintechs build customer bases and infrastructure around existing stablecoins. A prudent approach is to experiment with stablecoins today while preparing for deposit tokenization tomorrow.

Aside from stablecoins, what other blockchain-based solutions or products should I consider?

There are many offerings worthwhile for banks to explore. These can include crypto trading, lending against crypto, crypto for wealth management and more. Each of these products offers its own strategic opportunity. While not every bank will want to compete in retail or institutional crypto markets, core custody and settlement infrastructure for digital assets—including stablecoins—will likely be table stakes. Investing in the underlying infrastructure to support stablecoins enables banks to have the foundational components (including both technical and operational processes) to add on other use cases easily in the future. Ensuring interoperability with tokenized assets and stablecoins will be crucial for client services.

Where do I start?

Banks don’t need to reinvent the wheel. Partnering with a regulated blockchain infrastructure provider like Paxos allows you to:

• Leverage existing, regulated stablecoins with proven liquidity and scale.

• Access turnkey solutions for issuance, custody and settlement.

• Join networks designed for interoperability and cross-border payments.

• Build optionality into your long-term digital asset strategy.

The Bottom Line

For banks, the stablecoin question is not “if,” but “how.” The opportunity is to lead in shaping a global, dollar-denominated digital economy—before others do. By engaging with stablecoins today, banks can future-proof their role in global finance while preparing for the tokenized assets and AI-driven systems of tomorrow.

Want to discuss your approach? Reach out to Paxos today to schedule a call.