Bansal & Thivaios 2 (June 2026)

BTRM Faculty Opinion 

Stablecoin Payment Networks: Silver Bullets or Shotgun Pellets? – [Article 2/2]

“Anyone can create money; the problem lies in getting it accepted”

Hyman Minsky, 1986

This article is a 2part series on stablecoins. Based on the foundations outlined in the preceding article, this piece discusses stablecoins as separate currency networks, outlines the layers involved in transactions and provides strategic considerations for bank Treasurers.

Impact on Bank Liquidity: The Great Shift

The rise of stablecoins has created a “double-edged sword” for traditional banking liquidity. For smaller community banks, stablecoins represent a threat of disintermediation. As retail and corporate users move cash out of low-yield savings accounts into digital dollars, banks lose their cheapest source of funding, forcing them to raise rates to retain deposits. Conversely, for systemically important “megabanks,” stablecoins may be a liquidity boon. Because many issuers would prefer the safety of Tier-1 institutions for their cash reserves, liquidity may end up concentrating at the top of the financial pyramid. This may reinforce the dominance of global banking giants while squeezing the margins of local lenders.

Stablecoins are multi-layered networks

Because of the multiple issuers, each stablecoin is better understood as a separate currency network, even if each references the same underlying fiat. Therefore, stablecoin networks inevitably demonstrate the properties underpinning network economics. Rather selectively for our purposes:

• The value of a network increases as the number of users – and prospective number of users – increases (Economides, 1996).
• Value perception is two sided, stemming from both the demand and the supply sides (Rochet & Tirole, 2003).

In this context, payment value networks are better understood comprising of three layers:

In ‘current’ payment networks, the information and settlement layers are disjointed (e.g., SWIFT message versus recipient funds credit). The settlement and value recognition layer, however, are often internalised by either of the participant banks.

While stablecoins integrate the information and settlement layers, they do not necessarily integrate the value recognition layer. Where either the sender’s or the recipient’s operating currency is different than the stablecoin, or where value is required in different stablecoin, value recognition requires network connectors (bridges such as on- or off-ramps). This is illustrated at Figure 1.

Figure 1 – Payment flow and value recognition scenarios for stablecoin enabled payments © True North Partners LLP. Used with permission.

Stablecoins offer significant benefits by integrating messaging and settlement within a closed loop stablecoin value network. End user value (two-sided), however, often involves larger or more networks. Under these scenarios, stablecoins contribute only part of the solution and any stablecoin network alone cannot be the silver bullet.

Non-Tech Constraints Matter as Much as Infrastructure

Technology can improve existing payment processes and mechanisms but does not address all pertinent payments components. Local liquidity, trapped funding, AML and sanctions, trust and business relationships, and regulatory fragmentation (amongst others) are equally important considerations.

Even with yesteryear’s technologies, the impediments to sending funds to -say- North Korea were hardly technological. Stablecoin networks are not more global than the societal overlays that impact them.

Strategy Implications for bank Treasurers

What does this all mean for bank Treasurers? The following discussion points are arguably limited but lay some foundations for the development or enhancement of valuable stablecoin networks.

1. First mover advantages are material: Existing networks such as Tether (USDT) and Circle (USDC) enjoy huge first mover advantages albeit in niche end user value networks. While the creation of stablecoins is theoretically only bound by regulatory constraints, in practice only few networks will achieve critical mass and exhibit positive externalities.
2. Successful networks are not necessarily the best ones: Network externalities effectively lock users in the network, due to factors ranging from convenience to reach to switching costs. Such path dependency often limits innovation and handicaps new entrants – as the case of the most prominent social networks illustrates. While we are still in early stages of network dominance, a strategy of pursuing the ‘best stablecoin’ may fail due to the traction achieved by lesser good networks.

3. Interoperability is impractical beyond a point: Stablecoins and associated blockchain based solutions – such as tokenised deposits and deposit tokens – are not governed by any ISO-like standards. Due to path dependencies outlined above, any standards are likely to evolve incrementally and be influenced by existing dominant networks, even if such networks are not optimal. Practically, a bank may well be able to inter-operationalise its own network with that of another bank. This chain of thought, though, quickly becomes impractical as the number of connections increases.

4. Stablecoin networks benefit from existing bank networks: Networks do not exist in a vacuum. Banks already have their own, or participate in, existing nexuses such as client networks and country of presence networks. Introducing stablecoin networks within existing value networks provides a head start and can further augment cross network externalities. Bank strategies may also focus on expanding existing networks, instead of building new ones, by contributing their client, geography, local liquidity and regulatory relations reach.

5. Prepare for a world of stablecoin correspondent banking (network connectors): Correspondent banking is often considered the malaise of existing payment methods. As already discussed though, networks hardly ever demonstrate unlimited reach. If ‘correspondent’ sounds unpalatable, we already experience the need for alternative terms such as network connectors, bridges, exchanges, translators, on- or off-ramps amongst others. Banks, with their existing networks outlined previously, are well positioned to play this role in blockchain based infrastructures that provide more transparency, traceability, efficiency and speed than existing correspondent relationships.

In summary, bank strategies can develop own stablecoin networks or extend existing ones, by becoming a network node, bridge or -dare we say- stablecoin correspondents. At figure 2 we illustrate a number of different stablecoin business models available for regulated institutions, depending on risk appetite, technical capabilities and network size. This may be the scope of a future paper from BTRM.

Figure 2 – Digital currency strategies available to banks, categorised based on infrastructure and the backing asset

© True North Partners LLP. Used with permission.