One might expect that traditional banks and crypto natives rarely get excited about the same things, but stablecoins are proving to be the exception. Not so long ago, the combined market cap of the top stablecoins pushed past $200 billion, which, of course, hasn’t gone unnoticed.
Why Banks Are Interested in Stablecoins
Stablecoins offer a way for institutions to tap into the crypto economy, and banks see the potential to turn that access into profit. Banks also have the potential to issue stablecoins by converting dollars into tokens and then invest the underlying fiat in safe, interest-bearing assets like U.S. Treasury bonds. However, adoption will remain slow until banks can obtain regulatory compliance and legal approval.
It’s not just a milestone — it’s a signal that any big player in finance can hear. Banks and large fintech firms, which used to keep cryptocurrency at arm’s length, are now stepping up with real interest in stablecoins. They are interested not just in supporting them, but also managing them and integrating these assets into the mainstream global financial ecosystem.
TradFi Is Gearing Up for Stablecoin Adoption
Why the Sudden Shift in Stablecoins?
The answer is fairly straightforward: it’s about revenue. Stablecoins offer a way for institutions to tap into the crypto economy, and they see the potential to turn that access into profit. But the journey from curiosity to full adoption doesn’t happen overnight, and it’s not without hurdles.
What’s Holding Banks Back?
The traditional finance sector isn’t lacking in tools or talent. It has the infrastructure, the capital, and the customer base to bring stablecoins into mainstream usage and make it stick in the long term.
What it doesn’t have — at least, not yet — is regulatory clarity. Currently, the stablecoin sector, like much of crypto-related topics, remains without balanced and thought-out rules. But that is not to say that no attempts are taking place.
Recently, the U.S. House of Representatives has introduced new legislation aimed at stablecoins: the STABLE and GENIUS Acts which are now pending a review that could result in the creation of a unified bill. If accomplished, this could alleviate many regulatory concerns and finally give financial institutions the ability to jump into the stablecoin field head-on.
So the question becomes: once the regulatory fog is dealt with, will banks be the ones to take the lead in this space?
What Are TradFi’s Key Advantages?
One major advantage traditional finance companies have in their corner is trust. If you’re a regulated bank or a licensed fintech, consumers naturally assume a level of security and reliability. Even better, if you already have a long-standing history behind you, which many banks do.
That kind of trust is no small thing when we’re talking about assets that are meant to be “stable”. In the U.S., banks are already allowed to offer crypto custody services. And custody is key to issuing stablecoins, since the issuer needs to hold the fiat that backs the assets. Once banks get the necessary approvals from regulators to issue their own stablecoins, we’ll likely see them move quickly.
Some are already testing the waters: take Emirates NBD in the UAE, for example. The bank’s Liv X app now allows crypto trading, which is a clear signal that traditional banks can and will jump into this sector when there’s a strong enough business case.
And that case is strong. Banks can issue stablecoins by converting dollars into tokens and then invest the underlying fiat in safe, interest-bearing assets like U.S. Treasury bonds. Given today’s elevated interest rates, that’s a very appealing setup. The stablecoins get to circulate in the crypto ecosystem, increasing liquidity and transaction volume, while the fiat sits quietly and earns yield. For the banks, it’s a win-win scenario on all sides.
The real challenge lies in getting through the layers of compliance and legal approvals. But as we’ve already covered earlier, some of these barriers are gradually easing up as regulatory bodies push for a clearer path forward. Once that path is firmly established, we can expect to see a whole new flurry of activity from TradFi players.
What Role Does DeFi Play in Stablecoins?
Now that we’ve talked plenty about traditional finance, let’s turn attention to its counterpart — decentralized finance.
The Reversal: TradFi Enters DeFi’s Turf
DeFi has historically taken inspiration from TradFi when it comes to its services, from lending to exchanges to payment systems. They took traditional financial service models and rebuilt them on-chain, adding a decentralized element to them.
But now, we see the tables turning, as stablecoins gradually gain regulatory traction and banks actively seek to enter the territory that used to be firmly DeFi’s domain. Not just that, but banks have the experience and the capital to dominate in this field, while DeFi faces competition from the very institutions it once sought to disrupt.
Does That Mean DeFi Will Lose Out?
Not necessarily. It is important to keep in mind that stablecoins are the heart of the DeFi ecosystem. They are used for trading, lending, borrowing, and providing liquidity. They drive transactions and serve as the main unit of exchange, powering the real economy inside the crypto market. Without them in the picture, the market would lose a key piece of its infrastructure, and that is unlikely to happen.
Although it does mean that the shifting views on stablecoin adoption are now slowly pulling crypto away from its decentralized principles. Most transactions in the crypto landscape don’t happen in native coins — they happen in stablecoins like USDT and USDC. According to the Chainalysis data, these assets are responsible for over two-thirds of all crypto transactions.
This creates a paradox: stablecoins help crypto grow and gain increased acceptance but also centralize it further. Once again, we arrive at regulation as the centerpiece of mainstream adoption.
Who Wins In the End?
While many might ask this question, I feel that it’s the wrong one. Stablecoins are the kind of assets that can benefit anyone, regardless of which side of the table they’re sitting at. Banks and fintechs can issue them and earn on the underlying assets, while DeFi platforms can integrate them to offer seamless, low-volatility services, manage liquidity, and power transactions.
Instead of a battle, what we are likely to see going forward is a convergence of sorts. If stablecoins are the common ground where TradFi and DeFi can work together, then their expansion and adoption will benefit all sides.
In the future, I expect that we’ll likely see a new kind of financial ecosystem emerge, where banks, crypto platforms, exchanges, and other parties all have their roles. And stablecoins will be the thread that ties them all together, bridging TradFi and DeFi and helping finance as a whole evolve.
