Weighing stablecoins’ promise in bank payments

Banks exploring stablecoin payments must weigh conversion costs, compliance requirements and operational risks against the benefits of round-the-clock settlement. The FR sat down with Maharaja Subramanian, senior director and head of product management for the Americas at Volante Technologies, to discuss where stablecoins offer an advantage over existing payment systems and what it takes for banks to adopt them. Volante recently announced a USDC partnership with Circle at Sibos.

Where do you see the strongest demand for stablecoin payments among banks and their clients, and what problems are they trying to solve that existing payment systems don’t adequately address?

The strongest demand we are seeing is around cross-border payments and treasury use cases, particularly where businesses need to move value outside of traditional operating hours, reduce reliance on complex correspondent routes, or more efficiently manage their liquidity. 

We're also seeing growing interest on the retail side, where banks want to use distributed ledger technology and digital currencies to pay salaries in U.S. dollars to people living outside the US. For globally distributed workforces, that can mean faster access to wages, lower costs than traditional international transfers, and a stable dollar-denominated way to receive income, especially in markets where access to USD banking is limited.

Banks and other types of financial institutions, and their customers, are not asking for stablecoins simply because they are digital assets. They are tasked with solving very real, very practical problems: payments take too long, liquidity that has to be positioned in advance, limited operating windows, and payments chains involving multiple intermediaries. Stablecoins offer another way to address those challenges through 24/7 settlement and a more direct movement of value. 

For a bank deciding between USDC and an existing payment rail, what determines which is the better option? How do conversion costs, liquidity needs and the recipient’s ability to use the funds affect that decision?

The right choice comes down to the end-to-end outcome for the customer, not how fast one part of the journey is. A bank should weigh the full picture: the amount and destination, total cost - including FX, settlement time, liquidity needs, compliance, and what happens when the payment reaches the recipient.

Conversion is often the deciding factor. USDC can move very quickly on-chain, but that advantage shrinks if getting into or out of it adds cost or delay. If the recipient needs local currency in a bank account, then the quality of the off-ramp, local liquidity, and domestic payment connections all become part of the equation. On the other hand, if the recipient can hold and use USDC directly, or the payment needs to settle outside banking hours, stablecoin can be the clear winner.

Integrating stablecoins into existing infrastructure addresses one hurdle. What operational challenges remain, particularly around compliance, reconciliation and handling payments sent to the wrong wallet?

Integration solves the technology problem, but banks still have to run stablecoin payments to the same standard as any other payment, and that brings some real operational challenges.

Compliance is the first. With traditional payments, banks know who sits behind each account. 

With stablecoins, they also need to know who sits behind each wallet, screen wallet addresses against sanctions lists, assess the risk of the wallets their funds interact with, and meet Travel Rule requirements for passing sender and recipient information. That means adding blockchain analytics to the existing compliance toolkit rather than replacing it.

Reconciliation is the second. Stablecoin payments settle around the clock, while many bank ledgers and processes still run on business days and end-of-day cycles. Banks need to match on-chain transactions to their internal records in real time, account for network fees, and map stablecoin activity into the same reporting and accounting structures they use for every other rail.

Payments sent to the wrong wallet are the third, and probably the most important. On-chain transfers are generally final. There's no equivalent of a recall or chargeback, so getting funds back usually depends on the recipient cooperating. That makes prevention critical: registering and whitelisting approved wallets, validating addresses before sending, and building in checks similar to confirmation of payee.

How do you see stablecoins fitting alongside bank deposits and tokenized deposits? Where might banks gain new business, and where could they face pressure on deposits or payment revenues?

We see these as complementary rather than competing. Bank deposits will remain the foundation of the banking relationship. Tokenized deposits bring that same bank money onto digital ledgers, which makes them well suited to institutional use cases like intraday liquidity, treasury movements, and settlement within or between banks. Stablecoins are strongest where value needs to move across open networks, beyond a single bank's reach, for example cross-border payments, 24/7 settlement, or paying people and businesses outside the traditional banking system. Most banks will end up working with all three, choosing the right form of money for each use case.

They can offer wallets and custody, provide on- and off-ramps between fiat and stablecoins, support corporate clients with treasury and cross-border flows, enable USD payroll for workers abroad, and serve fintechs and digital asset firms that need a trusted banking partner. The pressure is also real. If customers hold more value in stablecoins rather than deposits, that can reduce a bank's funding base. And as stablecoins make cross-border payments faster and cheaper, some traditional revenue from correspondent banking, FX margins, and international transfer fees could come under pressure.

If a bank can offer stablecoin services itself, it keeps the client relationship and the flows, instead of losing them to someone else. 

What will your partnership with Circle allow banks to do that they couldn’t easily do before? Which USDC capabilities will be available for testing first, and what needs to happen before banks can use them in production?

With Volante, USDC becomes another option alongside Fedwire, CHIPS, SWIFT, and real-time schemes, using the same governance, compliance controls, and operational frameworks. So, a bank can decide, payment by payment, when stablecoin settlement makes sense, for example a cross-border transfer outside banking hours, a treasury movement between entities, or USD payroll for employees abroad.

The first capabilities clients will be able to test are the core USDC workflows: minting and redemption, wallet registration, and wallet-to-wallet payments. Commercially, it starts with a tri-party agreement between the bank, Circle, and Volante, which sets out each party's role across issuance and redemption, platform connectivity, and the bank's own customer relationships. 

Operationally, the bank then needs to set up USDC wallets, either for its own treasury and settlement activity or on behalf of its customers, depending on the use case it wants to offer. Alongside that, banks need regulatory clarity in the jurisdictions where they operate, internal sign-off from risk, compliance, and governance, and confidence that controls such as sanctions screening, AML monitoring, reconciliation, and accounting work just as well for stablecoin flows as for traditional payments. 

Looking five years out, where do you expect stablecoins to become a routine part of bank payments, and where will adoption remain limited? What would demonstrate that they have moved beyond pilots into mainstream use?

I’d expect stablecoins to become one component of a much broader multi-rail payments environment, particularly for 24/7 cross-border, treasury, liquidity, and programmable payment use cases. Adoption will remain more selective where existing rails already provide the required speed, cost and certainty.

The clearest sign that stablecoins have moved beyond pilots will be when banks no longer operate them through a separate digital-asset environment. They will be governed, screened, reconciled, and routed within the same infrastructure as other forms of payment. A customer will specify the amount, destination, and required outcome, and the underlying payments environment will determine the appropriate route. At that point, using a stablecoin will simply be one of the available ways to execute a payment, rather than a noteworthy event.