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Insights and Expertise

chain's immutable ledger provides unparalleled trans- Cross-border systems like SWIFT will continue to play a
parency, simplifying compliance with anti-money role, particularly for high-value transactions and legacy
laundering (AML) and know-your-customer (KYC) systems. However, the rise of stablecoins and tokenized
regulations. This is particularly advantageous for in- assets will inevitably erode their market share, especially
stitutions operating in highly regulated markets like in regions where speed and cost are critical. It's not an
Europe. easy feat, though. There's also regulatory complexity. Op-
erating across multiple jurisdictions adds layers of regula-
However, capitalizing on these opportunities requires tory complexity. PSPs must navigate varying compliance
significant investment in blockchain infrastructure and requirements while ensuring the security of customer
skilled talent. data, a task that demands continuous risk management
processes.
What's holding financial institutions back?
The opportunity for early movers
Despite the momentum, adoption among traditional fi-
nancial institutions remains mixed. Many still conflate Institutions bold enough to move early will secure a com-
blockchain, Bitcoin, stablecoins, cryptocurrency, central petitive edge. The rise of Tether, issuer of the world's larg-
bank digital currencies (CBDCs), and tokenized assets est stablecoin and among the most profitable companies in
as one and the same. However these are clearly very dif- the world, and Stripe's billion-dollar acquisition of Bridge,
ferent instruments that comprise a broader digital-assets point to what's coming. Banks and fintechs must take no-
asset class. Misconceptions persist that on-chain systems tice and build their own strategies—or risk obsolescence.
are inherently risky, unregulated or limited to fringe use
cases. In reality, public blockchain infrastructure is being Beyond competitive necessity, this is also a chance to do
adopted rapidly, is central to many regulatory develop- better and improve financial access. In emerging markets,
ments across financial markets, and is far more resilient on-chain solutions provide reliable access to global curren-
than many assume. It's decentralized by design, making cies without the need for a bank account. And stablecoins,
it robust against single points of failure—unlike some tra- particularly those pegged to the U.S. dollar, offer stability
ditional systems. And when implemented well, stablecoin to billions of individuals and thousands of businesses in
transactions can be fully compliant with existing AML/ emerging markets that until now have had no alternative
KYC standards, with emerging best practices developing to holding their economic value in their often-volatile and
globally. inflationary national currencies.

That said, the technical hurdles are real. Integrating on- It's time to engage
chain functionality into aging tech stacks is no small feat, On-chain transfers are no longer speculative hype. They
although this is generally true for all types of digital trans- are a practical, scalable solution to many of the inefficien-
formation. Perhaps the greater challenge is cultural and cies that have plagued traditional finance for decades. For
educational, with many institutions still not fully under- institutions willing to learn and adapt, the rewards are
standing that this isn't a passing trend, or seriously com- considerable—from reduced costs and faster settlements
mitting to developing their own digital asset strategies. to enhanced transparency, access to new markets, and
This phenomenon signals a fundamental shift in financial delivering better financial products and services for cus-
infrastructure that requires education, strategic thinking tomers. But the window for passive observation is closing.
and a willingness to embrace change. The time to explore, experiment and build a strategy is
now. The rise of on-chain transfers demands individual
Regulation also plays a pivotal role. The EU has taken research, study and experimentation, and industry col-
the lead with its Markets in Crypto Assets (MiCA) frame- laboration.
work, while the United States is pivoting quickly toward
pro-innovation stablecoin regulation to maintain dollar Banks, fintechs, and PSPs must work together as common
dominance. Meanwhile, the UAE and Singapore have es- industry participants to assess and develop services that
tablished themselves as global crypto hubs, drawing tal- leverage blockchain's strengths while addressing its limi-
ent and capital. The UK, however, risks falling behind tations and abstracting away complexities for the benefit
without a clear, coherent regulatory strategy. of clients, many of whom simply want their providers to
Adapt or be disrupted offer better, faster, more cost-effective services. As digital
assets continue to mature and regulatory clarity emerges,
Banks and fintechs don't need to overhaul everything financial institutions that act decisively will shape the next
overnight, but they do need a plan. On-chain transfers are era of finance, one that's faster, fairer and truly global.
increasingly being recognized as an excellent alternative
to traditional rails like SWIFT, especially for cross-border David Unsdorfer is head of non-bank financial institutions for Clear
transactions and for time-sensitive use cases. It seems
likely the next three to five years will see hybrid models Junction, a London-based, FCA-regulated financial institution that
dominate—where institutions offer both fiat and crypto provides cross-border payment and treasury services to banks, fintechs,
rails, and customers are given the flexibility to choose and other regulated financial entities. Contact David via LinkedIn at
what works best for them. linkedin.com/in/davidjuns.

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