The Green Sheet Online Edition
June 9, 2025 • 25:06:01
On-chain transfers - the shift traditional finance can't ignore
As the spotlight on crypto grows and intensifies, it's not just speculative crypto assets and flashy digital tokens like memecoins commanding attention. A quieter but more profound shift is happening with on-chain transfers. These transactions, which occur directly on a blockchain network rather than through traditional financial systems, are gaining serious traction globally, especially the use of stablecoins (a type of digital asset pegged to and backed by fiat currencies). For banks, fintechs and payment service providers (PSPs), ignoring this shift is no longer an option.
From niche to necessity
Stablecoin transfers hit an astonishing $27 trillion in 2024 (see visaonchainanalytics.com/transactions). That's more than Visa and Mastercard's combined transaction volume. And this figure is poised for explosive growth as banks, corporations and individuals deepen their grasp of digital assets and refine their own adoption strategies. So, what does all this mean for traditional financial players?
Long dismissed as the playground of tech enthusiasts and crypto anarchists, blockchain has matured significantly since Bitcoin's inception 16 years ago, evolving to encompass a wide range of crypto assets supporting varied use cases.
For financial institutions and PSPs, the growth of stablecoins in particular signifies a continuing shift toward decentralized finance (defi) as a mainstream and dependable alternative to traditional systems. Institutions that have been engaging or experimenting with on-chain transfers like stablecoin payments will likely have discovered the following:
- Lower transaction costs: While there are numerous public blockchain networks available, and selecting the right one is an important factor, transaction fees are generally very low, especially when compared to the costs of cross-border payments through traditional banking systems.
- Near-instantaneous and final transactions: Blockchain transactions are near-instantaneous (though speeds vary by network) and final once signed, delivering unmatched reliability compared to traditional banking, where cross-border payments can take days or weeks and may still be canceled or reversed after delays.
- Highly secure networks: Blockchain networks leverage advanced cryptographic techniques and decentralized architecture, making them highly secure, antifragile and robust, unlike traditional systems that rely on centralized points of vulnerability.
- Regulatory progress: While the regulatory landscape on digital assets is still highly fragmented, major markets have now established, or are actively in the process of establishing, clearer frameworks, reducing uncertainty and encouraging institutional adoption.
- Diverse assets for varying needs: Amid growing global uncertainty and multi-polarity, blockchain's decentralized nature has attracted financial institutions and other market participants to adopt a diverse range of digital assets for varying needs – from Bitcoin as a form of "digital gold," stablecoins for seamless global payments, and tokenized assets for enhanced liquidity and investment opportunities.
Stablecoins are a major part of driving this shift. Once tools for crypto traders, they are increasingly now recognized as serious financial instruments with global relevance, offering a compelling proposition: faster and final settlement, lower fees, transparent ledgers and always-on availability.
In emerging markets, they unlock seamless access to U.S. dollars for businesses and individuals bypassing the hurdles of traditional banking and foreign exchange. For remittances, gig worker payments and business liquidity, they're redefining the boundaries of financial possibility with speed and efficiency.
Why traditional finance can't compete
What we're seeing with the growth of on-chain transfers isn't about ideological disruption anymore. It's about performance. The traditional financial system, built on legacy infrastructure and batch settlement, simply can't compete with the speed, efficiency and programmability of public blockchain networks. The benefits are clear:
- Faster, cheaper cross-border payments: Traditional systems rely on multiple intermediaries, high fees and slow processing times. On-chain transfers cut through these inefficiencies, offering near-instant transactions with low fees and settlement finality.
- New revenue streams: Blockchain technology opens avenues for banks and fintechs to offer an exciting and broad spectrum of value-added services, such as tokenized asset management, smart contract-based lending, and real-time settlement solutions. These innovations can attract new customer segments while retaining existing ones.
- Improved compliance and transparency: Blockchain's immutable ledger provides unparalleled transparency, simplifying compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations. This is particularly advantageous for institutions operating in highly regulated markets like Europe.
However, capitalizing on these opportunities requires significant investment in blockchain infrastructure and skilled talent
What's holding financial institutions back?
Despite the momentum, adoption among traditional financial institutions remains mixed. Many still conflate blockchain, Bitcoin, stablecoins, cryptocurrency, central bank digital currencies (CBDCs), and tokenized assets as one and the same. However these are clearly very different instruments that comprise a broader digital-assets asset class. Misconceptions persist that on-chain systems are inherently risky, unregulated or limited to fringe use cases. In reality, public blockchain infrastructure is being adopted rapidly, is central to many regulatory developments across financial markets, and is far more resilient than many assume. It's decentralized by design, making it robust against single points of failure—unlike some traditional systems. And when implemented well, stablecoin transactions can be fully compliant with existing AML/KYC standards, with emerging best practices developing globally.
That said, the technical hurdles are real. Integrating on-chain functionality into aging tech stacks is no small feat, although this is generally true for all types of digital transformation. Perhaps the greater challenge is cultural and educational, with many institutions still not fully understanding that this isn't a passing trend, or seriously committing to developing their own digital asset strategies. This phenomenon signals a fundamental shift in financial infrastructure that requires education, strategic thinking and a willingness to embrace change.
Regulation also plays a pivotal role. The EU has taken the lead with its Markets in Crypto Assets (MiCA) framework, while the United States is pivoting quickly toward pro-innovation stablecoin regulation to maintain dollar dominance. Meanwhile, the UAE and Singapore have established themselves as global crypto hubs, drawing talent and capital. The UK, however, risks falling behind without a clear, coherent regulatory strategy.
Adapt or be disrupted
Banks and fintechs don't need to overhaul everything overnight, but they do need a plan. On-chain transfers are increasingly being recognized as an excellent alternative to traditional rails like SWIFT, especially for cross-border transactions and for time-sensitive use cases. It seems likely the next three to five years will see hybrid models dominate—where institutions offer both fiat and crypto rails, and customers are given the flexibility to choose what works best for them.
Cross-border systems like SWIFT will continue to play a role, particularly for high-value transactions and legacy systems. However, the rise of stablecoins and tokenized assets will inevitably erode their market share, especially in regions where speed and cost are critical. It's not an easy feat, though. There's also regulatory complexity. Operating across multiple jurisdictions adds layers of regulatory complexity. PSPs must navigate varying compliance requirements while ensuring the security of customer data, a task that demands continuous risk management processes.
The opportunity for early movers
Institutions bold enough to move early will secure a competitive edge. The rise of Tether, issuer of the world's largest stablecoin and among the most profitable companies in the world, and Stripe's billion-dollar acquisition of Bridge, point to what's coming. Banks and fintechs must take notice and build their own strategies—or risk obsolescence.
Beyond competitive necessity, this is also a chance to do better and improve financial access. In emerging markets, on-chain solutions provide reliable access to global currencies without the need for a bank account. And stablecoins, particularly those pegged to the U.S. dollar, offer stability to billions of individuals and thousands of businesses in emerging markets that until now have had no alternative to holding their economic value in their often-volatile and inflationary national currencies.
It's time to engage
On-chain transfers are no longer speculative hype. They are a practical, scalable solution to many of the inefficiencies that have plagued traditional finance for decades. For institutions willing to learn and adapt, the rewards are considerable—from reduced costs and faster settlements to enhanced transparency, access to new markets, and delivering better financial products and services for customers. But the window for passive observation is closing. The time to explore, experiment and build a strategy is now. The rise of on-chain transfers demands individual research, study and experimentation, and industry collaboration.
Banks, fintechs, and PSPs must work together as common industry participants to assess and develop services that leverage blockchain's strengths while addressing its limitations and abstracting away complexities for the benefit of clients, many of whom simply want their providers to offer better, faster, more cost-effective services. As digital assets continue to mature and regulatory clarity emerges, financial institutions that act decisively will shape the next era of finance, one that's faster, fairer and truly global.
David Unsdorfer is head of non-bank financial institutions for Clear Junction, a London-based, FCA-regulated financial institution that provides cross-border payment and treasury services to banks, fintechs, and other regulated financial entities. Contact David via LinkedIn at linkedin.com/in/davidjuns.
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