Reprint: Plain Language Blockchain
Why is cross-border payment sometimes fast and sometimes slow? Where is the innovation of stablecoins, and what challenges hold it back? This article will dissect the scenarios of speed in cross-border payments and stablecoin payments, and based on this, estimate the penetration of stablecoins in cross-border payments.
Introduction
In a coffee shop, scanning a QR code allows for 'instant arrival'; however, when a Shenzhen assembly factory wants to pay 50,000 USD to a Brazilian supplier, it is often informed by the bank: 'Expected T+2 to T+3.'
This is not because the bank's computers cannot keep up, but because three institutional chains - ledger fragments, liquidity inertia, compliance review - have turned technological potential into real-world obstacles. This article first clarifies how these chains slow down cross-border transactions, then examines how stablecoins can accelerate the process, under what scenarios they are truly implemented, and finally dissects the high walls they still need to overcome and the potential market space.
1 Traditional Cross-border Payment: Three Institutional Chains
1.1 Ledger Fragments
Term Explanation | Correspondent Bank: When two banks do not have account relationships, a third-party bank acts as an intermediary for bookkeeping and settlement.
There is no 'World Central Bank Ledger' internationally. If Kasikorn Bank in Thailand wants to pay USD to Banco do Brasil in Brazil, it must first transfer the money to a correspondent bank in New York or London, which then transfers it to the receiving bank. Each additional hop incurs another message, another reconciliation, and another transfer fee.
A Clear Overview of 'Ledger Fragments'
Multi-level Agency → Layered Encryption and Decryption of Messages
Different Operating Time Zones → Difficulty in Synchronizing Approval Nodes
Gradual Collection of Fees → Increased Final Costs
1.2 Liquidity Inertia
Term Explanation | Nostro: A foreign currency account opened at your bank for pre-depositing settlement funds.
Banks must pre-deposit USD at correspondent banks to prevent 'insufficient balance' from causing settlement failures - this portion of money sits idle all day and cannot be invested.
Cut-off at 15:00 New York Time;
Weekend and holiday cut-off for 48 hours;
Instructions sent Friday evening in Asia often 'sleep' until the following Monday.
Two Major Side Effects of Liquidity Inertia
Idle Capital: Companies may have money on hand, but due to 'cross-border in transit,' they cannot circulate.
Hidden Costs: Opportunity cost of pre-depositing dead money + overnight interest differentials.
1.3 Compliance Review
Term Explanation | FATF 40 Recommendations: Global standards for anti-money laundering and anti-terrorist financing.
Term Explanation | OFAC: Office of Foreign Assets Control of the US Department of the Treasury (sanctions list).
In cross-border chains, each hop must independently perform KYC, AML, and sanctions list screening.
If there are slight doubts in the risk control model, it triggers manual review;
Timezone + Holiday Misalignment, commands are often suspended;
If any node slows down, the entire chain follows suit.
Core Pain Points of Compliance Review
'The Slowest Determines the Law': Point delays amplify into link delays.
Enormous Fines: Banks prefer to be slow rather than risk money laundering.
2 The 'Triple Strike' of Stablecoins to Unlock Chains
2.1 Shared Ledger - Compressing Multiple Hops into 'One Hop'
Term Explanation | Shared Ledger: A blockchain database jointly maintained by multiple parties, which is immutable.
In the USDC network, the paying bank transfers 50,000 USDC to the receiving bank's address, and seconds later, the other party confirms on-chain. The steps of correspondent banks, messaging, and reconciliation disappear simultaneously.
2.2 Programmable Liquidity - Turning Dead Money into Active Money
Term Explanation | Tri-party Repo: A repurchase agreement of US Treasury bonds facilitated by a third-party custodian, allowing overnight liquidity lending.
Term Explanation | Tokenized T-Bill: Short-term US Treasury bond tokens mapped on-chain, callable by smart contracts.
J.P. Morgan Onyx: Putting Tri-party Repo on-chain, allowing group internal repurchases to be settled in seconds.
Franklin Templeton BENJI: Issuing Tokenized T-Bill, which can be collateralized for USDC.
2025 (Payment Stablecoin Act): Passed by both houses, allowing reserves to hold ≤ 90-day government bonds and to disclose in real-time, regulated by OCC.
Current Situation: Dead money can now 'pledge government bonds → instant borrow stablecoins', but to become a global conventional tool, expansion is needed in custodial banks, clearinghouses, and regulatory sandboxes.
2.3 Payment is Asset Management - 0% → 4%+
In Europe and the US, as long as a 1:1 reserve is maintained, over 80% of funds can be invested in ≤ 90-day government bonds, yielding an annualized return of approximately 4%. The previously zero-interest customer balances instantly become a revenue engine.
3 Traditional vs. Stablecoins: Who is Faster, Who is Slower, and How to Compensate?
3.1 Scenarios of Traditional Speed
Term Explanation | FedNow / SEPA Instant: Local instant payment systems in the US and Eurozone that achieve real-time fund transfers.
Same Currency + Single Clearing Network → Smooth Technology, Low Costs.
In this sub-scenario, stablecoins have limited speed improvement at the front end, but changing the technological architecture can increase revenue by borrowing 4% government bond interest margin at the back end.
3.2 Traditional 'Conditionally Fast' Scenarios
The London ↔ New York business hours require only one hop to the correspondent bank, allowing USD to settle at T+0.5. However, during weekends or cut-off times, the speed drops, and stablecoins, with 24×7 on-chain settlement, become the 'fallback solution.'
3.3 Scenarios of Traditional Structural Slowness
Long Chain Route: Thailand ↔ Brazil, 2-3 Level Correspondent Banks + Weak RTGS → T+2~3.
Weak Infrastructure: African and Latin American remittance fees of 7-10%.
Small Amount Fragmentation: A freelancer's 200 USD salary is diluted by a 20 USD fee.
Cut-off Blind Spot: Weekend dollar flows can be suspended for 48 hours.
In the aforementioned scenario, the advantage of one hop on-chain + Gas < 1% + 24×7 stablecoins is immediately apparent.
4 Major High Walls that Stablecoins Still Need to Overcome
Local Currency Implementation - On-chain USD wanting to become fiat still requires legal FX licenses and quotas.
Regulatory Fragmentation - The US calls it 'payment stablecoins', the EU classifies it as 'electronic money', and Japan requires 'bank issuance'.
Transparent Reserves - USDC monthly audits, USDT only attestation; discount rates and frequencies lack standardization.
On-chain Compliance - The Travel Rule requires real-name verification, GDPR restricts cross-border data, and businesses must 'run on both ends'.
Macroeconomic Stability - If banks hoard the same stablecoin, a crisis in redemption could impact the short-term government bond market.
5 Market Outlook: Median Estimation
2024 Current Situation: The market value of stablecoins is approximately 150 billion USD; cross-border penetration at 2%.
Assumption: Weekend + Long Chain Remittances account for 12% globally, stablecoin cross-border penetration CAGR 45% from 2025-30.
Annual Market Value (Median) of Cross-border Penetration Savings on Agency Fees * 2026 ≈ 500 billion ≈ 10% ≈ 1.5 billion USD 2030 1-1.5 trillion 25-30% 40-60 billion USD
* Estimated based on the average fee rate of traditional correspondent banks at 50 basis points.
Conclusion
The Slowness of Tradition: Ledger Fragments, Dead Money Cut-off, Compliance Review;
Speed of Stablecoins: Shared Ledger + Programmable Liquidity, turning zero-interest reserves into 4%+ interest margin;
Real High Walls: Local currency implementation, global regulatory consensus, and macroeconomic stability still need to be resolved.
Summary in One Sentence
Stablecoins upgrade cross-border payments from 'long journeys trading time for space' to 'the movement of a pointer on a globally shared ledger'. The speed is impressive, but the true disruption lies in the profit chain of multi-level correspondent banks. As long as regulations, liquidity, and governance are finally synchronized on-chain, cross-border payments will no longer be timed by business days but will be timed by 'block height'.
