The Potential of Stablecoins to Reshape Global Capital Flow

Stablecoins, as the most representative practical tools in the field of digital currency, demonstrate the potential of blockchain to provide a new and efficient infrastructure for traditional financial payment systems. Over the past year, the total market value of stablecoins has increased by more than 50%, currently exceeding $250 billion, facilitating the efficient circulation of trillions of dollars in global payment funds.

Stablecoins fully embody the core capability of blockchain to "transfer funds and value instantly," making it possible to build a closed-loop payment system on-chain. However, real enterprise-level payment scenarios are far more complex than simple peer-to-peer transfers.

Currently, most enterprise-oriented stablecoin applications adopt a "stablecoin sandwich" architecture: using blockchain to replace traditional payment channels for horizontal value/fund transmission, while both ends still rely on traditional financial payment systems. Although this design has brought significant improvements, it also limits the full release of blockchain advantages.

This article will analyze the specific improvements of the stablecoin sandwich structure in fund management, B2B payments, and card network settlements from the perspective of global capital transfer, and discuss how to overcome challenges at both ends to ensure that the value of blockchain runs through the entire process.

1. Background of Stablecoin Payments

Among the many applications of stablecoins, B2B enterprise payments are the most notable. Last year, the monthly B2B enterprise payment amount grew from $770 million to $3 billion. Stablecoins accounted for nearly half of the transaction volume on a certain payment platform, with 49% of customers actively using stablecoins for payments.

The internal data of leading companies reflects the size of the segmented market. One company has an annual processing volume of about $15 billion, with approximately half coming from B2B enterprise payments. Another company's annualized transaction volume is $10 billion, estimated to account for 20% of the global B2B stablecoin cross-border payment market.

The use of global payments is increasingly popular, as the advantages of stablecoins based on blockchain infrastructure are amplified when financial payment infrastructures become more outdated. The traditional system facilitates over $100 trillion in global payment volume each year; however, businesses and banks still face significant complexity and delays.

2. Various Models of Global Cross-Border Payments

2.1 Bank Infrastructure Based on SWIFT

For interbank transactions between different countries, the entire process is divided into two parts: "message transmission clearing" and "fund settlement": SWIFT is responsible for transmitting transfer instructions between banks, while the actual flow of funds only occurs between those banks that have pre-established accounts and can directly conduct debit/credit transfers.

Only when both banks are connected to the SWIFT system and are partners with each other can the final transfer be completed. If the two parties have not established a direct cooperative relationship, they must connect through correspondent banks with the appropriate interfaces and positions to complete the fund settlement.

As the need for more intermediary banks increases, issues such as settlement times extending to several days, rising costs, tracking challenges, and other problems also emerge. This has led to cross-border payments between neighboring countries with underdeveloped financial infrastructure requiring detours through banks in the Global North, causing significant inconvenience.

2.2 PSP-based cross-border fund pool model

The service model of the cross-border fund transfer provider (XBMT) has emerged. It aims to allow enterprises to complete global payments without having to go through the SWIFT channel directly, a capability also known as "global multi-currency account" or "local collection account."

Its essence is a cross-border fund pool model, with the core being to provide enterprises with a multi-currency fund pool, allowing them to make flexible payments between different countries. XBMT is responsible for managing compliance and banking relationships, while enterprises or individuals gain a single multi-currency banking product, forming a "closed loop."

XBMT has now established an important position in the global B2B enterprise payment and corporate fund management market. They operate in a closed-loop model, preparing and scheduling the required liquidity in advance, and then distributing it to corporate clients on demand. Due to their control over the end-to-end process, XBMT has set strict limits and risk control rules for clients.

Despite its glamorous appearance, XBMT is still built on the SWIFT framework, relying on sophisticated liquidity management techniques to "create" an instant settlement experience. However, the speed and scale of this design are always constrained by the available liquidity of XBMT in specific countries, as well as the settlement efficiency of its underlying settlement framework.

Some payment companies have built relatively complete "global multi-currency accounts" or "local collection accounts" in the currently developed G10 countries, and are able to achieve relatively "zero-cost" fund disbursement. In contrast to the "stablecoin sandwich" model, which requires deposit and withdrawal costs on both ends, this offers a greater cost advantage. Therefore, the adoption of stablecoin payments also needs to have clear scenario advantages.

2.3 stablecoin mode

Stablecoins represent a deeper leap: they leverage blockchain technology to reconstruct the way internet business operates.

The settlement cycle of a stablecoin is equivalent to the block time of its issuing blockchain, which is a magnitude of speedup. Any system that relies on traditional methods can be replaced by a shared, verifiable ledger.

Moreover, stablecoins are typically deployed on top of smart contract platforms, enabling innovative systems and workflows that are not achievable within traditional banking frameworks. On open and verifiable protocols, anyone can add functionalities to stablecoins without permission.

From a macro perspective, faster and more interactive financial payments can directly expand global GDP: companies can receive payments more quickly, and funds can enter downstream processes more rapidly, thereby reducing management costs and capital occupation caused by settlement delays. When the settlement cycle is compressed from "days" to "seconds" or "minutes", its chain effect will sweep across the entire economy. At the same time, the existence of verifiable standards allows financial innovation to occur globally for the first time without permission.

3. The Application of Stablecoins in Global Payments

3.1 Corporate Fund Management

For example, in corporate fund management: a company has an obligation to make a payment in currency b in country B on a certain date. They must prepare to transfer funds in currency a from country A before the payment is due. This is a prepayment process, and the corporate finance team must consider the preparation time required to execute the payment on time.

The team must open an account at a local bank in order to execute payments on time. Sometimes, to support this, the company may seek short-term loans from partners in the region. The longer the global funding settlement delays, the greater the foreign exchange risk exposure and the higher the capital requirements for the corporate finance department.

Stablecoins simplify the system by eliminating the requirement to control delays in international settlements. Although the "stablecoin sandwich" structure still requires the initial deposits and withdrawals at both ends to touch the fiat currency system, the existence of stablecoins allows for smooth capital flow between the two fiat "ramps."

By using stablecoins, the entire process is split into local transfers within country A and country B, while the blockchain completes the global liquidity settlement between the two parties in the middle. ( Note: To make this exchange successful, there must be sufficient liquidity on-chain to exchange A stablecoin for B stablecoin. )

3.2 B2B enterprise payment

The process of global B2B enterprise payments is similar to corporate fund management, but B2B scenarios can yield greater benefits because B2B payments are often more complex, and their success or failure can affect other aspects of enterprise operations.

In this type of payment, banks from different countries are usually directly tied to the delivery of a service or goods. This means that all parties will be more sensitive to tracking the progress of the payment.

In addition, if the payment channels required by enterprises are relatively niche, they often need to go through multiple international transfer routes to complete the fund allocation. Such routes may lack a clear progress reporting mechanism and, being restricted by banks' non-24/7 operating hours, the payment time can easily be extended.

When these B2B cross-border payment processes are executed with stablecoins in the middle of the chain, a series of additional benefits will emerge at the enterprise level:

• Both parties can clearly and in real-time manage and monitor the payment status.
• Financing can be directly linked to time-sensitive raw materials or delivery nodes, allowing companies that heavily rely on the timely arrival of goods to avoid significant risks or delays.
• After the risk is reduced, the cost of capital decreases, and the capital turnover speed increases; as the stablecoin integration solutions mature, this effect will bring significant productivity improvements globally.

Similar to enterprise fund management scenarios, the agency bank links, pre-financing needs, and most foreign exchange exposures have basically been removed. The entire process has been compressed from the past 3 days to just a few seconds, and there is no need to consider market closures, significantly reducing and simplifying the operating capital requirements.

3.3 card organization network settlement

In the card organization network, the issuing institution sends payment on behalf of the cardholder to the acquiring bank of the merchant, which receives the payment and credits it to the merchant's account. These banks do not directly settle debts; they are all connected to a payment network that performs net settlement between banks during business hours on working days. Each bank must maintain a prepaid balance for timely wire transfers.

A certain payment giant began trialing the use of stablecoins for settlement between acquiring banks and issuing banks as early as 2021. This method of using stablecoins replaced the wire transfer process, opting instead to use USDC on Ethereum and Solana. After completing card authorization on a specific date, the company uses USDC to debit or credit the accounts of both parties involved.

Since the system operates on an internal network, its net effect benefits the partners within the network. This is most similar to the closed-loop system of XBMT, but the vast scale of the card organization network benefits the issuing/acquiring institutions ( because they previously had to manage global payments ).

The advantages of stablecoins are similar to those of fund management, but these advantages belong to the banks within the network: they can reduce the capital requirements needed for timely international transfers, thereby avoiding foreign exchange risks. In addition, the openness, verifiability, and programmability of blockchain lay the foundation for credit and other financial infrastructures between internal banks.

4. Conclusion

"Stablecoin sandwich" is indeed useful in certain scenarios; however, most stablecoin applications still remain within this sandwich structure and have not further advanced. In reality, very few enterprises actually utilize on-chain payments and stablecoins. As long as any part of the process still needs to touch fiat currency rails, we have to sandwich bread on both ends of the "sandwich".

The ultimate goal of stablecoin payments is to completely eliminate the bread at both ends. When businesses and consumers fully embrace stablecoins, the entire financial and commercial cycle can be completed on the blockchain, and we will no longer be limited by the outdated traditional tracks.