But existing isn’t the end goal.
In order to not just exist but to function, stablecoins will need to interoperate safely and scale. They’ll need to knock on the doors of bank balance sheets, everyday commerce and the broader financial services landscape and be welcomed in.
To make the move from the periphery of financial experimentation to the core of the global economy, stablecoins will need to achieve something that no cryptocurrency product has yet managed: interoperability, institutional trust and systemic scale.
And as the most recent marketplace news this week shows, stablecoin issuers both crypto-native and institutional are doing their best to make exactly that happen.
From PayPal launching its stablecoin across nine new blockchains, to Ripple, Circle and other crypto-native firms lining up partnerships to help them break into the financial mainstream, interoperability and integration were the themes this week in stablecoins.
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See also: Institutional-Grade Custody Remains Missing Link in Crypto’s Mainstream Breakthrough
The Interoperability Imperative
At present, stablecoins are balkanized. Incumbents like USDC and Tether, along with a growing field of newcomers, exist on separate blockchains, each with their own rules for issuance, transfer and redemption. They are interoperable only to the extent that exchanges and custodians build bespoke bridges between them, often with brittle security guarantees.
This fragmentation is more tolerable in the self-contained world of crypto speculation than outside of it. In everyday commerce, interoperability is non-negotiable. Merchants, banks and consumers cannot be expected to appreciate navigating a maze of technical standards. For stablecoins to function like money, they must one day behave with the universal fungibility of cash or bank deposits.
That’s why stablecoin firms are becoming focused on partnerships. Collaborations like Clara and Bitso are launching stablecoin-backed payments and corporate cards for business use in Latin America, aiming for speed, stability and control.
Meanwhile, MoneyGram is developing stablecoin-based solutions for cross-border finance, a sector that has long suffered from delays, variable fees, and foreign exchange risk. And companies like Kraken and Circle are joining forces to expand stablecoin access and utility for a broader set of market participants.
One of the more visible moves is PayPal’s RLUSD expansion. PayPal’s U.S. dollar-based stablecoin (Ripple USD) is now being integrated via LayerZero into nine new blockchains, expanding its reach and interoperability.
Such integrations address one of the key bottlenecks for stablecoin adoption: on which chains, with what counterparties, under which fees and slippage, can I use the stablecoin? Broader chain access improves utility, but increases complexity in risk monitoring and regulatory compliance across jurisdictions and technologies.
Read more: Stablecoins Face Liquidity Shakeout That Could Upend Payment Strategies
Knocking on the Doors of Bank Balance Sheets
Interoperability, however, is only one side of the challenge. The other is credibility with the traditional financial system. Stablecoins are, at their core, promises of redemption: one token equals one dollar. Whether that promise holds depends on reserves, audits and trust.
If stablecoins are to graduate from crypto utility to mainstream money, they will need to live not just alongside banks but inside them. That means stablecoin issuers being willing to hold deposits in insured institutions, to open their books to regulators, and perhaps most significantly, to allow banks themselves to issue stablecoins directly.
A case in point of the growing collaboration between established financial institutions and stablecoin/tokenization infrastructure was the news that DBS, Ripple and Franklin Templeton have signed a memorandum of understanding to tokenize Franklin Templeton’s U.S. short-term money market fund as sgBENJI on the XRP Ledger. The two firms plan to list it together with Ripple’s stablecoin RLUSD on the DBS Digital Exchange. Accredited and institutional investors will be able to trade between RLUSD and sgBENJI, in effect offering a pair that balances liquidity and yield.
Put another way, clients get the ability to shift quickly between a yield-generating asset and more stable medium of exchange. DBS also plans to explore using sgBENJI tokens as collateral for repo-style credit, either via the bank or through third-party platforms, with DBS acting as collateral custodian.
None of this integration will happen without regulatory clarity. Stablecoins, by design, sit uncomfortably between categories: part bank deposit, part money-market fund and part payment instrument.
Ultimately, the measure of success for stablecoins will not be whether they survive but whether they scale safely. History is littered with financial innovations that worked in the laboratory but broke in the field. Money market funds, securitized mortgages, and shadow banking each offered efficiency until they became too large and too fragile. Stablecoins could risk a similar fate if growth outruns safeguards.
