This Week in Stablecoins: Building Trust Layers for a Trustless Technology

Rather than a full-blown revolution in money movement, the stablecoin story is increasingly coalescing into one of re-architecting payments and trust layers over a near-trustless base.

As recent news from Citigroup and the global inter-bank messaging network SWIFT reveals, banks and legacy infrastructure may be ready to embed stablecoins or tokenized fiat into mainstream chains rather than treat them as stand-alone crypto experiments. Citi and SWIFT undertook a trial proving the feasibility of settling payments between fiat and digital currencies, in a Payment-versus-Payment (PvP) workflow.

The trial used adaptations of SWIFT’s messaging rails alongside a digital-asset corridor and demonstrated that a bank could settle fiat and digital tokens in near-lockstep. The significance is more than technical. It signals that a large incumbent bank is treating digital-currency settlement as part of its core FX business rather than a crypto sidetrack. After all, Citigroup’s statement in the announcement came from its Head of FX Products rather than the separate “digital assets” unit, suggesting a melding of traditional payments/international-banking infrastructure with tokenized currency rails.

Yet while the infrastructure is converging, the underlying design of many stablecoins remains unchanged: they are not bank deposits, they are not central-bank liabilities, and they lack some of the implicit guarantees that traditional banking provides.

That structural limitation is increasingly coming into sharper focus.

Read more: Institutional Interest Is Stress Testing Blockchain’s Financial Interoperability

Key Fault Lines to Watch as Stablecoins Go Mainstream

Despite their inroads across mainstream finance, unlike bank deposits or central-bank liabilities, most stablecoins are issued by non-bank entities (or bank-subsidiaries) and are not backed by deposit-insurance or direct recourse to central-bank money. The trust they carry must therefore come from other mechanisms, including reserve backing, redemption at par, transparency, regulatory oversight.

Crucially, the U.S. GENIUS Act does not treat stablecoin tokens as bank deposits or securities; it treats them instead as payment tools.

What this means in practice is that the stability of the peg, the exit-mechanism (redemption), the reserve-asset quality, and the operational continuity of the issuer become central to user confidence. In times of stress, a stablecoin might behave not like a bank-deposit but more like a money-market-fund or commercial-paper equivalent: exposed to possible runs, asset-liquidity risks, credit mismatches.

PYMNTS covered Thursday (Nov. 20) how India’s central bank is reportedly taking a cautious stance on stablecoins and other cryptocurrencies. The comments out of India came one day after the Financial Stability Board announced plans to increase its focus on stablecoins and nonbank financial intermediation (NBFI), two areas that it said could present vulnerabilities in the world financial system.

Also this week, Erik Thedéen, chair of the Basel Committee on Banking Supervision, gave an interview to the Financial Times in which he said “a different approach” is required on the global rules for banks’ cryptocurrency holdings. Meanwhile, Canada has proposed a Stablecoin Act of its own as part of the latest federal budget bill.

In aggregate, any stablecoin-grounded vision of the future of money may look less like the overthrow of fiat and more like an addition to the monetary architecture: tokenized units, redeemable and exchangeable, sitting alongside bank deposits and central bank money, but requiring their own trust-layers. The question then becomes whether stablecoins can earn that trust in design, governance and regulation, and whether the system can deliver redemption and stability reliably in times of stress.

Read more: What Cross-Border CFOs Need to Know About Stablecoin Bridging

Marketplace Moves and Infrastructure Developments

Beyond banks and regulators, we see crypto-native infrastructure increasingly moving into the mainstream as highlighted by this week’s announcements.

Yellow Card’s CEO on Tuesday (Nov. 18) said that African countries are among the world’s top stablecoin adopters. The company has in the last year launched partnerships with Visa and PayPal to promote stablecoin usage.

Circle, also on Tuesday, unveiled xReserve, a new interoperability hub for stablecoins meant to serve as connective tissue across blockchains; while Deutsche Boerse, a German stock exchange operator, started using Societe Generale’s institutional stablecoin for its settlement business.

Not to be outdone, HSBC is reportedly due to launch an expansion of its tokenized deposits services. The global bank already offers that service in Hong Kong, Singapore, the UK and Luxembourg, and now plans to expand it to corporate clients in the U.S. and United Arab Emirates (UAE) beginning next year.