Early cryptocurrencies were about permissionless innovation. The current wave is about professionalization.
Faced with a turning point in maturation, the frontier of the industry has shifted from speculative tokens, especially as crypto markets remain as volatile as ever, to more enduring questions of blockchain infrastructure, such as how value evolves and settles, as well as interfaces with the existing financial system.
The last week alone has highlighted how quickly the race is accelerating between crypto natives and traditional financial institutions. On the crypto-native front, Circle revealed xReservea new interoperability hub for stablecoins intended to serve as the connective tissue between blockchains. Prediction Market Kalshi selected Coinbase as custodian of its stable coin payments For stricter controls.
On the traditional finance front, the Office of the Comptroller of the Currency published a letter of interpretation proposing banks clearer authority to interact with crypto networks. Deutsche Börsea German stock exchange operator, started using Société GénéraleIt is institutional stable coin for its colonization activities. Erik Thédéenpresident of the Basel Committee on Banking Supervisioncalled for an overhaul of crypto regulation. HSBC revealed new momentum behind tokenized depositspreparing its own rails for the chain future in new markets.
Behind these announcements, two potential themes emerge to shape the battlefield in this new infrastructure race, including interoperability between regulated blockchain networks and the institutionalization of stable settlement assets.
Read also: Stablecoin Orchestration Becomes a New Blockchain Battleground
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Interoperability is the biggest hurdle for blockchain finance
As financial institutions experiment with tokenized deposits, blockchain-based payment networks, and on-chain settlement systems, they face the uncomfortable reality that digital cash is just one useful just like the networks through which it can circulate.
For much of their history, crypto networks developed as isolated ecosystems, connected by improvised bridges, software that moved assets from one chain to another via wrapping, locking, or synthetic representations.
Those bridges were among the the biggest points of failure. Billions of dollars have been lost to exploits, while fragmented liquidity has made it difficult for institutions to treat tokens from different chains as fungible or trustworthy.
In this landscape, exclusive walled gardens with barely protected paths I won’t win. Institutions want blockchain infrastructure that ensures tokenized deposits, stablecoins, and settlement assets behave predictably, regardless of their origin. Whether it’s modular settlement layers, shared proofs, or cross-chain messaging protocols, the industry is trying to rebuild the Internet of Value as a connected archipelago, not a federation of islands.
Ultimately, banks will choose payment rails based on “the path of least resistance”, i.e. the lowest barriers in risk, compliance, fraud prevention and technology migration, Himal Makwanaglobal head of corporate strategy at FIStold PYMNTS in August.
Learn more: The Digital Asset Dictionary: Tokenized Deposits for Payments and Treasury
Stablecoins, tokenized deposits and the fight for institutional liquidity
Even with improved interoperability and regulatory clarity, the digital asset ecosystem cannot function without credible settlement assets or tokens that have stable value, operate within regulatory frameworks, and are accepted by multiple counterparties. That’s why some of the most interesting developments of the week came from the banking sector.
Deutsche Boerse’s decision to use SocGen’s stablecoin for settlement marks a change. Big banks no longer wait for the global standards. Today they use everyone’s symbolic debts. This East a break with previous phases of blockchain adoption, where banks built private networks and isolated digital currencies that have never reached interinstitutional utility.
HSBC’s bet on tokenized deposits adds another layer. Stablecoins are generally liabilities of private issuers backed by reserves. In contrast, tokenized deposits are liabilities of the bank itself, digitally native. representations of bank deposits. Banks are seeing more and more tokenized deposits as a way to maintain relevance in a world where stablecoin issuers might otherwise capture transaction flows.
See also: The Stablecoin debate for CFOs is not about performance; It’s around the plumbing
What makes this competition particularly intense is that settlement assets can determine where liquidity pools form. Once liquidity is centralized, it can be difficult to dislodge.
All of this rests on the single business reality that the value of blockchain financial infrastructure lies in eliminating friction, not in celebrating technological complexity. The analogy with early Internet protocols is one that the industry continually returns to. Users do not choose routing paths or understand packet encoding; they enter a URL and the system handles the rest.
Blockchain financial infrastructure is evolving toward this same unimaginable simplicity across the settlement layers of banks, in the treasury systems of FinTechs, and in the cross-border rails of multinational corporations.
