The Last Look…

Stables, stability and risks – where next?

At least one of Australia’s major super funds will start using stablecoins in the next 12 months – this was one of the predictions from the inaugural Full FX Sydney conference that took place last week.

With all the hype about stablecoins in 2025, this prediction could be perhaps dismissed as just that – an interested party talking their book and fuelling an overblown frenzy. Except, for a couple of recent and relevant events.

A few weeks ago, Andrew Hauser, deputy governor of the RBA, gave a speech at a locally-held event hosted by CLS, the backbone of FX markets from a settlement point of view, in which he talked about the enormous amount of currency activity that superfunds undertake, while noting that at the last count, only 75% of the country’s top 20 superannuation funds used CLS to settle trades. As Hauser said: this sounds great, but what about the remaining 25%?

Today these retirement behemoths hold savings that equal 150% of the country’s GDP and this is projected to rise to 180% in the next decade, which means that this cohort will be potentially doubling its hedging volumes from the current roughly AUD 500 billion annual activity.

Aussie supers manage around AUD 4.2 trillion of assets today and they’re on a path to become the second largest retirement pool in the world. These are big numbers, especially considering that a quarter of this is subject to settlement risk in some shape or form, as it takes place outside CLS. The prospect of this chunk growing further in just one corner of the world and in one (albeit, major) currency, is enough to make one of the founding members of CLS say that a rival system could take market share.

“[…] against the backdrop of such a big increase in scale and a huge range of uncertain and unpredictable macro risks, the need to ensure we retain a laser focus on mitigating settlement risk has never been greater,” Hauser told his audience, noting that the global macro and political backdrop is increasing fragmentation, upending natural hedges and breaking established correlations.

Against this backdrop, the fact that major Asian currencies remain outside the scope of CLS’ reach is a crucial risk, Hauser said, while noting that “there is always the possibility that rival payment systems…could cannibalise transactions” that go through the current system. 

“I sympathise with you that it can be hard to keep up with the hype cycle on this front – from distributed ledgers to central bank digital currencies to today’s topic du jour, stablecoins,” he added. “But it is important that you do, because we must ensure that whatever emerges from this process is as robust as what preceded it.”

It’s hard to see why an industry so forward looking and so much ahead of other asset classes still relies on T+2 settlement

The increase in settlement risk in FX is not new, policymakers have been warning about it for years now. What’s changed is that there is now also action. In Australia Project Acacia is the RBA’s initiative (as noted by Hauser) to look at the role stablecoins could play in “innovative payments platforms.” The idea that there could be financial rails deployed by central banks where the risk of one party not ponying up is eliminated by atomic settlement is not one that existing infrastructure had to seriously ponder before. 

The other factor, which is closely related to the first one, is the G20’s recent meeting in late November where authorities were expected to discuss their failure to meet their own targets around cross-border payments and what this means for switching up their thinking in how to go about lowering costs and ensuring that 75% of wholesale payments reach their destination within one hour by 2027. Some say that the new phase of their effort will focus on stablecoins, since there has been very little progress using existing infrastructures despite four years passing between now and target setting.

Just like with super funds, the numbers involved in cross-border payments are huge and expected to get bigger, rising to $320 trillion by 2032 from the current $190 trillion, according to figures cited by JP Morgan, a bank that just happens to use its own digital coin in its efforts to “enable the next generation of global payments.”

Stablecoins, have therefore, definitely passed the hype stage, as far as FX and settlement risk mitigation is concerned – and frankly, not a day too soon. As one FX veteran with 30+ years of experience noted at the conference, it’s hard to see why an industry so forward looking and so much ahead of other asset classes still relies on T+2 settlement.

Such big changes are not easy, however, and super funds as well as other major participants will have to explore what they can, and need to, do to keep up with the pace. As another attendee noted, legal frameworks and mandates are simply not there yet. Still, once there is official support, details can be worked out relatively quickly and one thing is for sure: incumbents don’t tend to lead change.

This, incidentally, also brings up potentially interesting implications for regions and geographies, not least for the world’s largest FX trading hub, London. While others like Australia are powering ahead with schemes like Project Acacia, the UK is proving to be somewhat less – how can I put it? – dynamic.

What this means for London’s future scope and role in currencies, especially considering its major advantage being time-zone-related which is closely linked to the whole T+2 issue, could prove to be interesting. But that’s for another time.

eszalay@thefullfx.com