The Last Look…
Posted by Colin Lambert. Last updated: March 10, 2026
The Irony of Ironies. Readers of this column will be familiar with my tendency to bang on about the benefits of digitalisation and the fact that tokenisation, blockchain technology and the world of crypto is not just here to stay but also have a deep impact on existing markets.
Stablecoins are already having a moment in cross-border payments and settlement and the tokenisation of the dollar is proof that creating onchain versions of traditional assets that can be moved 24/7 adds to capital efficiency and liquidity creation.
This is very far from a one-way process, however, for as much as blockchain is shaping TradFi markets (as they say in crypto), the new kids are also learning a few tricks from the old world. One example is credit intermediation, an area that crypto actually made less efficient than existing structures in FX and elsewhere, because of the way business models at exchanges evolved. Remember, the space that touts the benefits of decentralisation is one helluva concentrated place.
Despite the many, many ironies that exist in crypto today, the serious point is that pre-funding is not efficient and as more institutional investors venture into the space (what with ETFs and everything, not to mention, has anyone noticed that the war broke out on the weekend it was actually tradeable?!) it won’t last as a result.
This is a point that a recent report from Finery Markets makes. What the ECN provider is telling its readers is that it’s more efficient to have credit intermediators and exchanges that do nothing but act as market places (as opposed to the current, broker, custodian and exchange model that prevails in crypto). In other words, welcome to the world of ECNs!
This is perfectly valid, if somewhat an obvious point from a provider of said facilities. But the report goes further by asserting that stablecoins have become a threat to the centralised banking system and they’re set to revolutionise credit creation as individuals and professional investors flock to embrace them.
What’s much more likely to happen than the wholesale disappearance of banking is that some services will unbundle from the traditional banking offering
“Rather than recirculating fiat collateral back into bank deposits, major issuers allocate directly to capital markets – bypassing the banking system to become top-tier holders of US Treasuries and holding $24 billion in gold. Constrained by Basel III/IV, banks are losing market making and payment volumes, forcing them into an aggressive lobbying phase against yield-bearing stablecoins,” the authors write, before asking whether, as a result, anyone would miss traditional banking rails?
I think the answer is yes, very much.
For starters, it will be some time before (if) retail clients move to a wallet-based system and away from the current accounts-focused set-up. Despite various suggested use cases, individuals have failed to embrace web3’s wallet-based world, with even the most optimistic estimates topping out around 10 million in terms of users. For financial applications, such as Revolut or Monzo, the underlying plumbing is the traditional banking system with its fuddy duddy links to central banks.
Which brings me to the next point: there are projects, such as Project Guardian in Australia, that are experimenting with various settlement forms inter-operating, whether they’re stablecoins, CBDCs or traditional fiat money. Until a system that allows this to happen across central banks globally is open, banking rails will be needed.
What’s much more likely to happen than the wholesale disappearance of banking is that some services will unbundle from the traditional banking offering. As users view services such as yield provision, FX and investment in the context of financial apps rather than banking services, because fintechs and specialist providers can now compete as a result of stablecoins, the race for clients on the retail end will probably pick up. But is that the death knell for banking? To the contrary.
Finery Markets does make a valid point when it argues that beyond 2030 “blockchain infrastructure faces a binary outcome – it will either be absorbed by the banking establishment or it will fundamentally displace the traditional funding model”.
In other words, banks will buy threats, the same way they have always done and the same way stock exchanges bought ECNs 20 years ago. And this somewhat closes the loop for the report: some of the innovations may turn out to be simply slightly tweaked versions of existing infrastructure that won’t revolutionise much except bring the two worlds of DeFi and TradFi closer and make them more similar. Is it a revolution? Definitely not. But as the two worlds merge, both will change and those that make it happen will profit handsomely.
As Finery Markets says (in a slightly word salad way):
Ultimately, the 2030 cycle will reshape what alpha truly is. The previous chapter rewarded speculation. The new one is for those who lift off the complexity and unlock efficiency in making two separate financial systems compatible, interoperable, and mutually permeated.
In other words, platforms and infrastructure providers will continue to benefit. Atomic settlement or not.
