“As the spotlight on crypto grows and intensifies, it’s not just speculative crypto assets and flashy digital tokens like memecoins commanding attention – a quieter but more profound shift is happening with on-chain transfers.
These transactions, which occur directly on a blockchain network rather than through traditional financial systems, are gaining serious traction globally – especially the use of Stablecoins (a type of digital asset pegged to and backed by fiat currencies). For banks, fintechs, and payment service providers (PSPs), ignoring this shift is no longer an option.”
From niche to necessity: The surge in On-Chain Stablecoin Transfers
Stablecoin transfers hit an astonishing $27 trillion in 2024 – that’s more than Visa and Mastercard’s combined transaction volume – and this figure is poised for explosive growth as banks, corporations, and individuals deepen their grasp of digital assets and refine their own adoption strategies. So, what does all this mean for traditional financial players?
Long dismissed as the playground of tech enthusiasts and crypto anarchists, blockchain has matured significantly since Bitcoin’s inception 16 years ago, evolving to encompass a wide range of crypto assets supporting varied use cases.
For financial institutions and PSPs, the growth of Stablecoins in particular signifies a continuing shift toward decentralised finance (DeFi) as a mainstream and dependable alternative to traditional systems. Institutions that have been engaging or experimenting with on-chain transfers like Stablecoin payments will likely have discovered the following:
- Lower transaction costs via Blockchain: While there are numerous public blockchain networks available, and selecting the right one is an important factor, transaction fees are generally very low, especially when compared to the costs of cross-border payments through traditional banking systems.
- Near-instant and final settlement on Blockchain: Blockchain transactions are near-instantaneous (though speeds vary by network) and final once signed, delivering unmatched reliability compared to traditional banking, where cross-border payments can take days or weeks and may still be canceled or reversed after delays.
- Enhanced security with Blockchain’s Architecture: Blockchain networks leverage advanced cryptographic techniques and decentralised architecture, making them highly secure, antifragile, and robust, unlike traditional systems that rely on centralised points of vulnerability.
- Evolving Regulatory Clarity for Digital Assets: While the regulatory landscape on digital assets is still highly fragmented, major markets have now established, or are actively in the process of establishing, clearer frameworks, reducing uncertainty and encouraging institutional adoption.
- Blockchain Adoption driven by Economic trends: Amid growing global uncertainty and multi-polarity, blockchain’s decentralised nature has attracted financial institutions and other market participants to adopt a diverse range of digital assets for varying needs – from Bitcoin as a form of “digital gold,” Stablecoins for seamless global payments, and tokenised assets for enhanced liquidity and investment opportunities.
Stablecoins are a major part of driving this shift. Once tools for crypto traders, they are increasingly now recognised as serious financial instruments with global relevance, offering a compelling proposition: faster and final settlement, lower fees, transparent ledgers, and always-on availability.
In emerging markets, they unlock seamless access to US dollars for businesses and individuals bypassing the hurdles of traditional banking and foreign exchange. For remittances, gig worker payments, and business liquidity, they’re redefining the boundaries of financial possibility with speed and efficiency.
On-Chain performance vs Legacy Systems: Why traditional finance can’t compete
What we’re seeing with the growth of on-chain transfers isn’t about ideological disruption anymore – it’s about performance. The traditional financial system, built on legacy infrastructure and batch settlement, simply can’t compete with the speed, efficiency, and programmability of public blockchain networks. The benefits are clear:
- Faster, cheaper cross-border payments: Traditional systems rely on multiple intermediaries, high fees, and slow processing times. On-chain transfers cut through these inefficiencies, offering near-instant transactions with low fees and settlement finality. Clear Junction provides clients seamless access to international payment rails, and blockchain is now another payment rail we support – one we’re excited to champion.
- New revenue streams: Blockchain technology opens avenues for banks and fintechs to offer an exciting and broad spectrum of value-added services, such as tokenised asset management, smart contract-based lending, and real-time settlement solutions. These innovations can attract new customer segments while retaining existing ones.
- Improved compliance and transparency: Blockchain’s immutable ledger provides unparalleled transparency, simplifying compliance with anti-money laundering (AML) and know-your-customer (KYC) regulations. This is particularly advantageous for institutions operating in highly regulated markets like Europe.
However, capitalising on these opportunities requires significant investment in blockchain infrastructure and skilled talent.
Keep an eye out for part two in the series as we delve further into the barriers holding financial institutions back and the opportunity for early movers.