In emerging markets, on-chain solutions provide reliable access to global currencies…
David Unsdorfer, Head of Non-Bank Financial Institutions, Clear Junction
Understanding Adoption Hesitancy in Traditional Finance
Despite the momentum of on-chain transfers (see part one in the series), blockchain adoption among traditional financial institutions remains mixed. Many still conflate blockchain, Bitcoin, Stablecoins, cryptocurrency, central bank digital currencies (CBDCs), and tokenised assets as one and the same, however these are clearly very different instruments that comprise a broader ‘digital assets’ asset class. Misconceptions persist that on-chain systems are inherently risky, unregulated, or limited to fringe use cases.
In reality, public blockchain infrastructure is being adopted rapidly, is central to many regulatory developments across financial markets, and is far more resilient than many assume. It’s decentralised by design, making it robust against single points of failure – unlike some traditional systems. And when implemented well, stablecoin transactions can be fully compliant with existing AML/KYC standards, with emerging best practices developing globally.
That said, the technical hurdles are real. Integrating on-chain functionality into ageing tech stacks is no small feat, although this is generally true for all types of digital transformation. Perhaps the greater challenge is cultural and educational, with many institutions still not fully understanding that this isn’t a passing trend, or seriously committing to developing their own digital asset strategies. This phenomenon signals a fundamental shift in financial infrastructure that requires education, strategic thinking, and a willingness to embrace change.
Financial regulation in on-chain adoption also plays a crucial role. The EU has taken the lead with its Markets in Crypto Assets (MiCA) framework, while the US is pivoting quickly toward pro-innovation stablecoin regulation to maintain dollar dominance. Meanwhile, the UAE and Singapore have established themselves as global crypto hubs, drawing talent and capital. The UK, however, risks falling behind without a clear, coherent regulatory strategy.
Adapt or be disrupted: Planning your On-Chain Strategy
Banks and fintechs don’t need to overhaul everything overnight, but they do need a plan. On-chain transfers are increasingly recognized as a compelling option alongside traditional rails like SWIFT, offering faster speeds, lower costs, and fewer barriers to entry, especially for cross-border transactions and time-sensitive use cases. Over the next three to five years, hybrid financial models are likely to dominate, with institutions providing both fiat and crypto payment rails, empowering customers to select the solution that best suits their needs.
Cross-border systems like SWIFT will continue to play a role, particularly for high-value transactions and legacy systems. However, the rise of stablecoins and tokenised assets will inevitably erode their market share, especially in regions where speed and cost are critical.
It’s not an easy feat, though. There’s also regulatory complexity to navigate. Operating cross-border payment services across multiple jurisdictions adds layers of regulatory complexity. PSPs must navigate varying compliance requirements while ensuring the security of customer data, a task that demands continuous risk management processes.
The early mover advantage in On-Chain Finance
Institutions bold enough to move early will secure a competitive edge. The rise of Tether, issuer of the world’s largest stablecoin and among the most profitable companies in the world, and Stripe’s billion-dollar acquisition of Bridge, point to what’s coming. Banks and fintechs must take notice and build their own strategies, or risk obsolescence.
Beyond competitive necessity, this is also a chance to do better and improve financial access. In emerging markets, on-chain solutions provide reliable access to global currencies without the need for a bank account. And stablecoins, particularly those pegged to the USD, offer stability to billions of individuals and thousands of businesses in emerging markets that until now have had no alternative to holding their economic value in their often-volatile and inflationary national currencies.
Time to engage: Building the Future of On-Chain Finance
On-chain financial transfers are no longer speculative hype. They are a practical, scalable solution to many of the inefficiencies that have plagued traditional finance for decades. For institutions willing to learn and adapt, the rewards are considerable – from reduced costs and faster settlements to enhanced transparency, access to new markets, and delivering better financial products and services for customers.
But the window for passive observation is closing. The time to explore, experiment, and build a strategy is now. The rise of on-chain transfers demands both individual research, study and experimentation, and industry collaboration. Banks, fintechs, and PSPs must work together as common industry participants to assess and develop services that leverage blockchain’s strengths while addressing its limitations and abstracting away complexities for the benefit of clients, many of whom simply want their providers to offer better, faster, more cost-effective services.
As digital assets continue to mature and regulatory clarity emerges, financial institutions that act decisively will shape the next era of finance – one that’s faster, fairer, and truly global.