Summary
The article discusses how the banking industry needs to modernize its payment systems by using stablecoins, which are digital currencies linked to traditional currencies like the U.S. dollar. Currently, banks rely on older systems for cross-border payments, which are slower than blockchain technologies that promise faster settlement times. To stay competitive, banks need to improve their infrastructure to be more efficient than public blockchains.
Key Facts
- Banks mainly use an old system called SWIFT for international payments, which is slow.
- SWIFT does not directly move money; it sends messages that tell banks what to do with accounts.
- Stablecoins are designed to transfer money almost instantly, with both instructions and value moving together.
- Public blockchains have varying speeds; some are as slow as current bank systems.
- Current bank systems require setting aside a lot of money for potential payment needs, which stablecoins could reduce.
- Banks need new systems to use digital liquidity efficiently, potentially freeing up significant amounts of money.
- Faster settlement times with stablecoins mean banks can operate globally without needing extensive banking relationships.
