The Old Stablecoin Playbook Doesn’t Apply Anymore: Here’s What Banks Need to Know Now

TLDR:

• Paxos says regulated stablecoins must meet strict reserve and capital standards to operate in the U.S. market. 
• Stablecoins function as payment rails and settlement infrastructure, not as direct replacements for bank deposits. 
• Global corporations are now using stablecoins to move millions of dollars in minutes instead of days across borders. 
• Banks that issue or custody stablecoins can turn a perceived competitive threat into an entirely new revenue stream.

The old stablecoin playbook doesn’t apply anymore, and banks are beginning to take notice. The introduction of the GENIUS Act by the U.S. Congress has pushed financial institutions to reconsider long-held assumptions about stablecoins.

What was once dismissed as a crypto-trader tool has grown into a multi-trillion-dollar market. Banks that continue operating on outdated beliefs risk falling behind fintechs and blockchain-native competitors. The regulatory and commercial landscape has fundamentally shifted.

Outdated Assumptions About Regulation and Risk No Longer Hold

For years, banks treated stablecoins as unregulated, high-risk instruments sitting outside traditional finance. That view no longer reflects reality.

Jurisdictions including Singapore, the European Union, and the United States have established clear frameworks for stablecoin issuance and custody.

The GENIUS Act adds further structure, making regulated stablecoins the only viable path forward in the U.S. market.

Regulated issuers like Paxos already operate under strict reserve management standards and capital requirements. Consumer protections are built into these frameworks, reducing institutional risk considerably.

Banks can now engage with stablecoins knowing that legal guardrails are firmly in place. The compliance infrastructure that once seemed absent is now well established.

The old playbook also treated stablecoins as threats to financial stability. That assumption, too, has aged poorly. Paxos stated that “well-regulated stablecoins actually enhance financial stability by increasing transparency, speed and efficiency.”

On-chain stablecoin transactions are publicly auditable in real time, offering transparency that traditional interbank transfers cannot match.

Paxos further noted that “reserves held in short-term Treasuries are safer than many bank assets.” Banks clinging to outdated risk narratives are working from an incomplete picture.

Global regulatory bodies are aligning on oversight standards at a steady pace. Updating that picture is now a strategic necessity, not just an operational preference.

Banks That Rewrite the Playbook Stand to Gain the Most

The old stablecoin playbook also cast stablecoins as deposit killers threatening bank lending capacity. Paxos pushed back on that directly, stating that “stablecoins serve as rails for payments, settlement and capital efficiency in ways that deposit accounts cannot.”

Banks can issue or custody stablecoins themselves, turning a perceived competitive threat into a growth product. Just as electronic payments once seemed disruptive, stablecoins can expand balance sheets when embraced strategically.

Stablecoins now power cross-border remittances, tokenized asset settlement, and on-chain capital markets at scale. Global corporations are moving millions of dollars in minutes rather than days using stablecoin infrastructure.

Paxos confirmed that “asset managers use them as cash legs for tokenized assets and broker-dealers are leveraging them to create new revenue streams.”

These are not theoretical use cases — they are active, high-volume applications already reshaping global finance.

Paxos was direct in its assessment, saying that “financial institutions that deny this reality are ignoring the signals of market transformation.”

Banks that update their thinking can unlock faster settlement, improved liquidity management, and entirely new client offerings.

The old narrative that stablecoins were only for crypto exchanges has been overtaken by market reality. Those that don’t adapt may find competitors have already claimed that ground.

Paxos summed up the broader shift clearly: “Stablecoins are not a threat to banking — they are an evolution of money that can make banks more competitive.” The window to rewrite the playbook remains open, but it continues to narrow.

Banks that move now can help shape how stablecoins integrate with traditional financial infrastructure. Those that wait may find the terms of that integration have already been set by others.