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June 27, 2025 On-Chain Finance

Distribution isn’t the biggest barrier—off-chain collateral is.

Blockchain Is Set to Win the Backend of Global Transactions. Stablecoins are Winning the Frontend.

Stablecoins have won product-market fit. Institutions are onboard. Liquidity is deepening. But the infrastructure behind them is still largely off-chain, beholden to 9-to-5 banking rails, manual reserve attestations, and subject to redemption delays. 

That’s the mismatch: 24/7 programmable liabilities that settle instantly are backed by T+1 assets that don’t move on weekends or holidays. 

The next generation of stablecoin issuers won’t just offer better economics and deeper integrations, they’ll bridge this operational gap with onchain collateral that clears, settles, and scales at the speed of the internet.

Stablecoins Found Product-Market Fit — Infrastructure Lags Behind

Stablecoins have achieved product-market fit and continue to scale rapidly across crypto-native and institutional markets. But behind the growth lies a structural mismatch: 24/7 digital liabilities backed by off-chain assets with delayed finality. The next generation of issuers will solve this by matching stablecoins with 24/7 onchain reserve assets.

Incumbent Growth Shows Demand Is Real

Stablecoins have crossed the product-market-fit threshold. Circulating supply of leading stablecoins continues to climb: 

Growth is so noteworthy that incumbents are getting into the game: JPMorgan, in conjunction with Coinbase, has launched a pilot program for JPMD for institutional users, which serves as a tokenized, onchain, bank deposit that mimics a stablecoin in some respects.

The current scale of stablecoin supply exists because trading desks, treasuries, payment platforms and retail customers already rely on dollar-pegged tokens for real-time settlement and real economy use cases. 

Traction for tokenized money market funds, such as BlackRock’s BUIDL (≈$3Bn* AUM), reinforce the same point from a different angle: institutions now accept onchain instruments as credible, risk-free collateral. Breadth of distribution, however, remains thin. 

The bulk of stablecoin and tokenized money market fund volume still moves inside a crypto-native loop—exchanges, OTC desks, foundations and DeFi—while family offices, asset managers, and corporate treasuries watch from the sidelines. A lack of clear use cases isn’t the barrier; it is the missing infrastructure for 24/7 instant convertibility, reserve management, and seamless integration with existing risk controls that creates friction. 

Once we close that gap, the next wave of capital, hyper-sensitive to safety and security, will flow onchain.

24/7 Onchain Liabilities Need 24/7 Onchain Assets

Institutions managing high-frequency flows—like market makers, fintechs, and algorithmic traders—stand to benefit from an instant toggle between yield and liquidity. Stablecoins enable this at the liability level, settling instantly onchain. But the reserve side often can’t keep up.

Traditional settlement latency (e.g. T+1 or longer) undermines the utility of stablecoins as a true cash replacement. While the tokens themselves move in seconds, subscriptions and redemptions still rely on fiat rails, which are subject to banking hours unless bridged with settlement or credit risk.

This mismatch also constrains composability in onchain finance. Transactions across lending, liquidity provisioning, and collateralization are designed to clear instantly. When subscription and redemption infrastructure lags behind, the entire system slows down, and the full transformational effects of onchain finance cannot be realized.

Systemic inefficiency introduces risk and operational drag for issuers. A redemption request late on a Friday evening may not be fully settled until Monday morning. In volatile markets, that’s not just inconvenient, it’s dangerous.

Many USD transfers are still T+1 or longer, with post-cutoff, after-hours, weekend, and holiday downtime—contrasting with the 24/7 nature of onchain settlement.

Onchain Reserves Unlock True Liquidity

By adopting onchain reserves, stablecoin issuers can collapse the mint/burn window from hours (or days) to seconds, with no settlement or credit risk, and eliminate the back and middle office work required to reconcile across traditional and onchain financial rails. Reserves that are held onchain can be programmatically verified, managed and transacted, efficiently reducing reliance on static attestations or legacy audit firms while greatly increasing operational efficiency. These benefits not only enhance user trust but also improve operational resilience during periods of high redemption pressure or volatility.

High quality onchain reserve assets exist today. Franklin Templeton’s BENJI, WisdomTree’s WTGXX, Wellington’s ULTRA, Anemoy/Janus Henderson’s JTRSY, BlackRock’s BUIDL and others provide tokenized units of U.S. government money market or bond funds that can be transferred peer-to-peer on the public blockchain with daily NAV publication, enhancing speed, flexibility, real-time auditability and operational efficiency for stablecoin issuers.

Operational Efficiency Is a Competitive Advantage – Cross-Asset Reserve Management Simplified

Onchain reserve infrastructure offers a cleaner alternative to traditional solutions. Current stablecoin backings tend to include a blend of cash, short-duration Treasurys, and MMFs across multiple accounts, custodians and potentially jurisdictions. Each asset class comes with a specific reconciliation timeline, regulatory oversight, and operational nuance.

Cleaner processes result in leaner, faster responsiveness to market events as well as programmatic compliance. Reserve-layer efficiency is the counterpart to liquidity-layer efficiency. Without solving both sides of the equation, benefits are severely limited. 

Reducing Counterparty Risk While Scaling Responsibly

Counterparty risk is, perhaps, the greatest risk to stablecoin viability. If the asset isn’t convertible quickly at par, it’s no better than traditional cash equivalents–in fact, it’s likely worse. Tokenized Treasurys and onchain money market funds mitigate this risk by shifting reserve collateral into onchain-native, auditable, and settlement-ready formats. 

With these instruments, redemption liquidity doesn’t depend on a wire transfer clearing or a bank reopening on Monday, it’s always present and within reach onchain and accessible instantly as needed. 

Counterparty risk was front and center during the USDC depeg in 2023. Over $3.3 billion in U.S. regional bank deposits were at risk during the SVB and Signature Bank failures, leading USDC to temporarily depeg to $0.88 due to exposure to the underlying banks—highlighting the counterparty risk of centralized, off-chain reserves.

With onchain, transferrable and instantly-settled reserve assets, counterparty risk is reduced dramatically.

Embedding Stablecoins in Institutional Use Cases – Unlocking New Distribution Channels

Anchoring stablecoins to publicly verifiable, yield-bearing, onchain instruments like BUIDL and tokenized MMFs empowers issuers to offer a clearer value proposition to enterprise partners: transparent reserves, 24/7 redemption, reduced counterparty risk and native compatibility with digital infrastructure. 

In May 2025, Visa expanded its stablecoin settlement capabilities to include Solana, enabling acquirers like Worldpay and Nuvei to settle cross-border transactions in USDC. This evolution marks the next phase of institutional stablecoin integration: improving settlement finality and interoperability across chains and jurisdictions.

Going (Truly) Global Requires the Elimination of Fiat Bottlenecks

Most fiat-backed stablecoin mints and burns rely on traditional rails like SWIFT, ACH, or domestic wire transfers. These systems are expensive, slow, and often unavailable after hours, on weekends, or across borders. 

The result is a bottleneck: the technology is global and 24/7, but its inputs and outputs are still local and time-bound. Onchain-native reserves change this, allowing issuers to adopt tokenized assets as collateral.

According to Fireblocks’ “State of Stablecoins” report for 2025, stablecoins are becoming core infrastructure for payments, treasury, and liquidity strategy. Out of more than 290 respondents in the survey, 48% cite settlement speed as a primary consideration, while 33% cite better liquidity management. 

Conclusion: 

Stablecoins have proven their utility—but scaling beyond crypto-native markets requires infrastructure that’s as fast, transparent, and programmable as the assets themselves. Onchain reserves offer the missing piece: 24/7 liquidity, composability, and trust at the base layer, with native support for instant, programmatic mints and burns. 

Stablecoin issuers that solve for both distribution and operational integrity stand to capture outsized institutional demand—shifting the balance away from incumbents that refuse to adapt to the rails of tomorrow.

*Values as of June 2025

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