The Stablecoin Reality Check: Unlocking Liquidity or Just Relocating the Traps?
Written by Sharyn Tan (Views are my own) In the ever-evolving world of finance, stablecoins have emerged as a beacon of hope for revolutionizing payments and liquidity management. Often touted as the “future of money,” these digital assets pegged to fiat currencies like the US dollar promise to bridge the gap between traditional finance and the blockchain era. But from a treasurer’s perspective, the burning question remains: Do stablecoins truly unlock stuck liquidity, making capital more accessible and efficient, or do they merely accelerate its movement while shifting where it gets stuck? This debate isn’t just academic—it’s central to how corporations manage working capital in a globalized, 24/7 economy. Let’s dive deeper. Stablecoins, such as USDT, USDC, and newer entrants like PYUSD backed by regulated institutions, are designed to maintain a stable value, making them ideal for transactions without the volatility of cryptocurrencies like Bitcoin. Their growth has been explosive: as of late 2025, the total market capitalization of stablecoins has surpassed $300 billion, with daily trading volumes often rivaling those of major fiat currencies. Proponents argue they represent a seismic shift in settlement infrastructure, offering always-on availability, blockchain transparency, and smart contract programmability—features that traditional banking rails, like SWIFT or ACH, have struggled to combine effectively. From a treasurer’s lens, this sounds transformative. Imagine a world where cross-border payments settle in seconds rather than days, reducing the infamous “float” that ties up billions in corporate treasuries annually. Stablecoins could minimize prefunding requirements, where companies must hold excess cash in accounts to cover potential delays or failures in transactions. Real-time visibility across markets would allow treasurers to optimize cash positions dynamically, turning payments into a strategic tool for liquidity management rather than a mere operational chore. In surveys of banking professionals, faster settlements rank as the top benefit of stablecoin adoption, cited by nearly half of respondents, followed closely by improved liquidity access. But here’s where the debate heats up: Are stablecoins genuinely freeing liquidity from its traditional traps, or are they just relocating those traps to new silos within the crypto ecosystem? The Case for Unlocking Liquidity: A Revolution in Motion On the optimistic side, stablecoins are seen as “better money” that enhances velocity—the speed at which capital circulates through the economy. Unlike bank deposits, which are often locked in low-yield accounts or subject to banking hours and holidays, stablecoins operate on decentralized networks that never sleep. This always-on nature can unlock trillions in “stuck” assets, such as those in real-world asset (RWA) tokenization, where illiquid properties or commodities become tradable fractions on-chain. For treasurers, this could mean pooling cash across borders without the friction of currency conversions, where regulatory permitted, boosting capital efficiency and reducing exposure to float risk. Stablecoins, integrated with payment platforms, enable real-time settlements using on-chain liquidity, where collateral like RWAs or yield-bearing assets keeps earning returns even while in use. This “split-yield” architecture, as seen in innovative protocols like STBL, separates principal from returns, ensuring liquidity isn’t sacrificed for yield. In DeFi applications, stablecoins provide the backbone for lending and borrowing, where AI-driven agents can automate arbitrage, routing, and yield allocation, turning idle capital into productive assets. Moreover, with regulated players like J.P. Morgan, Citibank and PineBridge entering the space, stablecoins are gaining treasury-grade compliance, making them viable for institutional use. This could lead to a “liquidity revolution,” where stablecoins not only speed up money but make it smarter, integrating with broader strategies like tokenized treasuries or possibly even government-backed digital stimuli. As some experts suggest, their real value lies in the opportunities for creating complementary business models that export digital dollars globally, enhancing sovereignty and credit creation. The Counterargument: Just Moving the Traps Faster Skeptics, however, argue that stablecoins don’t unlock liquidity—they simply relocate where it gets trapped, often in opaque or fragmented ecosystems. While they promise daily liquidity, many are backed by assets that aren’t always easily sold, echoing the risks of uninsured bank deposits. Historical parallels to national bank notes from the 19th century highlight this: stablecoins, like those notes, rely on issuer credibility, but without universal deposit insurance or capital buffers, they can amplify systemic risks during market stress. Interoperability remains a major hurdle. Liquidity in stablecoins is often siloed within specific blockchains or protocols, requiring bridges or swaps that introduce fees, delays, and counterparty risks—essentially recreating the prefunding traps of traditional finance but in a digital guise. For instance, while DeFi liquidity pools sound innovative, they’ve seen massive outflows when incentives dry up, with LP tokens rotating into other assets but not truly freeing capital for real-world use. Regulatory uncertainties add another layer: in jurisdictions without clear frameworks, stablecoins can trap liquidity in compliance limbo, limiting their scalability. Critics also point out that stablecoins’ current scale isn’t sufficient to drive broad market movements, with turnover still dwarfed by fiat systems. In treasury contexts, holding stablecoins might benchmark well against operations checklists for execution and routing, but it doesn’t eliminate the need for traditional buffers against volatility or redemption runs. A Treasurer’s Balanced Take: From Experiment to Operational Model As treasurers, we must navigate this debate pragmatically. Stablecoins aren’t a cure-all, but they offer tools for smarter liquidity when integrated thoughtfully. Start by assessing how they fit into your working capital strategy: Use them for high-frequency, low-value payments to test waters, then scale to other treasury operations like yield-optimized holdings or RWA-backed lending. The key is diversification—don’t let liquidity get trapped in one ecosystem; leverage multichain protocols for seamless flow. The exciting developments? With confidential smart contracts and AI agents enhancing privacy and automation, stablecoins are evolving beyond mere efficiency tools. Regulated innovations could tip the scales toward a true revolution, especially if they address the traps through better compliance and liquidity routing. So, what’s your view? Are stablecoins just an efficiency tweak, relocating liquidity traps at higher speeds, or the dawn of a liquidity revolution that frees capital for good? Lorena Pérez Sandroni, Treasury Masterminds Board Member, Comments Stablecoins in my opinion are more than an efficiency tweak. They solve real pain points:speed, transparency, programmability . But they also introduce new…
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Why Financial Services Remain Frustratingly Hard to Navigate: A 30-Year Perspective
This article is written by HedgeFlows After three decades of watching both corporate and personal financial services, I’m convinced the fundamental problems haven’t changed — they’ve just gotten more sophisticated at hiding behind better interfaces. Last month, I watched a seasoned CFO of a £50M revenue company spend hours trying to understand whether they should hedge their Euro exposure. Despite running a financially sophisticated business, they couldn’t get straight answers from their bank about costs, timing, or even whether hedging made sense for their specific situation. The bank’s solution? A generic presentation about FX products and a suggestion to “start small and see how it goes.” This isn’t an isolated incident. It’s the norm. The Information Asymmetry Problem After 30 years of observing financial services from multiple angles—as a user, advisor, and now as someone building solutions—I’ve identified a fundamental issue that affects everyone from individual investors to mid-market companies: pervasive information asymmetry. Providers Don’t Really Know Their Customers Financial services providers excel at collecting historical data. They know what you’ve done, where you’ve banked, what products you’ve bought. But they’re remarkably poor at understanding what you’re trying to achieve or what challenges you’re facing next quarter, next year, or in the next phase of your business growth. This backward-looking lens means their “solutions” are often responses to problems you had yesterday, not the ones keeping you awake tonight. Customers Can’t Navigate the Complexity On the flip side, most companies—especially those outside the Fortune 500 or FTSE 100—simply can’t afford to have specialists in every area of finance. The CFO of a growing tech company might be brilliant at financial planning and fundraising, but they’re not necessarily experts in FX hedging, trade finance, or treasury optimization. This creates a knowledge gap that providers should fill but rarely do. Instead, they assume you know what you need and simply present options rather than guidance. The Transaction-First Mentality As a direct result of these information asymmetries, financial services have evolved into transaction machines rather than outcome optimizers. Banks sell FX products, not FX risk management strategies. Investment platforms sell access to markets, not investment success. The conversation typically goes: “Here are our FX hedging products” rather than “Let’s understand your business cycle, cash flow patterns, and risk tolerance, then design an approach that makes sense for you.” The Personal Finance Mirror These same dynamics play out in personal financial services, though this area is slowly improving. We’re seeing better apps, more intuitive interfaces, and wider access to investment products that were previously institutional-only. But even here, the improvement is mostly about democratising transactions rather than improving outcomes. Retail investors now have access to options trading, cryptocurrency, and complex ETFs — but are they getting better investment results? Are they making more informed decisions? Often, no. The focus remains on giving people more ways to trade rather than helping them achieve their actual financial goals: retirement security, home ownership, education funding, or wealth preservation. Why This Matters More Than Ever In today’s economic environment, the cost of financial services complexity has never been higher: Mid-market companies are particularly squeezed. They’re too sophisticated for basic banking products but not large enough to justify the white-glove treatment that major corporations receive. They’re stuck in the middle, often making suboptimal financial decisions not because they’re not smart enough, but because they don’t have access to the right information and guidance. The Path Forward The solution isn’t more products or better marketing. It’s fundamentally restructuring how financial services think about customer relationships. Instead of asking “What products can we sell this customer?” the question should be “What outcomes is this customer trying to achieve, and how can we help them get there?” This requires: Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.