Stablecoins for Trade Finance and the End of Mandatory Bank Rails

A physical commodity can trade around the clock. A vessel can discharge on Sunday. A supplier in Singapore can require payment while its buyer in Brazil is asleep. A margin call can arrive during Asian trading hours while the corporate treasury function sits in London.

Money still moves through an international banking infrastructure built around accounts, correspondent banks, payment messages, cut-off times, holidays, prefunded liquidity and sequential reconciliation between institutions.

Stablecoins offer a different settlement architecture. Dollar-denominated value can move directly between controlled blockchain addresses on a 24-hour basis without requiring every payment to travel through a chain of correspondent banks before reaching the commercial counterparty.

That does not mean ignoring KYC, sanctions, beneficial ownership or transaction monitoring. It means separating two questions that incumbent financial institutions have often bundled together: whether a transaction should be permitted and whether a commercial bank must sit in the middle of every movement of money.

Those are different questions. A payment can be compliant without requiring three banks, two correspondent accounts and a business-day settlement window to move from buyer to seller.

The Problem With Correspondent Banking

International bank payments often depend on a sequence of bilateral banking relationships.

An importer can instruct Bank A to send dollars to an exporter at Bank D. Bank A might not maintain the necessary direct relationship with Bank D. The payment can therefore pass through correspondent Bank B or Bank C before reaching its destination.

Each institution maintains its own compliance procedures, operating hours, account relationships and reconciliation process. Fees can accumulate across the chain. Payment information can be queried more than once. Funds can arrive after the commercial deadline even when the sender initiated payment correctly.

SWIFT has substantially improved the visibility and speed of international bank payments. Financely discusses those improvements separately in its coverage of SWIFT gpi transfers. The fundamental architecture nevertheless continues to rely heavily on bank accounts and interconnected financial institutions.

Stablecoins allow value to move using a shared blockchain ledger instead.

What a Stablecoin Changes

A fiat-backed payment stablecoin represents a claim designed to maintain a stable value against a reference currency, commonly the U.S. dollar.

Instead of instructing several financial institutions to update their respective account ledgers, two companies can transfer the token between blockchain addresses.

The exporter can retain the stablecoin for another commercial payment, move it to a custodian, use it as part of another on-chain transaction or redeem it into conventional currency through an appropriate regulated provider.

The blockchain has effectively replaced a portion of the correspondent settlement chain with a shared execution layer.

Stablecoins Do Not Eliminate Banks Completely

Claims that stablecoins remove banks from the system entirely are overstated.

Major fiat-backed stablecoins hold reserves in cash, bank deposits, Treasury instruments and other permitted reserve assets. Users also commonly rely on banks or regulated payment providers to convert conventional money into stablecoins and redeem stablecoins back into fiat currency.

What stablecoins can eliminate is the requirement for a commercial bank to intermediate every movement of value after the token has been issued.

That distinction matters enormously for trade. A company can obtain tokenized dollars once and use those dollars for multiple compliant commercial settlements without recreating a multi-bank correspondent payment chain for every transaction.

A Stablecoin Trade Settlement Example

Consider a European commodity trader purchasing USD 5 million of material from an exporter in Asia.

The commercial parties have completed KYC. The commodity, supplier, buyer and transaction have been screened. Both parties have agreed that USD-denominated stablecoin is an acceptable settlement method.

Once the relevant contractual conditions are satisfied, the buyer can transfer the stablecoin directly to the approved address.

There is no inherent need for the payment to wait until Monday morning simply because the goods were discharged on Saturday.

The exporter can confirm receipt on the ledger and use or redeem the value according to its own treasury requirements.

Why This Matters for Physical Commodity Trading

Commodity markets are unusually sensitive to settlement timing.

Traders fund cargoes, freight, storage, margin requirements, customs, terminal charges and suppliers across several time zones. Goods frequently move while banks in one or more jurisdictions are closed.

Faster settlement can reduce the amount of capital trapped between payment initiation and final receipt. It can also allow a trader to recycle liquidity into another transaction sooner.

In a low-margin commodity business, reducing the amount of time USD 20 million or USD 50 million spends in transit is not merely a convenience. It can directly improve capital efficiency.

24/7 Settlement Is More Important Than Faster Messaging

A payment message and final movement of value are different things.

Banking systems have become much better at transmitting instructions quickly. The difficult part of cross-border finance is often the coordinated settlement of money across different institutions and jurisdictions.

Public blockchains operate continuously. Subject to the specific network and token, a commercial payment can therefore settle at night, during weekends and on public holidays.

For corporate treasury departments accustomed to cut-off times and value dates, that represents a fundamental change in how liquidity can be managed.

Less Prefunding

Correspondent banking frequently requires liquidity to be positioned across accounts before it is needed.

A multinational can therefore hold idle balances across several banks and jurisdictions simply to ensure that future payments can be executed without delay.

Tokenized value that can move continuously between approved parties can reduce some of that need.

Citi explicitly markets its tokenized-deposit infrastructure as a way to reduce the need to pre-position liquidity between participating branches while providing near-real-time cross-border payments on a 24/7 basis. See Citi Token Services.

Programmable Money Is More Important Than Digital Money

Stablecoins are useful because they move quickly. Their more significant long-term advantage may be that the payment can interact directly with software.

A smart contract can be designed to release funds when predefined conditions are satisfied.

In trade finance, that can eventually support structures where payment is linked to:

• electronic bill of lading transfer;
• warehouse receipt validation;
• inspection confirmation;
• vessel arrival;
• customs clearance;
• buyer acceptance;
• invoice approval;
• borrowing-base eligibility;
• collateral thresholds; or
• another objectively verifiable contractual event.

The challenge becomes proving that the off-chain event actually occurred. Smart contracts do not solve fraud by themselves. They execute the information they receive, so reliable data and controlled oracles remain essential.

Citi Has Already Tested This in Trade Finance

This is no longer purely theoretical.

Citi developed Citi Token Services for trade finance using tokenized deposits and smart contracts. In an early pilot involving Maersk and a canal authority, the system automated a payment process that served a function traditionally supported by bank guarantees and letters of credit.

Citi said the digital workflow reduced processing from days to minutes. It subsequently used Citi Token Services for Trade in real shipping operations involving CB Fenton and GAC Panama Shipping. Read Citi's Token Services trade-finance update.

Citi did not use an open stablecoin in that structure. It used tokenized commercial bank money. The economic lesson is still relevant: global banks themselves have concluded that always-on programmable settlement can remove meaningful friction from trade finance.

The Compliance Argument Needs More Precision

Stablecoins are frequently discussed first as an AML problem and only afterward as payment infrastructure.

Financial-crime risk is legitimate. Stablecoins can be abused for fraud, sanctions evasion, money laundering and other illegal activity. FATF continues to document significant illicit use of digital assets and stablecoins.

That fact does not establish that every payment must pass through conventional correspondent banking.

Cash can be laundered. Shell companies can misuse conventional bank accounts. Trade-based money laundering existed long before public blockchains. Documentary trade finance itself has repeatedly been exploited using false invoices, manipulated prices, fabricated shipments and opaque intermediaries.

The appropriate response is to control counterparties, assets and transactions rather than treating one legacy settlement architecture as the only possible source of legitimacy.

Public Blockchains Are Not the Same as Anonymous Cash

Public blockchains are generally pseudonymous rather than inherently anonymous.

Transactions can create persistent records showing the sending address, receiving address, amount and transaction history. Blockchain analytics can connect addresses to known services, sanctioned entities and previously identified illicit flows.

Regulated stablecoin issuers can also operate controls at the token level.

The U.S. GENIUS Act, signed into law on July 18, 2025, created a federal framework for payment stablecoins. Among other requirements, permitted issuers are subject to AML obligations and must maintain the technical capacity to comply with lawful orders involving freezing, seizing or burning stablecoins. Read the GENIUS Act fact sheet.

Europe has taken a different regulatory approach through MiCA, whose stablecoin provisions have applied since June 2024. The relevant question in 2026 is increasingly how regulated digital money integrates with commerce rather than whether digital settlement will be regulated at all.

Stablecoins Can Reduce the Incumbent Advantage

Correspondent banking produces an economic moat.

A company that controls the relevant account relationships, payment corridors and banking licenses can charge for access to infrastructure that smaller institutions cannot easily reproduce.

Stablecoins make the settlement layer more open. A regulated corporate participant can receive tokenized dollars without requiring a direct correspondent relationship with every institution used by the sender.

This does not eliminate the value of banks. It puts pressure on one specific source of bank economics: charging for privileged access to the movement of commercial money.

Competition at the settlement layer is healthy. Banks should have to demonstrate why their payment service is better rather than relying on the fact that commercial counterparties have no alternative rail.

Stablecoin Settlement Can Reduce Intermediaries

Stablecoin Settlement Does Not Replace Trade Finance Credit

One important distinction is frequently missed.

Stablecoins solve settlement. Trade finance also solves credit.

If an importer does not have USD 10 million today, giving it access to a blockchain does not create USD 10 million of financing.

The importer can still require a bank facility, private credit line, borrowing base, supplier credit or documentary-credit facility.

Stablecoins can change how the borrowed money is drawn, held, transferred and repaid. They do not eliminate the need to underwrite the borrower.

This is why the more interesting future is the combination of on-chain settlement with off-chain credit underwriting.

A Stablecoin Trade Finance Facility

Consider a commodity trader with a USD 25 million revolving facility.

The lender still conducts ordinary credit analysis. Eligible transactions must satisfy borrowing-base criteria. Suppliers and buyers are verified. Inventory is controlled. Concentration limits apply.

The difference is in settlement.

Credit remains institutional. Settlement becomes programmable.

On-Chain Payment Control Could Be Better Than an Ordinary Bank Account

Trade lenders spend considerable time designing controlled accounts, lockboxes and cash dominion.

The objective is to stop financed proceeds from disappearing into the borrower's unrestricted operating account.

Blockchain-based systems can potentially make those controls more granular. Multisignature authorization, whitelisted addresses and smart-contract waterfalls can restrict where value moves and in what sequence.

Buyer proceeds could enter an approved address. Principal could be routed automatically to the financing vehicle. Interest and transaction expenses could be paid next. Only the remaining trader equity could then become freely transferable.

That is a more interesting use of blockchain than simply replacing a wire transfer with a token transfer.

Stablecoins Can Improve Treasury Management

A trading company operating across several countries has to decide where its cash sits.

Conventional treasury management can require multiple bank accounts, local cash buffers, FX conversions and daily cash sweeps.

A stablecoin treasury creates a portable liquidity layer that can potentially be moved between approved operating entities or counterparties without waiting for each banking corridor to open.

Stablecoin liquidity should still be incorporated into the company's wider treasury, cash, liquidity and FX risk framework. Wallet control and redemption risk are treasury risks just as bank concentration and correspondent exposure are treasury risks.

FX Does Not Magically Disappear

Stablecoins reduce payment friction more effectively when both counterparties already operate economically in the same currency.

A Brazilian importer earning BRL still needs to obtain dollars before paying a USD-denominated supplier. Moving those dollars as USDC does not eliminate the underlying BRL/USD conversion.

The same applies when the exporter ultimately wants EUR, JPY or another local currency.

Stablecoins can improve settlement infrastructure without eliminating currency risk or the need for an FX market.

Visa Has Already Moved Stablecoins Into Mainstream Settlement

Stablecoin settlement is increasingly being integrated by companies that operate at the center of the existing payments system.

In December 2025, Visa launched USDC settlement for U.S. institutions. Initial bank participants included Cross River Bank and Lead Bank, which began settling Visa obligations using USDC on Solana.

Visa said its stablecoin settlement activity had exceeded USD 3.5 billion on an annualized basis at the time of the announcement, with broader U.S. availability planned through 2026. Read Visa's stablecoin settlement announcement.

Visa's motivation is revealing. Banks are asking for faster, programmable settlement infrastructure themselves.

Banks Are Responding With Tokenized Deposits

Commercial banks are unlikely to surrender the payment business without competing.

Their most credible response is tokenized commercial bank money.

In November 2025, J.P. Morgan made its JPM Coin USD deposit token available to institutional clients on Base, an Ethereum Layer 2 network.

The token enables institutional clients to move bank deposit money on-chain with near-instant, 24/7 settlement. J.P. Morgan explicitly distinguishes JPM Coin from a stablecoin because it remains a representation of a commercial bank deposit. See J.P. Morgan's JPM Coin announcement.

The competitive battle may therefore become less about blockchain versus banks and more about which form of digital money wins particular commercial use cases: independent regulated stablecoins, tokenized bank deposits, central-bank money or interoperable combinations of all three.

Even SWIFT Is Building a Blockchain Ledger

Perhaps the clearest evidence of the direction of travel comes from SWIFT itself.

In September 2025, SWIFT announced that it would add a blockchain-based shared ledger to its infrastructure in collaboration with more than 30 financial institutions.

By March 2026, the project had moved into MVP implementation, with the initial use case focused on interoperability between banks' tokenized deposits and 24/7 cross-border payments. SWIFT said the ledger was being built using an EVM-compatible architecture based on Hyperledger Besu. Read SWIFT's 2026 ledger update.

The organization historically synonymous with bank-to-bank financial messaging is now building blockchain infrastructure because institutional customers increasingly expect money to behave like an internet-native asset.

Banks May Have No Choice but to Participate

The strongest argument for bank adoption is economic rather than ideological.

Corporate clients want faster settlement. They want fewer cut-off restrictions. They want better liquidity visibility. They want programmable treasury infrastructure and easier movement between conventional and tokenized assets.

If regulated stablecoin providers, payment companies and blockchain networks can deliver those capabilities, banks cannot protect a slower service indefinitely by emphasizing the risks of the competing rail.

They have to improve their own infrastructure.

Citi, J.P. Morgan, Visa and SWIFT are already doing exactly that. The likely outcome is not the disappearance of banks but the erosion of the assumption that international settlement must always occur through conventional correspondent accounts.

The Risks Are Real

Stablecoin advocates undermine their own case when they pretend the technology has no meaningful risks.

Corporate users need to evaluate:

• stablecoin issuer credit;
• reserve quality;
• redemption rights;
• temporary deviations from par;
• blockchain network risk;
• smart-contract risk;
• wallet security;
• private-key management;
• custodian risk;
• address-screening procedures;
• regulatory treatment;
• tax and accounting treatment;
• cross-chain bridge risk;
• liquidity on the chosen network; and
• whether the recipient can legally and operationally redeem the token.

The BIS has also highlighted risks involving financial integrity, monetary sovereignty, operational resilience and the possibility that stablecoins can trade away from par. Those issues should be underwritten rather than dismissed. See the BIS 2025 assessment.

Stablecoins Should Not Be Used to Evade Sanctions or Capital Controls

The ability to route a payment outside conventional correspondent banking does not make an otherwise prohibited transaction permissible.

A sanctioned counterparty remains sanctioned. A prohibited export remains prohibited. Local foreign-exchange and capital-control laws still apply where relevant.

Institutional adoption depends on making the rail compliant enough for legitimate commerce, not turning it into an escape route from financial regulation.

That distinction is also commercially important. The deepest pools of corporate capital will not use a settlement network that cannot survive regulatory scrutiny.

The Better Criticism of Banks

There is a legitimate criticism to make without pretending financial crime does not exist.

Incumbent financial institutions can become too comfortable treating their existing infrastructure as synonymous with compliance. It is not.

Compliance is a control framework. Correspondent banking is a settlement architecture.

When those two concepts are conflated, every competing payment technology can be portrayed as inherently suspect simply because it reduces reliance on incumbent intermediaries.

The better approach is technologically neutral. Apply rigorous KYC, sanctions screening, KYT and legal controls to the transaction, then allow the market to determine which compliant settlement rail provides the best speed, cost, programmability and liquidity.

Stablecoins Could Transform Trade Asset Distribution

Settlement is only the first layer.

Trade receivables, bills of exchange, inventory claims and participation interests can themselves be represented digitally. A financing asset and the money used to purchase it could eventually exist on compatible infrastructure.

That creates the possibility of delivery-versus-payment for trade assets. Ownership of a receivable could transfer at the same moment tokenized cash settles.

Financely has covered these broader possibilities in its articles on trade finance tokenization and the benefits of tokenizing trade-finance assets.

The Future Is Probably Hybrid

A complete replacement of the banking system by independent stablecoins is unlikely and unnecessary.

Banks still provide credit, custody, derivatives, FX, deposits, letters of credit, guarantees, regulated lending and access to central-bank money. Those functions remain valuable.

The weaker part of the incumbent model is the assumption that these services must remain bundled with a slow and highly intermediated settlement architecture.

Stablecoins separate the two.

A company can borrow from a bank and settle using tokenized money. A private credit fund can finance a commodity trader and receive repayment on-chain. A bank can issue a documentary instrument while the final commercial settlement occurs in regulated stablecoin. A tokenized deposit can move across blockchain infrastructure while remaining a bank liability.

The market can keep the useful parts of banking while making the payment rail compete.

Banks That Adapt Can Remain Important

The adoption of stablecoin technology does not have to be anti-bank.

Banks can become custodians of digital assets, stablecoin issuers, tokenized-deposit providers, fiat on-ramps, FX providers, lenders against tokenized collateral and operators of programmable trade-finance platforms.

They can also connect corporate treasuries to multiple forms of digital money while preserving regulated credit and risk-management services.

What becomes harder to defend is earning economic rents merely because a payment has no alternative route to the recipient.

Trade Finance Does Not Need Another Closed Network

Global trade already suffers from fragmented documentation, inaccessible financing, duplicated compliance checks and too many intermediaries.

Recreating the same architecture on a private blockchain would deliver only part of the opportunity.

Open and interoperable digital money can allow qualified counterparties to transact across institutions rather than requiring every participant to belong to the same proprietary network.

That openness needs controls. It also creates competition.

Competition is precisely what international payments have historically lacked.

Stablecoins and Trade Finance FAQ

Can stablecoins be used to settle international trade?

Potentially, where the payment is lawful, both parties accept the settlement asset and the relevant regulatory, tax, accounting, KYC and sanctions requirements are satisfied.

Do stablecoins bypass correspondent banks?

They can reduce or remove the need for correspondent banks in the token-transfer leg because value moves directly across a blockchain. Fiat issuance and redemption can still involve banks or regulated payment institutions.

Can stablecoins replace letters of credit?

Stablecoins primarily provide a settlement asset. A letter of credit provides a bank payment undertaking subject to documentary conditions. Smart-contract and tokenized-cash structures can reproduce parts of the workflow, but the legal and credit functions are not automatically identical.

Can a trade finance lender fund in stablecoins?

Potentially. A lender can underwrite a conventional credit exposure while using regulated digital money for drawdowns, supplier payments, collateral movement or repayment, subject to its mandate and applicable law.

Are stablecoin payments anonymous?

Public blockchain addresses are generally pseudonymous. Transactions are recorded on-chain and can be analyzed. Regulated platforms and issuers can additionally impose customer identification, address screening and other controls.

Can stablecoins be used to avoid sanctions?

They should not be. Moving a payment to another technology does not make a prohibited transaction lawful.

What is the difference between a stablecoin and a tokenized bank deposit?

A regulated fiat-backed stablecoin is issued under the applicable stablecoin framework and backed by designated reserve assets. A tokenized deposit represents a commercial bank deposit and remains a liability of the issuing bank.

Are banks adopting blockchain settlement?

Yes. J.P. Morgan has launched a USD deposit token for institutional clients, Citi operates tokenized cash infrastructure and SWIFT is developing a blockchain-based shared ledger for 24/7 cross-border interbank payments.

Will stablecoins replace banks?

More likely, stablecoins and tokenized deposits will force banks to compete on settlement infrastructure. Banks can remain important providers of credit, custody, FX, guarantees and risk management while losing some of the exclusive control they historically held over cross-border money movement.