Banks and SWIFT Are Building Stablecoin Rails. Is There Hope for the Disruptors?

5 min read

For a few years, independent players used stablecoins, the dollar-pegged digital tokens that move on public blockchains, to move money quicker and cheaper than banks could. Now the big institutions are doing it themselves. In the space of one month, a group of more than 140 banks and corporates launched their own dollar stablecoin, SWIFT turned on a blockchain ledger with 17 major banks, and Samsung said it will put stablecoins in the wallet on hundreds of millions of phones. The incumbents are taking the disruptors' own technology and using it to defend their position. So where does that leave the companies that started this?

Key takeaways

  1. The big institutions are moving in together. Open USD, a group of more than 140 banks, card networks and tech firms including Visa, Mastercard, BlackRock and Stripe, launched in late June. On 9 July, SWIFT turned on a blockchain ledger with 17 major banks running tokenised-deposit pilots, South Africa's FirstRand among them. On 22 July, Samsung said stablecoins are coming to Samsung Wallet.
  2. They are copying the speed and keeping the customers. The disruptors' advantage was moving dollars fast and cheap at any hour. The banks can do that now, and they already have the customers and the standing a known name brings. Circle, which issues USDC, fell around 17% when Open USD launched, and neither Circle nor Tether is in the group.
  3. Once the banks match the rails, price is no longer the pitch. South Africa runs strict know-your-business and know-your-customer checks, so compliance costs the same for everyone, and the consortiums are tokenising deposits inside their own closed networks. What the independents keep is reach, and serving the customers banks turn away. The one option none of them offer is self-custody, which sits a layer below the whole fight.

The Stalwarts Are Securing Their Stronghold

In late June, more than 140 banks, card networks and technology firms formed a group to launch Open USD, a dollar stablecoin they can mint and redeem for free, with the reserve income shared among the partners. On 9 July, SWIFT, which carries most of the world's cross-border bank messages, turned on a blockchain ledger, with 17 major banks preparing live tokenised-deposit pilots. FirstRand is the South African bank on that list. On 22 July, at Galaxy Unpacked in London, Samsung said Samsung Wallet will add stablecoin support, showing Circle's USDC in the demo. Samsung ships around 241 million phones a year, and the wallet is already installed on them.

All three do the same thing. They take the part of the stablecoin model that worked, quick and cheap dollar transfer on a shared ledger, and put it inside the reach and control the banks already hold. The technology gets adopted, and the network stays theirs.

What the Disruptors Are Up Against

The independents got ahead by being quicker and cheaper than the banks. That lead shrinks once a bank consortium, the interbank messaging network and a phone maker all move at the same speed. The banks also bring what the independents spent years building: hundreds of millions of customers, and the standing that comes with a known name. Open USD goes after the money, too. Circle and Tether keep the interest earned on the reserves behind their tokens, and Open USD hands most of that back to its partners instead, cutting into the model the independents live on.

Is There Hope for the Disruptors?

Take the hardest case first. South Africa checks businesses and customers hard, so compliance is a cost everyone pays. If your own bank now settles on the same rails, at the same speed and about the same fee, why pay a private remitter? For a business whose partners all bank inside that network, there is no strong reason to, and the bank wins that customer.

What the banks are building still has a limit. SWIFT and the consortiums are tokenising bank deposits inside their own closed networks, which speeds up settlement between member banks. It does not put an open dollar in the customer's hands. A business still needs an independent rail to pay someone the bank network does not reach: a supplier in a frontier market, a worker with a phone wallet and no bank account, a partner settling on another chain. Sub-Saharan Africa is still the most expensive place on earth to send money to, and much of it sits outside the big banks. An open rail also lets a business hold a dollar it can move anywhere or use on-chain, rather than a balance locked inside one bank, and it lets a platform pay thousands of people across many countries from one connection. Some businesses have no bank rail at all, because banks refuse whole industries no matter how clean the company is.

There is one thing no bank and no remitter can offer, because the law does not let them: money that answers to no one. That comes from self-custody, where a person or a business holds its own crypto and moves it without asking anyone. Bitcoin is the plainest example, with no group issuing it and no central bank able to print more. The remitters will fight the banks at the edges. The thing none of them can match is money you hold yourself.

What It Means for South Africans

FirstRand is inside the SWIFT pilot, so a local bank is already securing its own position, and Samsung is one of the most common phone brands in the country, so these bank-built rails will reach people here first. If a South African bank offers the same stablecoin settlement, most local businesses will use the bank, and the exchange-control rules that limit moving money across the border stay exactly where they are. The independents keep a place on reach, moving money to counterparties and workers across a continent where a lot of value travels outside the big banks. Self-custody stays the one option no bank or remitter can give you, and it counts for more as the rand slips. It traded near R16.70 this week after briefly touching R17 when the Reserve Bank held rates.

Two things stay true. A stablecoin is still a dollar, and it loses value over time like any paper currency, because more can always be printed. And a wallet built into a phone or a bank app is not full self-custody, which means holding your own keys and being able to send money on your own. For the disruptors, and for the rest of us, the money that lasts is the money you hold yourself, that no company or central bank can freeze or print away.

Cape Crypto (FSP 53746) provides information, not financial advice. Crypto assets are volatile and you can lose money. Don't invest more than you can afford to lose. Past performance is not indicative of future results.

Sources

Leon Kowalski