Stablecoins can drain from banks and nations at lightning speed

Anyone who’s ever sent a bank transfer overseas is familiar with the painful process of waiting for things like working hours, correspondent banks and settlement times.

In many cases, it would be faster, cheaper and just more efficient to strap the physical cash to a homing pigeon, or slap it in an envelope and send it via DHL.

Stablecoins can move money across borders around the clock, without waiting for the legacy system to fire up its steam engines.

They can settle transactions 24/7, cut out layers of intermediaries and give people access to digital dollars without even needing a traditional bank account.

So do we even need banks any more? And what are the ramifications of stablecoins offering a faster, cheaper and easier way to move money?

The two clocks

Anthony Vassallo, director of crypto at Silicon Valley Bank, which failed in March 2023 and now operates as a division of First Citizens Bank, tells Magazine competition from stablecoins will show up across two time frames:

“Two clocks matter. One is slow: currency substitution, deposit erosion, and weakening policy transmission building over months or years. One is fast: a depeg, issuer shock, or banking event that can move capital at software speed within hours.”