Stablecoins are drawing in banks, regulation is defining responsibility, and public blockchains still complicate financial privacy.

Crypto is increasingly being judged by the standards of financial services: who stands behind an asset, who is responsible for it and what happens when a transaction goes wrong.

Martin Masser has seen the gap from both sides. Before moving into crypto, he worked on an FX trading floor, where settlement often depends on legacy systems and layers of approval. In a recent conversation with The Daily Wolf, he described banks moving beyond trials and looking more closely at the parts of blockchain infrastructure that can make those processes less manual.

How Banks Use Stablecoins for Payment Settlement

Banks are exploring stablecoins for settlement, treasury operations and cross-border payment flows. A token can move continuously on its network, while practical settlement still depends on redemption, acceptance and the systems at each end of a payment.

For most of their first decade, stablecoins largely stayed within crypto: they served as dollar substitutes on exchanges and in DeFi. Their role has broadened as banks and payment firms consider where tokenised cash might fit into treasury operations, settlement and international payment flows. In its look at why banks want stablecoins, BeInCrypto notes that total supply rose from $27 billion at the end of 2020 to more than $300 billion today.

A stablecoin can move in seconds. Banks still have to convert tokens into bank money, settle with the counterparty and reconcile the transaction across the institutions involved.

Bank-backed stablecoins could give users something they already understand: a familiar institution behind their digital money, with clearer regulatory recourse. But the real value will depend on what users can do with these tokens beyond the issuing bank.
— Tim Stanyakin, Head of Growth at ChangeNOW

That usefulness also depends on the model behind the token: the reserves, redemption terms and entity a holder is expected to rely on.

Stablecoin Backing Models

Stablecoins can share a dollar peg while relying on different forms of backing and oversight. Bank-issued tokens depend on the issuer and its reserves; decentralised designs depend on collateral, protocol rules and on-chain data.

The USDD explainer describes a decentralised, over-collateralised model. Its collateral and protocol data can be checked on-chain, making the condition of reserves, the redemption mechanism and the risks of any yield layer part of the user’s assessment.

Holding a stablecoin and deploying it through a yield product involve different exposures. sUSDD and other DeFi routes introduce their own terms, smart-contract dependencies and liquidity conditions alongside the token’s dollar peg.

Different models create different expectations around backing, disclosure and redemption. MiCA turns those distinctions into separate obligations for issuers and service providers.

MiCA Stablecoin Rules

MiCA gives the EU a common rulebook for crypto-asset issuers and service providers. It applies distinct requirements to stablecoin categories and defines obligations around authorisation, disclosures, client-asset safeguards and consumer protection.

The EU’s Markets in Crypto-Assets Regulation, or MiCA divides stablecoins into categories with different treatment. Asset-referenced tokens can track a basket of assets, while e-money tokens are designed to track one official currency. The category shapes the issuer’s obligations and the disclosures users receive about the token.

These requirements make the roles around a token easier to identify: the issuer, the service provider and the entity accountable when an operational failure occurs. Those roles become operational in the custody systems used to hold and administer client assets.

Crypto Custody and Operational Control

Crypto custody determines who can access assets, approve transactions and operate the systems that protect client funds. In practice, it is a division of permissions and responsibilities, not only a question of where a private key is stored.

In a Bitcoin.com case study, CoinRabbit says it uses ChangeNOW’s NOWCustody in its lending operation. This is a company case rather than an independent industry benchmark. It shows the scope of custody in a lending setup. CoinRabbit describes the arrangement as separating custody infrastructure from the lending platform’s client and product operations.

CoinRabbit presents the security and operational side as a central measure of that arrangement:

Working with NOWCustody gives us confidence in both the security and operational side — especially important when working with client assets at scale.
— Walter Barrett, Chief Strategy & Growth Officer, CoinRabbit

Protecting an asset and keeping financial activity confidential require different forms of control.

Bitcoin Payments and Financial Privacy

Bitcoin payments can expose financial patterns once an address is linked to a person or business. Address reuse, public transaction history and wallet metadata can reveal counterparties, timing and treasury activity.

Repeated business payments make the issue tangible. Activity from a known wallet can turn a public transaction record into a source of operational and commercial signals.

In her BeInCrypto column on Bitcoin payment privacy, Yana Mar uses a business example: a company paying suppliers from a reused Bitcoin address can expose information about counterparties and treasury activity. The point is not that blockchain analysis always produces a complete picture. It works with patterns and probabilities, so false positives and incorrect links can occur.

Privacy tools can make a particular link harder to see, such as a direct connection between sender and recipient. They do not erase public records or remove compliance duties around a transaction.

Public networks, self-custody and open infrastructure continue to give crypto a distinct character. The questions around a token increasingly resemble those around any financial product: what supports it, who takes responsibility for it and what becomes visible when it changes hands.

Thank you for reading this week’s digest. The next payment may still run on a blockchain. Its questions are starting to sound very familiar.