29 Aug, 2025
Crypto Payments & Banking: From Stablecoins to Institutional Custody
The Boundary Between Crypto Payments and Banking Services Has Rapidly Blurred in the Past Two Years: The instant settlement capabilities centered on stablecoins are increasingly viewed by payment giants and banks as key options to improve cross-border and merchant settlement efficiency. At the same time, regulatory developments and the expansion of institutional custody are gradually dismantling the traditional “trust” barrier, ushering in a new stage that emphasizes both compliance and efficiency.
Firstly, payment companies are accelerating the integration of crypto settlement into existing merchant ecosystems. Companies like PayPal and Stripe have rolled out products in 2025 supporting stablecoins or direct settlement with crypto assets, claiming lower cross-border fees and faster settlement speeds. These initiatives have attracted numerous pilot projects in e-commerce and international acquiring scenarios. PayPal’s official statements indicate that its “Pay with Crypto” products offer clear advantages in settlement speed and cost, prompting merchants to start testing crypto as an optional payment channel.
Secondly, traditional banks are moving from observation to active participation. Large banks are evaluating and piloting custody, clearing, and market access services for stablecoins and digital assets. Their goal is to bring regulated deposit and asset management capabilities into the digital asset space. Institutions like Citibank have publicly stated that they are exploring the feasibility of providing tokenized custody and stablecoin payment services backed by high-quality assets such as government bonds and cash. This signals that banks aim to occupy the “underlying trust” role within a compliant framework rather than being marginalized as simple transaction conduits.
Regulatory developments act as a catalyst for accelerating this integration. Recent U.S. legislation and regulatory guidance on stablecoins have clarified that stablecoins must be backed by high-quality, liquid assets while defining the boundaries for bank participation. Regulators are also debating whether banks can directly provide interest on crypto assets or issue stablecoins themselves. Statements from the U.S. Congress and regulatory bodies are redefining the triangular relationship of “who can issue coins, who can provide custody, and who can settle,” directly influencing the commercial models of banks and crypto companies.
Against the backdrop of parallel policy and market evolution, banks—especially those with cross-border settlement networks—see opportunities to enhance cross-border efficiency and reduce costs through digital dollars/stablecoins. U.S. monetary regulators such as the OCC have clarified the authority of banks in digital asset services, allowing custody and trading service pilots under strict compliance and risk controls. This provides a legal basis for large banks to enter crypto custody and settlement services.
On the technology and ecosystem front, on-ramps, off-ramps, and settlement infrastructure are maturing rapidly. Payment networks like Mastercard and Visa are educating the market and offering API-level crypto access solutions, enabling more seamless fiat ↔ stablecoin flows between wallets and bank accounts. At the same time, improvements in blockchain settlement layers in throughput and cost make micropayments, small-value transfers, and instant settlement scenarios feasible, further encouraging merchant adoption.
However, risks and frictions remain. First, regulatory inconsistency remains the greatest concern: rapid U.S. legislation coupled with cautious approaches in other countries has fragmented global market rules, requiring enterprises to prepare multiple compliance schemes when rolling out cross-border stablecoin payments. Second, banks’ concerns about deposit outflows may limit stablecoin interest rates and product design, affecting their attractiveness to retail customers. Third, technical and operational risks—including contract vulnerabilities, custody key security, and anti-money laundering compliance—require continuous investment, especially as transaction volumes scale, since a single failure could trigger systemic trust issues.
From a business model perspective, three typical competitive patterns may emerge over the next 12–36 months:
- “Payment Giant + Stablecoin Issuer” partnerships: leveraging their merchant networks to normalize stablecoin payments.
- “Bank + Custody Service Provider” model: banks provide compliant custody and settlement channels to retain client fund flows while expanding fee-based businesses.
- “Neutral Infrastructure Provider” path: offering cross-chain settlement, compliance interfaces, and risk management services to connect payment companies and banks, acting as a neutral market layer.
These three paths are not mutually exclusive; cooperation and competition coexist in the evolving ecosystem.
The impact on merchants and end users is bidirectional. For cross-border e-commerce and international acquirers, stablecoin payments can significantly reduce foreign exchange costs and shorten settlement times. For ordinary consumers, education and incentive mechanisms (e.g., discounts, instant cashback) are needed to drive habit changes. Privacy, data protection, and consumer protection regulations must also advance in parallel to avoid compromising user rights in the pursuit of efficiency.
Conclusion:
The integration of crypto payments and banking services has moved from proof-of-concept into an amplification phase of engineering and compliance. The “dual push” of policy and technology will determine whether this transformation evolves from industry experiments to large-scale adoption: regulators must provide clear and actionable rules; banks and payment giants must offer compliant custody and broad merchant access; technology providers must solve settlement efficiency and security challenges. When these three forces align, a true “digital cash era” can materialize in the real economy. For industry participants, the short term requires seizing compliance windows and optimizing cross-border settlement products; the medium term demands continued investment in risk management and user experience to capture the payment transformation dividend driven by stablecoins and custody services.