Banks and Stablecoins: From Fear to a Trillion-Dollar Opportunity

Recently, a $1 trillion figure has appeared on the horizon for the global banking sector, but not as most traditional bankers expect. It’s not about potential deposit losses, but a golden opportunity to generate massive returns through new stablecoin infrastructure. This shift in perspective is driven by a man who spent 20 years in the deepest corners of the global banking system: Tony McLoughlin, founder of Ubyx.

When I first met him after he left Citi and founded his company, I was impressed by one thing: a man who spent two decades at the world’s largest banks speaking confidently about blockchain and public ledgers—no different from early crypto adopters—yet all his assumptions were based on a deep understanding of banking settlement mechanisms and real banking services.

Why Are Banks Fighting Stablecoins? A Misclassification

When President Trump publicly criticized U.S. banks in March 2026 for “corrupting” the GENIUS law and holding hostage the crypto agenda, it revealed a deeper industry debate. The fear among banks about stablecoins is real: global issuance has already exceeded $300 billion, with concerns that this could lead to deposit leakage from bank balance sheets.

But McLoughlin sees the problem as completely misclassified. The core mistake starts with how regulators categorize stablecoins. As he explained: “When regulators define stablecoins as ‘cryptographic assets linked to fiat currency,’ they’re making a fundamental error. That’s like saying ‘a check is a piece of paper linked to fiat currency.’”

The mistake isn’t in the technology but in the definition itself. Regulators used the technical mechanism to define the instrument instead of its actual function. The true essence of a stablecoin—like a check—is not in the technology used but in a legal promise to pay the face value. Whether I write “I owe you $10” on clay, paper, or a digital token on Ethereum, the legal instrument is the same. What matters is who commits to this promise and whether it’s enforceable.

In this logic, stablecoins aren’t a new product in crypto but the latest evolution of one of the oldest tools in commercial law: negotiable and transferable instruments.

The Forgotten Infrastructure: A Lesson from Travel Checks

To understand the core idea, McLoughlin offers a historical analogy with traveler’s checks issued by American Express in 1891. Before credit cards and ATMs, traveler’s checks were the main way people carried cash abroad. They could be purchased in advance for a set amount and spent anywhere in the world at face value because banks and merchants trusted the settlement network that guaranteed payment from the issuer.

Traveler’s checks had properties identical to today’s stablecoins: dollar-denominated, not issued by a traditional bank, pre-funded, fully backed, interest-free, and transferable to the bearer.

As bank cards proliferated, traveler’s checks almost disappeared quickly—not because the instrument failed, but because the channel—the settlement network—became unnecessary. Both products relied on the same core infrastructure, and the winner was the one offering a better service.

Now, stablecoins are in the same position. They can move across borders in seconds on public blockchains, but there’s no unified mechanism allowing regulated financial institutions to redeem them at face value. The result? Every stablecoin issuer must build distribution networks from scratch and negotiate bilateral partnerships with each bank. If a bank wants to accept stablecoins, it must negotiate separately with each issuer. The complexity grows exponentially.

The Profits Banks Overlooked: $36 Billion in a Trillion

Here lies the real shift in the narrative. Instead of fearing deposit loss, McLoughlin proposes a completely different accounting model.

Suppose the stablecoin market reaches $1 trillion (currently around $300 billion and growing fast). Assuming conservatively that only 0.5% of these funds are redeemed daily via point-of-sale and transfers, the annual redemption volume would be about $1.8 trillion.

If banks charge 100 basis points on transactions, plus another 100 basis points for cross-border spreads, the potential annual revenue could reach $36 billion.

These figures are very conservative, and the simple question McLoughlin asks bankers is: what’s your share of this $36 billion?

For non-U.S. banks especially, these returns are extraordinarily attractive. Every dollar of stablecoin entering the European or Asian banking system and converted into local currency generates foreign currency income for the local bank. FX trading profits are considered “huge gains” in traditional banking terms. So when McLoughlin says that foreign stablecoins are “gifts” in all his talks and seminars, he’s not being overly optimistic.

How the Real Model Works: Settlement, Not Trading

What Ubyx offers isn’t a stablecoin exchange. In an exchange, these currencies are bought and sold at floating market prices, with no guarantee of redemption at face value. Ubyx provides a true settlement model.

The mechanism is astonishingly simple: the client deposits stablecoins (like USDC) into a wallet and bank account. The bank sends the tokens to Ubyx. Ubyx transfers them to the issuer (e.g., Circle). The issuer verifies the token’s legitimacy and releases fiat from a pre-existing reserve. The dollars are returned to the original bank and credited to the client (usually after fees and local currency conversion).

If the issuer fails to pay, the bank reclaims the tokens—just like bouncing a check.

The bank bears no risk to its balance sheet during this process. It treats the stablecoin as a transfer instrument funded by a third party, similar to a check.

McLoughlin describes this system as a “black box” with three states:

• Stablecoin inflow, cash outflow (redemption)
• Cash inflow, stablecoin outflow (issuance)
• Stablecoin type A in, stablecoin type B out (direct exchange)

The network is designed to be independent of any single issuer, specific public chain, or fiat currency. At launch, partners include Paxos, Ripple, Monerium, GMO Trust, and others, covering USD, GBP, EUR, and emerging market currencies across multiple public chains.

For banks, the technical infrastructure has intentionally been minimized. Most banks don’t build their own blockchain infrastructure, and if they do, they must solve the trust problem among other banks. Ubyx has solved this.

Who Is Betting on This Future? Massive Investments in a Trillion

The list of Ubyx investors reveals much about the forces backing this path. The company completed a $10 million seed round in June 2025, led by Galaxy Ventures. But the more interesting investors are: Founders Fund (Peter Thiel), Coinbase Ventures, VanEck, and LayerZero.

In other words: libertarian Silicon Valley capital, major crypto exchanges, traditional asset managers, and modern blockchain infrastructure—all investing in the same vision: a unified settlement model for stablecoins.

Most importantly, many investors are also active users of the network. Paxos and Monerium are both investors and issuers within the system. Several banks are strategic partners. This “investor-as-user” structure is deliberate—it echoes the ownership structure of early Visa and Mastercard: the banks that use the network are also its owners.

In January 2026, Barclays (the second-largest UK bank by market cap) made a strategic investment—its first in a stablecoin company. Ryan Hayward, head of digital assets at Barclays, said: “Interoperability is key to unlocking the full potential of digital assets.”

The implicit but clear message: one of Europe’s most stable systemic banks understands the logic of stablecoin settlement and has invested with its own funds.

A month later, AB Xelerate (the fintech accelerator of Arab Bank Group) made a strategic investment. Now U.S. venture funds, European banks, and Middle Eastern financial infrastructure are all moving in the same direction.

The Real Challenges: An Untested Model and Competition from Circle

Despite the enthusiasm, real challenges lie ahead.

Circle launched its own “Circle Payments” network in mid-2025, an exclusive settlement infrastructure for USDC. Circle has enough scale to build its own distribution system. The key question for the market is: will it move toward a single-source settlement model (Circle’s path) or a multi-source settlement system (Ubyx’s path)?

McLoughlin argues that history favors a multi-source approach. But Circle’s initial dominance and current market share are very real.

There’s also an ongoing regulatory debate about yields. The proposal from the U.S. Office of the Comptroller of the Currency (OCC) assumes a model that opposes yield on stablecoins. If yields are banned, banks will be more comfortable (since stablecoins would remain less attractive than savings accounts), but this also limits the scope to payments and settlement, resulting in a smaller market and slower growth for Ubyx.

On the other hand, if yields are permitted, stablecoin markets could explode, competing directly with deposits, money market funds, and government bonds. In this scenario, banks would have full incentives to rapidly build the infrastructure.

Finally, Ubyx has committed to open-source code and governance via DAO tokens in the future. This aligns with the philosophy of decentralized networks but remains an untested model for regulated, bank-backed financial infrastructure.

The Bottom Line: From Defense to Offense

McLoughlin’s journey reflects a broad evolution in understanding the relationship between banks and cryptocurrencies. Initially, he defended the fiat system against crypto challenges. Then he sought to build private chains for banks. Ultimately, he realized private chains wouldn’t solve the widespread reliance problem.

All these shifts stem from one core insight: where will people keep their money? On public chains, in their wallets, with a secure settlement infrastructure, making each stablecoin a trusted, bank-like instrument.

The one-sentence summary, according to McLoughlin: “Banks can handle stablecoins just like checks.”

If someone with real authority said that, every bank and fintech worldwide would immediately know what to do. Ubyx bets that moment is very near.