The core of stablecoin payments is not to completely remove banks from the payment process, but to transfer a portion of the value settlement to the blockchain for completion. The article points out that such payments typically use tokens pegged to the US dollar as a medium. After the transfer is completed on the blockchain, the payment institution or bank then exchanges them for the local currency required by the recipient.
The payment process is divided into three steps.
A stablecoin payment usually follows this process: the payer first converts fiat currency into stablecoins such as USDC and USDT, then transfers them to the recipient's wallet through the blockchain network, and finally, the local payment service provider or partner institution completes the conversion back to fiat currency.
In this process, the blockchain plays the role of the settlement layer, responsible for recording the transfer of token ownership; the inflow and outflow of fiat currency and stablecoins are usually still handled by banks, exchanges, issuers, or payment platforms.
- Fiat currency exchanged for stablecoins
- Stablecoins transferred on-chain
- The payee exchanges for local currency.
On-chain settlement can operate 24/7.
The article mentions that stablecoins can circulate on networks such as Ethereum, Solana, and Polygon. Unlike many traditional payment systems, on-chain settlement can operate around the clock, unaffected by weekends and holidays.
After a transaction is sent, network validators confirm the transaction and update the ledger, after which control of the stablecoin is transferred to the recipient. Looking solely at this step on the blockchain, the processing time may only take a few seconds to a few minutes.
However, whether a complete payment can be completed quickly still depends on compliance reviews, foreign exchange conversion, and bank connectivity. This means that stablecoins can reduce some frictions, but they do not eliminate all intermediate steps.
More like a new payment channel than an alternative to banks
The article argues that stablecoins are better understood as a new form of payment channel, rather than a substitute for the banking system. What they change is the location where value settlements take place, allowing “tokenized dollars” to circulate continuously on the blockchain, while custody, compliance, and local currency exchange are still primarily undertaken by financial institutions and fintech companies.
This model has already been adopted by some large institutions. The article mentions that the stablecoin settlement infrastructure of Visa supports multiple blockchains and is expanding the scope of on-chain settlements.
In cross-border payment scenarios, this structure is also easier to implement. For example, a company can first convert US dollars into USDC, send it to an overseas payment service provider, who then converts it into the local currency and delivers it to the recipient. The article also mentions that the cooperation between Ripple and Convera follows a similar approach, where fiat currency enters from one end, stablecoins handle part of the settlement, and then the delivery of fiat currency is completed from the other end.
Can embed existing products such as bank cards
Stablecoin payments are not necessarily directly exposed to merchants or end-users. The article points out that the association of stablecoins with bank cards is one example: users can make payments using crypto assets, but what merchants receive is still fiat currency.
This means that on-chain settlement can be integrated into existing payment products without having to change the payment experience for merchants. For the payment industry, the main change brought about by stablecoins is the update of the backend settlement methods, rather than a complete reconstruction of the front-end payment habits.
