The Potential of Stablecoins to Reshape Global Capital Flows

Stablecoins, as one of the most practical tools in the field of digital currency, demonstrate the ability of blockchain to provide a new and efficient infrastructure for traditional financial payment systems. Over the past year, the total market value of stablecoins has grown by more than 50%, currently exceeding $250 billion, supporting the efficient circulation of trillions of dollars in global payment funds.

Industry insiders understand that the value of stablecoins lies in fully reflecting the core capability of blockchain to "instantaneously transfer funds and value," making it possible to build a commercial closed-loop payment on-chain. However, real enterprise-level payment scenarios are far more complex than simple peer-to-peer transfers.

Currently, stablecoin applications aimed at enterprises often adopt a "stablecoin sandwich" architecture, which uses blockchain to replace traditional payment channels for horizontal value/fund transfer, while still relying on the traditional financial payment system at both ends. Although this design has brought significant improvements, it also limits the full realization of blockchain advantages.

This article will explore how stablecoins are applied in global cross-border payments from the perspective of global capital transfer.

1. Analyze the existing global cross-border payment system
2. Analyzing the specific improvements of stablecoin sandwich architecture in fund management, B2B payments, and card network settlements.
3. Discuss how to overcome the challenges at both ends of the stablecoin sandwich, allowing the value of blockchain to run through the entire process.

1. Background of Stablecoin Payments

Among the many applications of stablecoins, B2B enterprise payments are the most noteworthy. The latest report shows that last year, the monthly payment amount of B2B enterprises grew from 770 million dollars to 3 billion dollars. Data indicates that stablecoins account for nearly half of the transaction volume on certain payment platforms, with approximately 49% of customers actively using stablecoins for payments.

The internal data of leading companies better reflects the scale of niche markets. Reports indicate that a leading payment company processes approximately $15 billion annually, with about half coming from B2B enterprise payments. Another company's annual transaction volume is $10 billion, estimated to account for about 20% of the global B2B stablecoin cross-border payment market.

The use of global payments is becoming increasingly popular, primarily because the advantages of blockchain-based stablecoins become more prominent when traditional financial payment infrastructure appears outdated. Although traditional systems facilitate over $100 trillion in global payments each year, businesses and banks still face significant complexity and delays.

2. Various Models of Global Cross-Border Payments

2.1 SWIFT-based banking infrastructure

The traditional cross-border interbank transaction process is divided into two parts: "message passing clearing" and "fund settlement". A global financial communication system is responsible for transmitting transfer instructions between banks, while the actual flow of funds only occurs between banks that have pre-established correspondent accounts and can directly conduct debit/credit transfers.

Only when both banks are connected to the system and serve as partners can the final transfer be completed. If the two parties have not established a direct cooperative relationship, it will be necessary to link up with corresponding agent banks that have the appropriate interfaces and positions to complete the fund settlement.

As the need for more intermediary banks arises, issues such as settlement times possibly extending to several days, rising costs, and difficulties in tracking also emerge. This also leads to significant inconveniences when making cross-border payments between neighbors with underdeveloped financial infrastructures, as it may require routing through banks in developed countries.

2.2 Cross-border Fund Pool Model Based on PSP

In response to the limitations of traditional models, cross-border fund transfer providers (XBMT) have emerged. They are designed to enable businesses to complete global payments without having to go directly through traditional channels, a capability also known as "global multi-currency accounts" or "local receiving accounts."

Its essence is a cross-border fund pool model, with the core service being to provide enterprises with a multi-currency fund pool, allowing for flexible payments between different countries. XBMT is responsible for managing compliance and banking relationships, while enterprises or individuals receive a single multi-currency banking product, thereby forming a "closed loop".

XBMT now occupies an important position in the global B2B enterprise payment and corporate fund management market. They operate in a closed-loop model, preparing and scheduling the necessary liquidity in advance, and then distributing it to corporate clients as needed. Due to their control over the end-to-end process, XBMT has set strict limits and risk control rules for clients.

Despite its glamorous appearance, XBMT is still built on traditional rails, relying on sophisticated liquidity management techniques to "create" an instant settlement experience. However, the speed and scale of such designs are always constrained by the available liquidity of XBMT in specific countries and the clearing time of its underlying settlement rails.

2.3 stablecoin model

Stablecoins represent a deeper leap: they use blockchain technology to reconstruct the way internet commerce operates.

The settlement cycle of stablecoins is equal to the block time of their issuing blockchain, which is an order of magnitude faster compared to traditional transfers. Any system that relies on traditional methods can be replaced by a shared, verifiable ledger that can track the issuance and ownership of stablecoins.

More importantly, stablecoins are usually deployed on top of smart contract platforms, enabling innovative systems and workflows that traditional banking rails cannot achieve. On open and verifiable protocols, anyone can add features to stablecoins without permission.

From a macro perspective, faster and more interactive financial payments can directly expand global GDP: companies can receive payments more quickly, allowing funds to enter downstream processes faster, thereby reducing management costs and capital occupation caused by settlement delays. When the settlement cycle is compressed from "days" to "seconds" or "minutes", its ripple effects will sweep across the entire economy. At the same time, the existence of verifiable standards allows financial innovation to occur globally without permission for the first time.

3. The Application of Stablecoins in Global Payments

3.1 Corporate Fund Management

In the traditional model, businesses must prepare for fund transfers in advance before payment is due, which is a prepayment process. The financial team of the business must consider the preparation time required to execute payments on time and open accounts with local banks to ensure timely payments. Sometimes, it may also be necessary to seek short-term loan support from regional partners.

The longer the settlement delay, the greater the foreign exchange risk exposure and the higher the capital requirements for the corporate finance department. For companies that only want to execute global payments, managing derivatives to hedge currency risks and calculating short-term liquidity will significantly increase operating expenses.

Stablecoins can simplify this system by eliminating the need for control over delays in international settlements. Although the initial deposits and withdrawals at both ends must still touch the fiat currency system, the existence of stablecoins allows for smooth completion of the flow of funds between the two fiat "ramps."

By using stablecoins, the entire processing process is divided into local transfers conducted within each country, while the blockchain completes the global liquidity settlement between the two parties in the middle.

3.2 B2B enterprise payment

The process of global B2B enterprise payments is similar to corporate fund management, but the B2B scenario can yield greater benefits because B2B payments are often more complex, and their success or failure may affect other aspects of business operations.

In this type of payment, banks in different countries are usually directly linked to the delivery of a service or goods. This means that all parties will be more sensitive to the tracking of the payment progress. Additionally, if the payment channel required by the business is relatively obscure, they often need to complete the fund transfer through multiple international transit routes.

When the B2B cross-border payment process is executed through stablecoins in the middle of the chain, a series of additional benefits will emerge at the enterprise level:

• Both parties can clearly and in real-time manage and monitor the payment status.
• Financing can be directly linked to time-sensitive raw materials or delivery milestones.
• After the risk is reduced, the cost of capital decreases, and the capital turnover speed increases.
• Agency chain links, pre-financing needs, and most foreign exchange exposures have basically been removed.
• The entire process has been compressed from the past 3 days to just a few seconds, and there is no need to consider market closures, which significantly reduces and simplifies the working capital requirements.

3.3 Card Organization Network Settlement

In the card organization network, the issuing institution sends payments on behalf of the cardholder to the acquiring bank of the merchant, and the acquiring bank receives the payment and credits it to the merchant's account. These banks do not directly settle debts; they are all connected to a certain payment network, which conducts net settlement between banks during banking hours on business days. Each bank must maintain a prepaid balance to facilitate timely wire transfers.

A large payment network began trialing the use of stablecoins for settlements between acquiring banks and issuing banks as early as 2021. This method of using stablecoins replaced the wire transfer process, instead utilizing USDC on Ethereum and Solana. After completing card authorizations on specific dates, the network deducts or credits USDC from the banks of both parties involved in the transaction.

Since the system operates within the network, its net effect benefits the partners in the network. This is most similar to the closed-loop system of XBMT, but the large scale of the card organization network benefits the issuing/acquiring institutions (as they previously had to manage global payments).

The advantages of stablecoins are similar to those of fund management, but these advantages belong to the banks within the network: they can reduce the capital requirements needed for timely international transfers, thus avoiding foreign exchange risks. In addition, the openness, verifiability, and programmability of blockchain lay the foundation for credit and other financial infrastructure between banks within the payment network.

Four, Future Prospects

Although "stablecoin sandwich" is indeed useful in certain scenarios, most stablecoin applications still remain at this structural level and have not made further breakthroughs. In reality, very few companies truly use on-chain payments and stablecoins. As long as any part of the process still needs to touch fiat currency rails, we have no choice but to add more bread on both ends of the "sandwich."

The ultimate goal of stablecoin payments is to completely eliminate the bread on both ends. Once businesses and consumers fully embrace stablecoins, the entire financial and commercial cycle can be completed on the blockchain, freeing us from the constraints of outdated traditional rails. When financial institutions and businesses settle entirely in stablecoins, it will unleash an unprecedented scale of commerce. With the significant reduction of global friction in business construction, operation, and services, the growth curve of global GDP will align more closely with the actual consumption speed of goods, services, and content on the internet.

The essence of future payment finance will be: stablecoin payments + on-chain finance. If we can completely eliminate the sandwich structure and build more on-chain financial services at both ends, the speed of global capital/value circulation will reach unprecedented heights.

![Deconstructing stablecoin "sandwich