Banks are paying closer attention to stablecoins than ever before. New regulatory momentum, growing interest in tokenized assets, and the emergence of digital-first competitors are pushing the topic from innovation labs into boardroom discussions.
To a surprising extent, the conversation is no longer just about stablecoins. Banks are also reimagining how blockchain-based technologies can revamp settlement, liquidity management, and other core elements of banking infrastructure.
Banking expert Jessica Cheney and financial messaging authority Edward Ireland, both senior Bottomline executives, shared what they're hearing from banks as interest in stablecoins, tokenization, and decentralized finance keeps growing. And while the technology is attracting significant attention, adoption remains measured as institutions evaluate practical use cases, regulatory developments, and operational considerations.
A top takeaway is that stablecoins are driving important conversations about innovation, and that process reveals what may be the bigger opportunity: how banks use the underlying technology to modernize existing services.
For example, in the long run, tokenized deposits could have an even greater impact on banking than stablecoins themselves. Much remains to be seen along these lines.
Banks Like Stablecoins as One Option
Among the biggest shifts in the market is that stablecoins are no longer being viewed as a standalone solution. Increasingly, banks see them as part of a broader movement toward tokenized assets, decentralized finance, and new forms of digital settlement.
"What started as a stablecoin conversation is now becoming much broader, with stablecoin being one use case of decentralized finance and alternative assets being explored in the U.S.," Cheney said.
That broader perspective is changing how financial institutions evaluate opportunity. Rather than focusing on stablecoins alone, many banks are examining how blockchain technology could support faster settlement, improved liquidity management, and greater operational efficiency.
Ireland sees a similar trend in Europe and the U.K. While stablecoins continue to attract attention, he said a lot of institutions are more interested in how distributed ledger technology can support tokenized deposits and modernize settlement infrastructure.
He pointed to growing industry interest in using tokenization to support settlement activity beyond traditional banking hours and improve existing financial infrastructure. The attraction for many is not creating a new currency. It is applying new technology to strengthen existing banking services.
Stablecoins may dominate headlines, but banks are increasingly focused on the broader infrastructure opportunity they represent.
Innovation and Rivalry are Driving Interest
The growing interest in stablecoins is not solely about technology. It is also about competition. According to Cheney, many banks are exploring digital assets and tokenization as a strategic response to a changing marketplace. New regulatory frameworks are opening the door to fintech firms, digital-native organizations, and other nontraditional players seeking a larger role in financial services.
As a result, established institutions are under pressure to demonstrate that they can be as creative and effective as digital-native competitors. "They want to be seen as innovators against that type of competition," Cheney explained.
Banks are also focused on protecting customer deposits.
Many institutions view stablecoins, tokenized assets, and other digital financial products through the lens of deposit retention. If customers eventually gain access to compelling alternatives offered by digital-first competitors, traditional institutions do not want to be caught unprepared.
Ireland believes this is one reason tokenized deposits are attracting so much attention. Unlike stablecoins, they allow banks to leverage emerging technology while building on existing deposit relationships and regulatory frameworks. Rather than replacing the traditional banking model, tokenized deposits enhance it, he said.
Even those banks moving cautiously recognize the importance of participating in conversations that could shape the next generation of financial infrastructure. That strategic mindset helps explain why interest remains high despite limited adoption.
Hurdles to Adoption
While enthusiasm around stablecoins continues to grow, both Cheney and Ireland emphasized that practical challenges remain.
One of the most persistent questions banks are asking is whether stablecoins are solving a meaningful problem.
When discussing the topic with financial institutions, Cheney often returns to a simple test. Banks are looking for solutions that are cheaper, faster, and more versatile than existing payment methods.
"What we ferreted out is that the banks are looking for something that is fundamentally ubiquitous across payment types," Cheney said.
Even in cross-border payments and remittances, Cheney acknowledges that "there hasn't been a massive amount of demand for this."
Ireland offered an important reality check. "It's very often not cheaper," he said. "Assuming that you have any kind of problem with the off ramp or on ramp onto the stablecoin, it's not going to be quicker either."
The technology may streamline portions of a transaction, but real-world payment flows still require compliance checks, identity verification, foreign exchange services, and banking connectivity.
"If I look at the cross-border payment space, where you've got complex payment chains, then stablecoin does solve a part of that problem, but it doesn't solve the whole problem," Ireland said.
He also pointed to know-your-customer requirements, sanctions screening, and digital identity verification as critical areas that still require further development.
At the same time, Ireland sees significant promise in the transparency of blockchain technology. Distributed ledgers create detailed audit trails that track ownership and movement of assets over time. As digital identity frameworks mature, those capabilities could become increasingly valuable to financial institutions and regulators alike.
For now, however, banks remain focused on understanding where stablecoins create measurable value and where existing infrastructure may continue to offer advantages.
Will Tokenized Deposits be the Bigger Story?
For all the attention stablecoins receive, both experts believe the most significant banking opportunity may lie elsewhere.
Rather than adopting entirely new currencies, many banks are likely to embrace tokenized deposits to modernize existing products and services. This approach allows institutions to apply the benefits of distributed ledger technology while preserving the core banking relationships that already exist today.
Ireland was unequivocal about where he believes the market is heading.
"I would bet that in five years' time, the main technology that we'll be adopting for our customers will be tokenized deposits," he said. "That's what the banks are going to jump on, because it's a way for them to leverage the technology to enhance what they already do today, rather than adopt a whole new currency."
Cheney agrees that the larger opportunity extends beyond just stablecoins.
"If you take a step up and look at this at one level higher, a stablecoin is really a use case of tokenized deposits on the technology of a distributed ledger," she said. "When you look at it like that, the opportunity is bigger."
That broader opportunity may ultimately become the most important outcome of today's stablecoin discussion. Even if stablecoins remain focused on select use cases, they have accelerated industry thinking around modernization, efficiency, and innovation.
For Cheney, that acceleration may be the most encouraging development of all.
"The fact that we are having the discussion around innovation and changing legacy payment rails has expedited so much in the last couple of years, that's exciting to see," she said. "If this can be the catalyst for the pace of change being faster, that's really exciting."
Whether stablecoins become a mainstream banking tool or remain a niche solution for specific applications, they have already succeeded in forcing the industry to reconsider how financial infrastructure should evolve.
And while stablecoins may be leading today's conversation, tokenized deposits may ultimately define where banking goes next.