Stablecoins Are Changing the Economics of Cross-Border Payments. The Hardest Work Remains Local.

How faster digital settlement is reshaping capital requirements, and why local liquidity, banking access and regulatory infrastructure will define the next phase of global payments.

By Gabriel Pan, Global Partnerships and Global Expansion Head at PhotonPay

For decades, providing fast and reliable cross-border payments at scale has generally required one of two models: a correspondent banking network spanning multiple markets, or a payment platform with sufficient scale to pre-fund local currency positions across the markets it serves. Both require substantial institutional reach and capital. The underlying challenge has not simply been how to move a payment instruction from one country to another, but how to ensure that funds are available for settlement wherever they are needed, whenever they are needed. For many providers, the cost of maintaining that liquidity has been a fundamental barrier to scale.

This came up in a panel discussion I was part of at Hong Kong Fintech Week, on the infrastructure behind companies going global. The specific question put to me was about stablecoins: which ones we use, which chains, and why. But the more useful conversation, I think, was about what stablecoins actually do and do not solve in the plumbing of international trade.

The pre-funding problem nobody talks about

Consider a payment moving from Germany to Vietnam. Under a conventional correspondent banking chain, that transfer might pass through three to five intermediary institutions before it arrives, and each hop adds time. Every correspondent runs its own system, its own cut-off windows and its own reconciliation cycle. Add those delays together and you get an architecture that creates latency by design, regardless of how well any one participant performs.

The historical alternative was to reduce the correspondent chain entirely through pre-funding. A large payment platform could hold a local VND pool in Vietnam and a EUR pool in Germany, settling bilaterally between them in real time because both sides of the trade were already in place before the transaction even started. This works, but it is capital-intensive: that money sits in local accounts as a straightforward cost of doing business. Run this model across fifty markets at once and the balance sheet requirement becomes less a competitive advantage than a barrier to entry for anyone without one. I have worked inside institutions built this way, and the asset base required was never incidental to the business model. It was the business model.

This is the part of the stablecoin story that tends to get underplayed, usually in favor of talking about speed or cost. The more consequential shift is about capital structure: stablecoin rails let the intermediate settlement leg run without pre-funded positions on either side. Nowadays, a licensed institution a fraction of the size of a global bank can offer a settlement experience that used to require a global bank's balance sheet. That is a structural change in who can compete, not a marginal efficiency gain for those who already could.

What the architecture looks like in practice

The pattern is fairly simple to describe. A buyer in Germany initiates a payment in EUR, collected through local banking infrastructure. That value moves through a stablecoin rail in minutes, with no correspondents and no cut-off windows to wait on, and arrives at an off-ramp in Vietnam, where it converts to VND and lands in the supplier's bank account. The supplier receives local currency through local banking, exactly as before, and never needs to know a stablecoin was involved at any point.

This is close to how our own platform at PhotonPay is built: a multi-asset wallet that holds fiat and stablecoin balances together, local collection accounts in 17 key markets, and global payouts in fiat or stablecoin to more than 200 countries and territories, all sitting on top of 34 payment and financial licenses across the Americas, Europe and Asia.

What the stablecoin leg removes is the capital requirement in the middle. What it does not remove is the work at either end: local collection infrastructure, off-ramp liquidity in each target market, compliance entities capable of distributing into local bank accounts, and the unglamorous operational task of reconciling on-chain settlement against conventional banking records. That work is exactly as hard as it has always been, which is precisely why it remains the place where real differentiation happens.

Where the technology still falls short

If the middle leg is now largely a solved problem, it's worth being specific about the transactions where stablecoins add friction instead of removing it.

In markets with mature local instant payment networks, such as Brazil's Pix or India's UPI, there is no correspondent chain to eliminate in the domestic leg in the first place, so inserting a conversion step adds cost and complexity without any offsetting benefit. In large transfers into thin currency markets, the real constraint is on-the-ground liquidity rather than the settlement rail: moving significant volume into a low-liquidity local currency still means finding a counterparty of sufficient size at a workable rate, and a stablecoin moves value efficiently without creating liquidity where none exists. And in transactions that require credit, such as letters of credit, documents-against-payment arrangements or a first-time deal with a large new counterparty, what both sides actually need is underwriting and guarantee rather than efficient transfer. Stablecoins are settlement instruments. For credit, banks remain banks, and that is unlikely to change soon.

Knowing where this technology is not the right answer matters as much as knowing where it is, and the institutions that will matter most over the next few years are the ones that have worked through that distinction in practice rather than treating every corridor as a stablecoin opportunity by default.

Where the next capital actually goes

The capital threshold for the middle leg has moved. The compliance and operational threshold at either end has not, and if anything it matters more now, precisely because speed and cost in the middle are no longer the differentiator they used to be. The institutions that will matter most over the next few years are the ones putting real capital into actual collection accounts in-market, actual off-ramp liquidity, actual compliance entities and actual banking relationships built over years rather than weeks.

It's part of why PhotonPay's recent $40 million Series C, led by Blockchain Capital, is going exactly where this argument points: more local collection accounts, more financial licenses, more off-ramp liquidity in the corridors where volume is compounding fastest.

Those corridors right now are Southeast Asia, the Middle East and Africa. Southeast Asia leads on volume, with VND, IDR, MYR and PHP flows deep and still expanding. The Middle East leads on pace, with regulatory frameworks across the UAE and the broader Gulf maturing faster than most expected. Africa remains the most underestimated of the three, with Nigeria, Ghana, Kenya and South Africa sitting on trade corridors into Asia and the Gulf that are only beginning to be served at the quality the underlying volume deserves.

These three markets are usually discussed as separate stories. For the businesses actually driving the demand, a company sourcing in Southeast Asia, selling into the Middle East and building a presence in East Africa, they are one continuous operational question rather than three unrelated ones. The infrastructure that answers that question as a single connected network, instead of three separate integrations bolted together, is where the real work still is.

That is the distinction between moving money globally and making it work locally. Stablecoins are changing the economics of cross-border settlement, but turning that efficiency into a dependable business outcome still requires local liquidity, regulated access and trusted institutional relationships. The providers that understand this distinction will be best positioned to build the next generation of global payment networks.