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Comment by logicalmind | Hacker News Reader

There are two layers of value on chains that are not bitcoin. There is the native currency and then various forms of tokens that can be transacted. Tokens are things like NFT's or Stablecoins. In order to trade tokens you need to pay gas in the native currency of the chain. For example, ETH on the Ethereum network.

Large financial institutions are already doing work using stablecoins. In order to turn stablecoins back into fiat, you have to take them back to the issuer for exchange. Countries with unstable currencies can hold USD by purchasing stablecoins. And financial institutions can do settlement between each other using stablecoins.

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Federal reserve (Kansas) says in ‘25 these transactions were about $390B (there are qild estimates of $35T but these seem to be typos or deliberate misreadings of a prediction for 2035 from a crypto enthusiast). At forex scale or the scale of global GDP, 400B is invisible.

It could grow, of course, though the use case appears to be weak and unstable countries, which are by definition distant participants of global exchange, and unlikely to have any visible effect on the overall macro economy.

I don't disagree, but there is a lot of hesitancy at financial institutions right now because the regulations are all over the place. I think what we are seeing now are MVP use cases that people are willing to try before regulations are finalized. There are some very large (macro-level) use cases possible, but the regulations have to allow for that.

BTW:

> And financial institutions can do settlement between each other using stablecoins.

Why would they bother though? How would they gain over the status quo?

The status quo rails in the U.S. are ACH or Fedwire. These are slow and require you to get connected to the rail in some way (directly or indirectly). And they have fees.

There is also same-day ACH and the new FedNow. Which are faster, but still require some kind of connectivity and have fees.

The cost of stablecoin settlement is mostly the gas fees of the chosen chain. There are various optimizations possible such as private chains and off-chain ledgers (no gas) and some single on-chain settlement to minimize gas fees. Note that these type of stablecoins are closed-loop and are not publicly available.

As I said in my other post, these institutional stablecoins are mostly just MVP use cases until regulations are finalized. Depending on the final regulations, there are quite a few other possibilities.

Source, I work for a large financial institution and run a team that launched a stablecoin this year.

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