OpenUSD is a new dollar-pegged stablecoin issued by Open Standard, a consortium of who’s who in banking, asset management, payments, fintech, and crypto.

Haven’t we seen this movie before? Blockchain consortiums? Walls of logos backing a new coin?

Yes. But this time, the pile-in may stick. It’s partly timing: OpenUSD comes at a time when regulators are already committed to supporting stablecoin use. It also comes at a point, after many false turns, when financial institutions have learned to treat blockchain-related finance as a specific tool rather than a shiny new thing to go chase.

There are still ways for large herds to mess things up, but OpenUSD has the look and feel of a new utility, more like SWIFT, which is owned by thousands of banks. It is being positioned deliberately as a utility, enabling financial institutions to transform stablecoins from a money-making and disruptive venture into safe infrastructure that ensures fees and value are derived from second-order services on top.

It is, in other words, the logical conclusion of the past several years of institutionalizing crypto. The finance industry, if it hadn’t come up with OpenUSD, would have invented something just like it.

What it is

OUSD is issued by Open Standard, an independent company set up to serve as neutral infrastructure for payments, trading, and on-chain finance. Its governance is overseen by more than 140 founding partners, which range from Visa, Mastercard, and Stripe (payments), to BlackRock, to Google, to BNY Mellon, to Coinbase...etc.

Three design choices define the economics of OUSD and are worth noting.

• First: zero mint and redemption fees. At any scale. And with no arbitrary caps as flows grow. This is not the layer where anyone makes money.

• Second: reserve yield is distributed back to the businesses that use and distribute the coin, rather than retained by a single issuer *cough* Circle *cough* Tether. In other words, the banks and others are not letting a disruptive issuer win the cheddar.

• Third: governance is collaborative through Open Standard rather than relying on a single issuer’s balance sheet. This is sound, although there are still plenty of unanswered questions about the nitty gritty of how decisions will get made.

• A fourth design choice: OUSD is multi-chain, scheduled to go live this year on Solana, Stellar, Base, Polygon, and other networks – including Tempo, the blockchain operated by Stripe for its merchant network.

Stripe’s fingerprints are all over OUSD. It acquired stablecoin issuer Bridge in 2024 for $1.1 billion. Then it launched Tempo as a payments settlement layer in September 2025. Bridge’s co-founder Zach Abrams is now interim CEO of OUSD.

What it does

The most obvious point about OpenUSD is that it attacks the profit model of Circle and other regulated stablecoin issuers. Circle and its peers keep the interest on tens of billions of dollars of reserves while charging, in one way or another, for access to minting and burning at scale. But OpenUSD pushes interest on reserves back to distribution partners, including crypto exchanges, banks, wallets, and payment service providers – the entities that actually bring balances and transaction volumes to the party.

Stablecoins have been a profit center. OpenUSD makes them into a loss-leader for other things. Cue the comparisons to SWIFT or a card network. We’ve come a long way from “tokenomics” in crypto-land. This is a means of repositioning stablecoins to move out of crypto-native remittances into corporate payments, capital-market settlements, and treasury working capital.

Another reason to suggest OpenUSD will succeed is that all of these designs for payments and transactions require standards. The industry would prefer standards be universal. One way to make that happen is to get enough big names behind the initiative. Hence the wall of logos. It’s a way of saying, “Argument over.”

Circle: “Et tu, Coinbase?”

Sometimes these big statements fizzle into nothing. But Stripe says it will make OUSD the default stablecoin for businesses using crypto instruments in its network. Yes, its users can still make do with Circle and such. But maybe it’ll be easier for most users to default to whatever looks cheaper and faster. Choice can still be a differentiator but for increasingly niche requirements.

This is a tough challenge for Circle and other regulated stablecoins, such as those being licensed in local jurisdictions in non-USD currencies. Pressure will build to be compatible with a global standard. This doesn’t mean the end of non-USD stablecoins, but it serves OUSD if it can present itself as the default plug-in for local players connecting globally.

First, OUSD blows up the idea that the stablecoin issuer gets to keep the interest. This notion has already been under pressure. Circle already has to kick back a substantial percentage to its primary distributor, Coinbase. Its $70 billion-plus in reserves sits in a dedicated fund managed by BlackRock and held in custody at BNY Mellon.

But Coinbase, BlackRock, and BNY Mellon are among those backing Open Standard. Yes, these firms earn fees by servicing Circle’s reserves, but they can get a much bigger slice of the pie if that accumulating interest goes to them too.

Payments companies (the cards, Western Union, BNPLs like Klarna and Affirm) see an opportunity to compress per‑transaction costs and move more flows on‑chain, even if that eventually eats into traditional interchange; they’re okay with tinier fees if the pie grows fast enough. Tiny fees become moats your would-be competitors can’t cross.

Second, for issuers, the mint-and-burn function goes from looking like a service to the industry to a toll they charge for controlling a choke point. Circle has invested heavily in a range of network infrastructure, including services to move stablecoins across chains, its own SWIFT-like management tools for making cross-border and fiat settlement easy, on-chain FX, developer infrastructure for anyone building applications, and even its own layer-1 settlement chain, Arc.

Circle in other words has devoted enormous resources to an end-to-end system of finance, particularly designed for A.I. agents. And now all the partners it’s relied on are taking the one part of this ecosystem where Circle makes all of its money, and turning that into a zero-fee service. Nice.

Blockchain business after OUSD

What Open Standard lacks, and which Circle does have, is experience. Circle has executed over many years, patiently getting USDC listed on most leading exchanges, building a brand, being the champion of regulated stablecoins. The company will have to rely on these to figure out new ways to capitalize on its market position. It already has built the pieces of the machine that can make money, and must now maneuver its operations to compete.

Right now, no bank or fintech has all of these tools. So this isn’t an obituary for Circle; on the contrary, if OpenUSD really opens the floodgates for scaling stablecoins, it can win a lucrative share. But that’s a longer term vision. Right now the company must be feeling intense pressure: its stock price cratered when Open Standard announced itself.

Circle isn’t the only one whose business model will be impacted. OUSD is a test to see which chains can genuinely claim to be the “world settlement layer” for regulated money. That includes Solana, Stellar, Base, and Polygon, not to mention Tempo.

OUSD is also a massive opportunity for Solana and the like – still regarded by most people in financial institutions as suitable for DeFi but not for their regulated businesses – to get a seat at the TradFi table. Open Standard includes Coinbase, Aave, Ripple, MetaMask, OKX, Solana, and Polygon. OUSD gives them a standard dollar rail that they can integrate, both with banks as well as across crypto exchanges and wallets.

It is this standard-setting, both for crypto and TradFi, that is Open Standard’s biggest achievement. This is different from Libra, Facebook’s ambitious but doomed attempt to launch a stablecoin across all the Meta userbase. Central banks freaked out and shut it down; this also jumpstarted a hundred experiments in CBDCs which, thankfully, have mostly fizzled. OUSD, on the other hand, is being positioned as a safe tool rather than a DeFi challenge to traditional payments and lending. It’s a new SWIFT owned by all the right people, instead of a Silicon Valley flutter.

But who’s not on the logo wall? Ethereum.

Solana and others are already challenging Ethereum with much faster speeds and low fees. Ethereum has been the default global settlement rail for tokenizing real-world assets. Not, however, for payments. OUSD will make it even harder for Ethereum to compete for the payments business, and could disrupt its place in capital markets. Meanwhile the gateway into capital markets has also been opened to its competitors. Ethereum’s hotdog is getting eaten away at both ends.

What needs to happen next

It’s possible that OUSD will fail. Consortiums aren’t known for their agility, product-market fit, or convivial agreement about capital allocation. Owned by everyone can mean accountable to no one. Is this a giant DAO in the making?

Things can always go wrong. OUSD needs a lot of things to happen to succeed.

Stripe and other payment service providers need to make OUSD their default stablecoin for payouts, merchant settlements, and cross-border flows. Exchanges, DeFi venues, and crypto market makers need to treat OUSD as a primary settlement asset, which means they will build deep order books and collateral frameworks.

The biggest unknown is governance; Open Standard’s statements on this topic have been vague. Can it make decisions quickly and cleanly? Maintain regulatory and operational resilience? Operate on a pretty thin revenue base (given the money will pass through Open Standard to its shareholders)?

And can it fend off potential anti-trust or geopolitical regulatory backlash? After all, lots of big countries these days are keener on promoting their own currencies rather than allowing all of their domestic liquidity to get sucked into a US dollar equivalent.

Is this fair? There was a time (before FTX blew up), when Singapore Inc. was all-in on crypto. But the MAS has always approached anything blockchain-y from a payments approach. The field is regulated via the Payments Services Act, and when you look at some of the pioneering work in Singapore, it was projects geared around wholesale cross-border payments.

This makes sense, given Singapore’s status as an open port. But there’s also a cultural factor. Bluntly: Hong Kong was born out of the wheeling-dealing stuff, and HKEX outpaces Singapore as a stock market by a country mile. So there’s a whiff of Singaporean caution around blockchain finance. The MAS appears (to me) happy now to let Dubai or Hong Kong take the lead in the capital markets.

This doesn’t mean Singapore is sleeping on such activity. I invited Rehan Ahmed to help us understand what’s being built in the Lion City. Rehan is CEO of Marketnode, a digital market infrastructure operator. Marketnode runs two businesses, Gateway, a tokenization platform, and Fundnode, processing investment funds on-chain.

Marketnode is owned by “Singapore Inc” types including SGX and Temasek, as well as by HSBC and Euroclear, giving it relevance beyond Singapore. Indeed, it has a growing presence in Hong Kong and other APAC markets. And Rehan has an established career in the intersection of fixed income, funds, and digital assets.

Timecodes:

0:00 - Introducing Rehan Ahmed and Marketnode’s origins

6:20 - Supporting fund markets and transactions on-chain for institutions, and supporting tokenization - and new use cases

9:37 - Are crypto-native investors interested in TradFi’s tokenized products? Building to unify liquidity

15:50 - Where banks versus asset managers are focusing within real-world asset tokenization

19:48 - Competing with traditional fund-management processing networks

22:23 - Marketnode’s cross-border activities, eg Hong Kong

24:10 - Product roadmap beyond money-market funds

The idea of financial institutions playing with crypto is predicated on a firewall between the compliant, consumer-protected world of regulated institutions versus the casino.

Asset managers and brokers can put wrappers around bitcoin, such as an exchange-traded fund, that abstracts the operational risks away from investors. They can offer stablecoins as payment tools that are safely embedded in KYC and other institutional processes, to remain compliant.

Or they can simply transact among themselves in permissioned on-chain environments.

It’s all pretty safe, which is why market turbulence in crypto, such as last October’s meltdown, don’t impact traditional financial markets or institutions.

However, the prospect of a quantum hack on the cryptographic foundations of bitcoin is one that banks should regard as a back door to their broader infrastructure. Institutions today are aware of quantum’s risk to their normal signature process, and they have heard about bitcoin’s particular risks – but these are linked in a way that may surprise. That link is the stablecoin.

Reaching the far Shor

Bitcoin and most other crypto assets are secured by elliptic-curve cryptography. We’ve known this technique is theoretically vulnerable to algorithms hypothesized by MIT mathematician Peter Shor back in the 1990s, but we never had a sufficiently powerful quantum computer to make it happen. We still don’t today, but we might within a few years, or at least by the mid-2030s.

Shor postulated it would take a multi-million qubit computer to crack the elliptic-curve safeguards of bitcoin. This refers to physical qubits, the hardware – the chips. These are prone to noise and decoherence. They are unstable and unreliable. The algorithm level of computing involves a logical qubit, which encodes information across many physical qubits to provide probabilistically clear and coherent code.

We’re still a long way from building such a powerful machine. But researchers at Google earlier this year suggested such an attack could be executed with fewer than 1,500 logical qubits, implying a machine using only half a million physical qubits. That’s still a long way off from today’s most advanced quantum machines, which haven’t developed beyond 10 logical qubits, but it cuts the timeline in half.

Not all digital assets are equally vulnerable to a quantum hack, but any assets with a known public key – including the 1.1 million bitcoin stash of Satoshi Nakamoto – will be the easiest pickings. But should those signatures become vulnerable, then so do the signature systems that support stablecoins, programmable dollars, and smart-contract ecosystems: the tools now being embedded into financial products and payment flows.

These too live on blockchains that rely on elliptic-curve signatures, including Ethereum-compatible environments and other major smart-contract chains.

On-spend scenario

The question of coins whose public keys are already exposed on-chain is well understood, but there is a more sophisticated risk: the on-spend scenario, in which a quantum attacker derives a private key quickly enough to hijack a transaction before it settles. They begin to make on-chain spending moves that are mistaken for small errors, before building into a systematic threat.

Banks using stablecoins face exposures beyond end-user wallet theft. Their risk includes operational wallets, issuer admin keys, custodial keys, oracle keys, and smart-contract governance keys. If a bank relies on stablecoins for high-value settlement, a quantum break of elliptic-curve signatures could enable an attacker to clone the private key of a settlement wallet and reroute funds without breaching the bank’s internal systems in the conventional sense.

The forensic problem is that a compromised signature still looks valid. To a blockchain, the forged transaction would appear properly authorized. To a bank’s operations team, the first symptoms might resemble reconciliation errors, routing glitches, or unexplained counterparty failures rather than a cryptographic compromise. In an environment where defenders are looking for malware, insider abuse, or API failure, a quantum-capable attacker could exploit the delay between odd-looking errors that can be explained, and diagnosing the true problem.

The dumb criminal would use a quantum computer to drain some fat accounts. This would alert the world to the problem. Presumably a criminal smart enough to develop a sophisticated quantum computer is not so dim. Rather they would use their power to silently usurp a financial system’s privileged control points.

Custodial stablecoins typically rely on admin keys or multisig structures that govern minting, burning, freezing, and sometimes contract upgrades. If a quantum attacker compromises those keys, the result may not simply be theft. It may be unauthorized issuance, selective freezing, malicious contract changes, or supply manipulation that undermines the token’s credibility as a settlement asset.

That makes stablecoins structurally different from conventional bank deposit systems. A stablecoin used by banks may look like a digitized cash rail, but its integrity depends on smart contracts and cryptographic control structures that can be attacked externally and silently. The more systemically important the stablecoin becomes, the more consequential any compromise of those control layers becomes for regulated institutions using it.

DeFi-native stablecoins create a related but distinct threat. There, governance participants, emergency shutdown committees, and oracle signers can become quantum targets. If an attacker gains effective control over those signers, they may be able to distort price feeds, alter collateral rules, or push governance changes that weaken or destroy the peg.

Lurkers

Banks with exposure through collateral, investment products, or tokenized wrappers may discover that they are not exposed merely to a coin, but to an entire governance stack built on vulnerable signatures.

The first stage of the on-spend attack would be reconnaissance. Public blockchains provide abundant historical transaction data, and with it, public keys or other useful metadata tied to valuable counterparties. The second stage would be selective key extraction: issuer admin keys, major custodial signers, and hot wallets used by banks for large stablecoin transfers. The third stage would be exploitation that blends into noise: small unauthorized mints, suspicious but not obviously impossible balance movements, and occasional interception of high-value transfers during periods of heavy network activity.

It’s like a hacker today who breaches, say, the details to one of my online subscriptions. I start getting billed for the news or the app in amounts too small to attract my attention. I get quietly drained, a few dollars at a time, for months or years before I scrutinize my spending...or until the lurker figures out the backdoor to my bank account.

And in our on-spend scenario, it’s only later that the systemic consequences become visible. A depeg could emerge if unauthorized issuance collides with market stress. DeFi collateral chains could begin to wobble. Banks using the token for treasury or settlement would discover that they face a double hit: some of their stablecoins may be missing, while the remaining balances are no longer worth par. In that sense, quantum risk turns stablecoins from a convenience layer into a transmission channel for digital financial contagion.

Managing the unknown

Is this all a bit dramatic? The tech is years away from such a possibility, and security and information teams have plenty of other, more immediate problems. But for risk managers, the relevant issue is not whether a quantum attacker is active in 2026. It is whether critical systems being adopted today will still rely on vulnerable primitives when that attacker does emerge.

Banks, payment providers, and policy makers already treat multi-year migration planning as standard for changes to core infrastructure. The post-quantum transition is no different, except that the assets involved are global, programmable, and in some cases outside the unilateral control of any one institution. A bank can change its own hardware security practices and certificate policies. It cannot by itself change Ethereum’s signature model, rewrite a stablecoin issuer’s contract architecture, or compel every counterparty to adopt a quantum-safe wallet scheme on the same schedule.

This is why the risk timeline for banks using stablecoins may be more urgent than the simple “Will quantum break bitcoin?” headline suggests. Bitcoin is the visible test case. Stablecoins are the institutional attack surface.

Banks do not need to abandon stablecoins immediately to take the threat seriously. But they do need to stop treating them as just faster dollars. A sensible response starts with a reclassification of risk:

• Map stablecoin exposure as a combination of issuer risk, protocol risk, and cryptographic risk, not just liquidity and counterparty risk.

• Demand visibility into the key governance and upgrade paths of any stablecoin used at scale, including who controls mint, burn, freeze, and upgrade permissions and how those controls can evolve toward post-quantum protection.

• Review wallet architecture and operational addresses with quantum exposure in mind, especially where address reuse or highly visible settlement patterns make key targets easier to identify.

Thanks to tokenization becoming part of mainstream financial plumbing, stablecoins could be the mechanism by which crypto’s quantum problem becomes the banking system’s problem. But there are also sensible ways to prevent this from happening, by treating stablecoins as multi-party ecosystems, not as products.

This is no longer the case: not if your firm is embracing tokenization of real-world assets, from cash (ie, stablecoins) to credit, real estate, or securities. The settlement blockchain now matters a lot.

Ethereum accounts for about 75 percent of the market cap of assets, or about $17 billion, that have been tokenized. It remains the go-to chain for most TradFi projects that seek distribution beyond clubby, permissioned DLT.

But there is a lot of change happening within the developer community that ultimately decides what Ethereum is, and how it works - including issues around throughput, gas fees, privacy, resilience, and more.

In March, Vitalik Buterin, Ethereum’s co-founder and an influential voice within the Ethereum community - and crypto broadly – threw his weight behind a new “Mandate” to make Ethereum a robust digital infrastructure for the long term. It has many admirable qualities. But it also moves Ethereum Foundation into a lesser role, particularly by stepping back from business development.

The Mandate has been praised by some, and criticized by others for abandoning the tokenomics required to incentivize miners and validators to keep the system running. Meanwhile, Ethereum has keener competition, both from faster, cheaper blockchain environments like Solana, and from better designed but permissioned DLTs like Canton Network.

With all of this happening, I thought it would be helpful to get a take from Ethereum Foundation, and invited Tiena Sekharan to discuss these trends. Tiena is APAC enterprise lead at Ethereum Foundation. Among her other career highlights, she also served in business development at J.P. Morgan’s Onyx Coin Systems, so she has first-hand knowledge of what large financial institutions are after.

Timecodes:

0:00 - Introduction; explaining Ethereum Foundation and the new Mandate

06:17 - Is there a contradiction between EF’s Mandate and business development relevant to banks and asset managers?

9:13 - Backlash against “ideologues” and keeping Ethereum competitive

13:03 - Frontrunning problems in blockchain Proof of Stake systems

14:52 - Censorship-resistance and privacy versus institutions’ need for compliance

20:03 - What tokenization projects meet the needs of issuers and investors?

25:59 - What’s next for Tiena and EF

Hong Kong’s stablecoin regime matters worldwide because it is now testing whether licensed stablecoins can become useful market infrastructure for a tokenization economy. But which tokenized economy: retail or wholesale?

The Hong Kong Monetary Authority has explicitly linked licensed stablecoins to both retail payments and tokenized investments, via its licensing regime for fiat-referenced stablecoin issuers and the two licenses it has awarded.

These recipients, HSBC and Anchorpoint, have said they will begin by tackling separate segments: HSBC is going into retail and Anchorpoint into wholesale. These first projects will use stablecoins pegged to the Hong Kong dollar, although regulations allow them to use other fiat references.

HSBC has said its Hong Kong dollar stablecoin will be integrated into its wallet business, PayMe, and its mobile banking app for peer-to-peer payments, merchant payments and subscriptions to tokenized investments. It’s a retail-facing strategy tied to existing distribution.

Given HSBC’s size and scale in corporate banking and other activities, it is likely that the bank will explore wholesale uses for stablecoins. It already has a platform, Orion, for asset tokenization. It could extend PayMe stablecoin uses to external corporate clients, but in ways that are not relevant to Hong Kong-domicile stablecoin issuance; corporate uses would likely steer towards cross-border payments and flows, in which case there is no need for a Hong Kong stablecoin. Effectively, therefore, HSBC’s local stablecoin issuance will probably remain a retail function.

Anchorpoint is a joint venture that is majority owned by Standard Chartered Bank. It has stated its intention to serve institutional and ecosystem use cases associated with digital asset markets, programmable finance, and tokenized asset activity. But the presence of its two investment partners, HKT (telco) and Animoca Brands (Web3 and gaming), suggest it will soon develop retail uses for its stablecoin. It is possible that the retail aspect will become more attractive sooner rather than later.

This neat division of eHKD stablecoin businesses is designed in consultation with HKMA. It is not necessarily an indicator of where these banks see the real opportunity. But we can see that the easiest play will be retail, but the meaningful – and still most challenging one – is wholesale.

Wholesale demand

Financial intermediaries love tokenization because it suits them. Now they’re scrambling to find “use cases” that please investors and issuers. Stablecoins represent one piece of this puzzle: tokenized cash.

These benefits include collateral mobility, programmable market infrastructure, surveillance, secondary trading, interoperability, and institutional access. Notably this does not include everyday consumer payments. Institutions have expressed interest in using stablecoins as the cash leg to allow tokenized assets to move, settle, trade, and be financed inside a compliant market structure.

A licensed stablecoin is not just a crypto payment token. It can function as the settlement asset that pairs with tokenized securities, tokenized funds or tokenized collateral transactions, reducing frictions created when the asset side is on-chain but the cash side remains trapped in conventional systems.

The utility case for licensed stablecoins is therefore strongest where tokenization is trying to solve real, wholesale market frictions: cross-time-zone settlement, intraday liquidity, fractional access, always-on trading, and programmable transfers among known participants. To the extent that retail uses exist, such as remittances, there’s no need for a Hong Kong dollar stablecoin, or even one that falls under HKMA regulations.

Tokenizing wholesale cash is by itself insufficient. To work it also needs additional wholesale steps: capabilities for monitoring, controls, and audits. Listed companies need visibility into who is trading tokenized versions of their securities and need a framework that preserves shareholder transparency and corporate actions.

Retail demand

Retail, on the other hand, is a head-scratcher for people in finance. They try to think of incentives that would convince Mrs. Chan to use a stablecoin, or be willing to open a crypto wallet to enjoy whatever benefits an eHKD coin would bring.

The retail case is based on HSBC’s intended use cases. According to HSBC, its HKD stablecoin will initially support peer-to-peer transfers, merchant payments and subscriptions to tokenized investments through PayMe and the HSBC Hong Kong banking app. That matters because it moves the stablecoin discussion beyond trading venues and into everyday distribution channels with existing customers, merchant relationships and mobile interfaces.

The misconception is that PayMe would market its stablecoin to users, as if it were a standalone product. More likely is that users will never know PayMe is using stablecoins behind the scenes. The stablecoin will serve as an internal treasury and liquidity rail. It cannot serve as an interest-bearing product to users under HKMA regulations. Any ‘yield’ would have to be packaged as a separate, regulated product. Moreover, PayMe users do not receive a yield now, and there is no investor expectation of such from a wallet.

HSBC has stated it will use its stablecoin for peer-to-peer, peer-to-merchant, and tokenized investment subscriptions within PayMe. None of these require a retail awareness of stablecoins. Rather, the stablecoin is a tool that will allow HSBC internally to facilitate these transactions more quickly and efficiently.

HSBC’s treasury department can use the stablecoin rail to move Hong Kong dollar liquidity between internal wallets (for PayMe, for merchant settlements, for corporate wallets, or for other HSBC entities) in real time, rather than relying on legacy batch rails. The treasury would also gain granular, near real-time visibility on wallet-level inflows and outflows, which it can use for intraday liquidity management.

The treasury can also harvest a modest spread on a low-risk, low-margin balance sheet item while treating the stablecoin pool as operationally constrained (due to strict HKMA asset-reserve rules) rather than as general funding. This internal return could be structured to fund loyalty points, cashback or fee discounts, rather than as interest payments.

Anchorpoint could establish a business that’s more explicitly about putting stablecoins in users’ wallets. The Animoca clientele is already crypto-native. The challenge is providing incentives for users to take up HKD stablecoins, but this is just a product design question: these people are already into crypto. The company has ambitions beyond this but the same logic applies: for the non-crypto majority, the immediate benefit is using stablecoins as plumbing, not products.

Wholesale questions

There remain several questions about licensed stablecoins in Hong Kong that will only be answered as HSBC and Anchorpoint introduce their tokens. Note that these are mostly about getting wholesale markets to function well, as opposed to internal, closed-loop functions.

• Regulatory coordination beyond issuer licensing. The HKMA regime establishes who may issue fiat-referenced stablecoins in Hong Kong and under what supervisory expectations, but a functioning tokenization industry also requires clarity for intermediaries, trading venues, custody arrangements, wallet infrastructure, tokenized securities treatment and cross-border participation. Institutions cite concerns about secondary market access, trading surveillance, global policy alignment and the ability to move collateral or assets across jurisdictions and market hours.

• Market structure. Many financial institutions want 24/7 trading, secondary liquidity, programmable collateral, and interoperability, but those ambitions require enough venues, counterparties, custodians, market makers and institutional workflows to create real depth. Licensed stablecoins may solve part of the cash-side problem, yet they do not automatically create liquid tokenized asset markets if the underlying products remain scarce, fragmented or operationally awkward.

• Legal and disclosure architecture for the asset side. Companies that issue stock need visibility and control over corporate actions. This suggests tokenized markets need enforceable legal relationships among the asset issuer, the tokenization platform, the settlement token and the end investor. Licensed stablecoins can improve trust in the payment leg, but they do not by themselves solve legal finality, beneficial ownership, disclosure duties, or claims handling across tokenized instruments.

• Technical integration. Interoperability, privacy, programmability, and the coexistence of on-chain and off-chain systems remain ongoing concerns for institutions. That suggests Hong Kong’s tokenization industry at the wholesale level will struggle unless licensed stablecoins can work across different wallets, permissioning models, tokenization protocols, bank systems, and supervisory data requirements without forcing each participant into a separate closed loop. But for the retail uses as envisaged in this paper – which are by definition closed loop activities – such integration issues are minor. This is another reason why the retail use case is likely to outpace the wholesale one, at least initially.

Because the retail use case is likely to be an internal one, it is easier to pursue but invisible to the market and irrelevant to other parties. The true test of Hong Kong’s new stablecoin market is not, contrary to common belief, about getting retail investors to ‘adopt’ stablecoins or eHKD. It is about getting wholesale usage off the ground in a meaningful way. Despite the demand among financial institutions for stablecoins as facilitators of tokenization, it is in the wholesale market where the biggest frictions remain.

It is the wholesale market that will test whether regulated stablecoins can bridge conventional finance, digital assets and tokenized capital markets more effectively than either unlicensed crypto tokens or isolated tokenization pilots. The easiest wins are in retail, though: not by converting the masses into Web3 acolytes, but by creating internal efficiencies that work within local, closed-loop systems where a HKD coin is relevant. It’s an easy win for HKMA and issuers, but relevant only to very specific businesses. The wholesale piece is still the prize, and still the hardest to win.

Depending on cloud is one thing. Depending on cloud provided by operators from just one superpower is another. There are other growing problems with this setup: tech debt, rising costs, and more.

When I interviewed David Gurlé about this topic, we kept the focus on the infrastructure and less on the software or the A.I.

A.I. dependencies are, however, back in the headlines, with the way the U.S. government and A.I. lab Anthropic are fighting over its latest release, Fable, and the Trump administration’s decision to ban foreign persons from accessing the model. This is going to have enormous ramifications for A.I. but also for the companies we rely on for infrastructure. Especially because Google, Microsoft (via OpenAI) and the other hyperscalers are also behind most of the leading A.I. labs.

One obvious alternative is open source. David’s company operates this way, as do others. However he also relies on Chinese open source model LLMs. If China mimics the U.S. approach on A.I. nationalism, we are indeed in unchartered territory.

I interviewed David because he’s a serial entrepreneur whom I first met when he was running Symphony, the Bloomberg challenger for trade-floor comms. Today he’s operating twin businesses, one in localized data centers and the other in distributed cloud services.

The hardware side is rarely discussed in the fintech world, which is all about software, but I think we are all going to be spending more time thinking about hardware, resilience, compliance, and sovereignty. I’d love to hear what you think about this topic and this interview.

Timecodes:

0:00 - Jame’s introduction of David Gurlé and his journey from Symphony to data centers and cloud

04:09 - Understanding why costs of cloud usage have risen, both financially and operationally

8:35 - Benefits of using hyperscaler cloud and the tradeoffs of bringing cloud back in-house

11:25 - Compliance and sovereignty

14:09 - Regulatory comfort with new architecture

16:05 - What will it take for meaningful change in how enterprises use cloud

18:59 - Financial services and crypto use cases likely to migrate from, or stick with, hyperscaler cloud

21:49 - Is co-location of servers going to make a comeback?

26:23 - The ethos of decentralization

27:48 - Building anew for agentic A.I.

30:47 - David’s update on his companies

If you are a global bank or fintech, or you govern a financial centre, your A.I. stack now embeds U.S. national‑security risk. That’s the lesson of the Anthropic Fable saga.

Fable 5 was the consumer wrapper on Anthropic’s Mythos 5, a frontier model explicitly framed by the company and U.S. officials as having serious offensive‑cyber capabilities. A trusted partner (Amazon) demonstrated a jailbreak that appeared to surface Mythos‑level behavior through Fable. That prompted U.S. national‑security officials to demand Anthropic either patch or pause the system.

Anthropic declined to voluntarily suspend the model. Within 48 hours of launch, the Trump administration issued an export‑control directive barring access to Fable 5 and Mythos 5 by any “foreign person,” including foreign nationals on U.S. soil and even Anthropic’s own non‑citizen staff. A control tool designed for foreign adversaries instantly became a constraint on allies, customers and the vendor’s own workforce.

In the U.S., the fracas has triggered a loud debate over the fate of A.I., governance, and fairness. The original Anthropic approach to Fable was to disable many fields of study on the grounds they were too dangerous (such as cancer research, which could be subverted to create a contagious virus). This led to charges that Anthropic was deciding what people could or couldn’t do with technology.

But even for those who wish to see a strong regulatory aspect to A.I. safety, the Trump administration’s response is equally frightening. It’s well known that Trump hates Anthropic’s CEO, Dario Amodei, who has clashed with Pentagon demands over control of the technology. The brutal export control may have been vendetta as much as policy.

What changed for financial institutions

While those debates are existential, this article’s focus is on the implications the Fable fable has for global finance and fintech. And the initial fallout looks to be significant.

Because Anthropic’s SaaS and compliance stack was not architected to segregate usage by nationality across every downstream surface – APIs, resellers, embedded dev‑tools, enterprise tenants, internal R&D – the only viable option was to pull both models globally. A theoretically targeted national‑security instrument operated as a global kill switch on a frontier model family.

This is the first live case of a frontier AI model being treated like dual‑use hardware in practice. For finance, that moves model choice out of “innovation strategy” and into the same category as sanctions, sovereign‑risk and critical‑infrastructure dependence.

The Fable episode also demonstrates that the U.S. government holds a de facto kill switch over any U.S. frontier model deployed via SaaS. It does not need to seize hardware or revoke licenses at the data‑centre level. It can compel the lab, which in turn compels the hyperscaler, which in turn cuts off customers.

The controls will not stop at a single incident. If U.S. labs move toward KYC and passport‑based gating to stay ahead of future directives, they will be building global identity databases as a condition of access to their models. That sits uneasily alongside data‑privacy laws and data‑localization rules in many of the jurisdictions where global banks and fintechs operate.

What looked like a neutral productivity layer now looks much more like SWIFT, satellite networks, or dollar‑clearing infrastructure: a chokepoint that can be weaponized.

Because the Trump directive applied to “foreign persons” wherever located, any global firm using Fable‑class models would have been in instant violation if non‑U.S. staff touched prompts, logs, or outputs.

That moves frontier‑model usage from a pure technology decision into export‑control compliance, HR policy, and vendor management. It forces banks to ask which roles, locations, and legal entities are even allowed to touch certain A.I. tools, and how they document that.

Dual stack

Global banks already run dollar and non‑dollar payment rails in parallel. The same logic will now accrue to AI.

Onshore U.S. workflows, and those tightly bound into U.S. legal entities, will be incentivized to use U.S. frontier models. Global operations – especially where non‑U.S. staff or sensitive jurisdictions are involved – will need sovereign or open‑source stacks that can survive U.S. export controls.

That implies running and governing two AI stacks: a U.S. frontier stack and a sovereign or open stack, with policies governing which businesses and staff can access which. Different stacks imply separate architecture, H.R., and compliance. It also implies banks will need to build surveillance and entitlement systems to ensure the right nationality of staff touch the eligible tools.

Global firms already wrestle with data localization: which data can sit where, and which staff can see it. They will now need to think in terms of “identity localization” for A.I. as well.

This collides with privacy regimes like GDPR and emerging AI.. regulations that restrict the external sharing of personal data. It also raises questions about whether global banks are comfortable with hyperscalers and model labs holding detailed maps of their internal org structures and nationalities as a condition of service.

Financial institutions should prioritize:

• mapping A.I. vendor and hyperscaler exposures

• designing a dual-stack A.I. architecture that includes policies for various nationalities

• baking A.I. export controls and kill switches into their stress tests and capital strategies

• and ensuring they have a strategy for open-source and alternative infrastructure.

Investors

The immediate reaction in much of the world will not be to “turn away” from the U.S. The leading labs are still in the U.S., and the Fable story signals that they are now being treated as strategic assets – with an implied state put option under their capex and balance sheets.

That is a green light to many investors. It suggests that a subset of U.S. AI balance sheets now sit closer to defence‑industrial‑complex status than to ordinary software.

At the same time, the total addressable market for U.S. frontier labs may begin to shrink or segment. If export‑control and nationality gating become persistent, the most valuable user base will be U.S. persons, while much of the rest of the world migrates to Chinese, regional, and open‑source stacks as insurance.

For allocators, “A.I. exposure” becomes a geographic and regulatory bet, not just a technology bet. Sovereign‑wealth funds and large asset managers will want both U.S. and non‑U.S. AI.. exposures, with new indices and hedging strategies separating U.S.‑gated, open‑source, and Chinese stacks.

Hyperscalers – AWS, Microsoft Azure, Google Cloud – become enforcement layers for export controls and KYC on behalf of labs and the U.S. state. That creates space for “neo‑clouds” specializing in sovereign AI hosting, whether in Europe, the Gulf, India or Southeast Asia.

The net result is higher costs of doing business. Firms will have to ensure access to both U.S. and non‑U.S. AI models, and to the infrastructure and talent to run them. This benefits the biggest institutions. It could cripple others seeking to operate a cross-border business on a slim balance sheet. Investors will respond accordingly.

Financial centers

Every financial centre now needs to ask how it remains global when access to digital cognition is being Balkanised by nationality and export control.

Markets clearly aligned with the U.S., such as the United Kingdom or Switzerland, will try to position themselves as trusted custodians of sensitive A.I. workflows. Having their nationals caught up in a U.S. crackdown may be politically galling, but they will have to find workable accommodations. Europe is unlikely to catch up with U.S. labs on models, but it can build leverage in compute, capital, and regulation. Whether these can amount to chokepoints is unknown.

Other centers – India, Singapore, the UAE – may find themselves having to pledge allegiance more explicitly. They will need to demonstrate that they are safe conduits for U.S.‑compliant AI deployment while also pitching themselves as neutral venues for open‑source and non‑U.S. stacks. Those balancing acts are getting harder, but these markets have a head start in building regional A.I. supercomputers and attracting talent. Their regulators should be pushing institutions to include A.I. export‑control scenarios in stress tests and resolution planning.

Hong Kong faces the hardest questions. Can it credibly host cross‑border A.I. finance that draws on both U.S. and Chinese ecosystems? In theory, its opportunity could be to pioneer utility‑style oversight of A.I., defining what it means to regulate digital cognition as critical infrastructure. More likely, though, it becomes trapped between incompatible stacks.

Hong Kong has so far walked the tightrope: politically it is now absorbed into Beijing’s orbit, but it also sits outside of the Great Firewall and remains a dollar money center. This position is under pressure: most American A.I. labs geoblock access to Hong Kong residents, and Hong Kongers have been banned from participating in mega-cap tech IPOs in New York. Morgan Stanley has put its Hong Kong-based bankers on “China-only” mobile devices. These steps have been annoyances. With Fable, expect the fallout to be greater. The tightrope is getting skinnier.

Read this next:

I’ve been writing about fintech for a decade and that has meant digesting a lot of really bad takes about money. I’ve spent these years not just writing about digital finance, but trying to understand what money is, where it comes from, who it serves, and why.

Money is about systems so it’s hard to understand in the snapshot format of journalism. Books do a much better job. One of the best is Brendan Greeley’s The Almighty Dollar, which came out earlier this year. The reason it is so good is that it delves into specific historical moments that are mostly forgotten but which provide evidence as to why our mythology about money, and the US dollar in particular, is so misinformed.

Greeley takes familiar arguments, turns them inside out, and discovers a perspective that answers a lot of the seeming contradictions in our money myths.

For a fintech writer, he is disappointingly curt, glib even, about stablecoins or other aspects of digital finance. He sees them as simply new wine in old bottles. I’ll probably spend more time in this review talking about stablecoins than Greeley does in his book. But this isn’t because I think Greeley is wrong. Nor does it mean we can just shrug and say, “Stablecoins, meh, old wine in new bottles.” But we can have a clearer idea of why this is so, and what that means for the finance industry.

Bad takes

The most interesting takeaway in Greeley’s argument is that we err by equating the dollar with the United States. Of the two, the dollar is older, bigger, and the one that is becoming more powerful rather than experiencing relative decline.

His in-depth examinations of the dollar in its earlier incarnations show it was transnational from the start. America later adapted to a currency that was already circulating through global trade. The US didn’t invent the dollar. It inherited it, standardized it, and scaled it. And now the dollar, truly almighty, is poised to slip its leash again.

Yes, the Federal Reserve and the U.S. government are powerful, but they have never been fully in charge of the dollar system.

One of the worst takes on money that I’ve endured this past decade is the bbrrrrrr money printer notion that bitcoiners, goldbugs, and even your everyday banker like to talk about. It’s a great way to blame the Fed (or whoever) for inflation, or currency debasement, or whatever economic trend is in the news. These views usually come with a hidden sales pitch to buy some kind of magic asset to save yourself from this Gomorrah of currency mismanagement. More politely, this is the view of advocates of hard money, limited by some artificial constraint: rocks in the ground, data blocks mined.

Modern monetary theory, or MMT, sits on the other extreme: the government should go bbrrrrr all it likes! The government really should be in the money-creating business! Usually associated with pinkos, it was Dick Cheney who declared “deficits don’t matter”. Anyway, MMT is more about mismanaging an economy rather than about money per se.

Another argument, one I’ve been more partial to, is that the dominant currency stems from politics: that it flourishes because of well regulated markets; that nomos, Greek for ‘law’, is what gives us nomisma, ‘currency’ or ‘coin’. Private experiments in currency have either been coopted by the state (such as paper notes in China), or eventually fizzled (all manner of local, community-level monies, leper colony notes, the Stella currency that for a time was used among speakers of Esperanto...etc.) These views also lead one into the realm of sociology and anthropology, which is both as fun and problematic as any metallist fantasy.

These arguments, valid or disingenuous, do serve the purpose of asking, what is money, what is currency, and how do they exist? Greeley provides us with the great service repositioning this as asking who is money for, and differentiating between ‘small money’ for us plebs leading our everyday lives, and moneta grossa for the bigwigs involved in large-scale and cross-border trade and finance.

Commercial banks

Whatever the theory, the clear answer about who creates money in today’s world is commercial banks. The Fed influences the price of money, by which it can affect growth and employment, but the business of making money lies in the fiat of double-ledger bank bookkeeping – an invention from 13^th century Italy. Banks in the U.S. were printing money long before the Fed existed. Heck, Americans have been printing money before they licensed banks.

Greeley details how the origins of the dollar were minted as large silver coins in Bohemia by Saxon punters in the sixteenth century. These ‘thalers’ were plentiful and consistently designed for merchants conducting long-distance trade. The Hapsburgs mimicked the thaler when their Spanish conquistadors mined the New World, flooding Europe and Asia with standardized silver dollars. China played a passive but vital role as a sink, with bottomless demand for silver dollars – and at one point, specifically for Spanish silver dollars, not just silver ingot – that lasted for centuries.

(As an aside, from me, not Greeley: the reason China craved silver was because its emperors, jealous of their powers, never allowed merchants to evolve into Italian-style bankers. This ensured a rich man couldn’t become a political rival, but it also kneecapped China’s ability to develop a modern financial system. One of the weaknesses of Greeley’s otherwise fine book is that he doesn’t explore in detail why China became the world’s dollar sink. A missed opportunity!)

Offshore dollars

All of this is to explain that the Fed and the Treasury Department have never been fully in charge of the dollar system. The modern dollar is manufactured through banks, offshore markets, and global habits that extend well beyond Washington, D.C. The result is a currency that is deeply American in law and infrastructure, but not purely American in operation or demand.

This came as a surprise to American politicians. Bretton Woods placed the dollar at the center of global trade. Other currencies were pegged to the dollar but only the dollar was pegged to gold. No one understood it at the time, but the emergence of the eurodollar market in London in the 1950s ensured the end of the Bretton Woods arrangement.

Eurodollars enabled banks outside of the U.S. (including offshore branches of American banks) to create dollar liabilities of their own, denominated in dollars but outside the reach of U.S. regulators. They did this because it was profitable, but also because the system already had strong global demand for dollar assets. This was despite Bretton Woods, whose creators hadn’t anticipated eurodollars. Under Bretton Woods, countries operated with capital controls, and the International Monetary Fund was designed to smooth out balances of payments and ensure flows of currency and gold – the gold was mostly in the U.S. – remained stable.

But if eurodollars were a bug in the Bretton Woods architecture, they were a feature of the postwar financial economy. They were evidence that the dollar’s real power came from network effects, not legal borders.

Stablecoins

Does this apply to stablecoins today? For those referencing USD, the question isn’t whether the instrument is onshore or offshore, but whether it can become a trusted, transferable, widely accepted dollar claim across venues, counterparties, and jurisdictions. Greeley says stablecoins are a new chapter in a long history of private actors manufacturing dollar-like money under the auspices but not the direct power of the state.

Stablecoins inherit the eurodollar problem: they can scale faster than policymakers can define them. If a stablecoin is used as settlement money, reserve money, treasury collateral, or trading money, then it is no longer just a payment app feature; it is part of the dollar system itself. That is the kind of system Greeley says the United States has often managed only indirectly, through regulation, emergency support, and toleration of private monetary innovation.

The book also suggests a hard truth for stablecoin advocates: stable money is not just about peg maintenance in calm markets. (I’ve written at length about this.) It is about what happens when confidence cracks, redemptions accelerate, and users ask whether the liability is truly money or merely a promise that behaves like money until stress arrives. In that sense, the stablecoin industry is living inside the same historical tension that shaped bank notes, deposits, and eurodollars.

Deep foundations

In the U.S. case, that tension originates in the decision to deny states the ability to print money – but to allow private banks to do so. This is the foundation of American monetary history, and by extension our contemporary dollarized world. The dollar was no longer about silver coins. It was about banking.

If banks are still the deep architecture of dollars, then the winning stablecoin models are the ones that connect cleanly to bank balance sheets, bank reserves, and bank-style compliance. A stablecoin that tries to bypass the banking system entirely may find itself out in the cold.

By the same, ah, token, Greeley’s book is cautious about neat theories of dollar replacement. These ideas are often packaged as new the eclipse of the greenback by a new public currency or digital asset, probably linked to the rise of China. Greeley’s history says the currency dominance comes from habits, settlement depth, credible liabilities, and persistent use across many types of users. The dollar is sticky because it sits inside global banking, trade invoicing, reserves, and credit creation.

The fact that governments and conference speakers inveigh against it doesn’t really matter. It is true that the U.S. government has weaponized its chokehold on dollars, which is leading to strident efforts to avoid the long reach of Washington. Ditto for the Trumpian campaign to end Fed independence. At some point, institutional degradation and deficit living could lead to a financial crisis that endangers America’s ‘exorbitant privilege’ of the dollar.

But the current demand for USD stablecoins suggests – to me, at least – the answer will lie in unregulated dollars, not in a new currency. The fact that the Genius Act prohibits the Fed from any action related to a digital dollar not only ensures the privatization of tokenized dollars, but removes the central bank from even surveilling this market – so I find it hard to imagine the U.S. can weaponize stablecoins as it has done to flows that pass through American banks.

A future crisis may end cheap financing for the U.S. government, but not necessarily demand for dollars, or even Treasurys (at current prices). Replacement stories such as Saudi Arabia invoicing oil exports in yuan are going to remain limited to specific trade and currency corridors, and in any case are political statements more than epochal monetary events.

This doesn’t mean the dollar regime is infinite and immortal, but the Spanish experience with its silver dollar shows that the elite’s desire for promoting their international currency – at the expense of local industry and prosperity – can enable a currency to outlast the empire for a very long time.

A final note: Greeley is an entertaining writer. A former financial journalist turned professional historian, his book brings to life otherwise obscure, ordinary figures who turned out to have played fascinating roles in the dollar’s history. He also does a great job of explaining the technicalities of balance sheet accounting. This was a very satisfying read.

Greeley, Brendan, The Almighty Dollar: 500 Years of the World’s Most Powerful Money, Crown Currency, 2026.

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Arta Finance is a young wealthtech company operating in Singapore and the US with backing from ex-Googlers (including former CEO Eric Schmidt), VCs, and the Singapore government.

It has been designed (and is licensed) to serve accredited investors, that is, people with a minimum net worth – not the mass affluent. In other words, it’s a wealthtech that is competing with private banks.

Arta also has a B2B business selling technology to those same private banks.

In either case, it is using artificial intelligence to support its relationship managers (RMs). But there are still limits to what AI can do. In my discussion with Arta’s Singapore CEO, Amanda Ong, we explored the extent to which “AI first” is a step change from other wealth services, or just an incremental addition.

Anyone in the wealth-management industry will find this discussion relevant to understanding where technology is taking the business, and the customers.

Timecodes:

0:00 - Amanda Ong, Arta Finance

2:20 - What differentiates Arta’s customer base, in both its B2C and B2B businesses

5:25 - The expansion of B2B

6:26 - What do traditional private banks not yet get about AI and wealthtech?

8:47 - Why can’t big banks just create their own AI services and displace Arta?

10:49 - How Arta’s use of AI and LLMs evolved over the past three years; are these capabilities really “moving the needle”? Will agents move into advice and transacting?

15:45 - What needs to change to take AI-wealth management to the agentic level

17:50 - Managing RMs once they rely on AI

20:35 - Limits to wealthtech businesses versus a bank, and how Arta may address those

22:31 - Handling challenges around private credit and gating, and aligning with customer interests

26:54 - Amanda’s take on tokenization

28:34 - The company’s growth strategy

You know you’re in a hype cycle when companies reposition themselves as the hot new thing, like Kodak’s rebranding as a blockchain company: it enjoyed a short-lived stock surge in 2018 but soon returned to penny-stock status. Kodak is not a blockchain company.

So what to make of Western Union’s launch of its own stablecoin?

For at least a decade now, WU has been the fintech industry’s poster-company for a disruptable incumbent. It and its pre-fintech peers charge high fees for remittances. It’s been easy for challengers to color this as exploitative. That Filipino nurse or Bangladeshi construction worker shouldn’t have to pay double-digit fees as a portion of the money they are remitting to their families. Legacy rails bad, digital payments good.

The crypto industry has seized on stablecoins as a moral justification. Poor people or hard-pressed micro entrepreneurs in emerging markets have turned to USDT or USDC to handle cross-border payments. It’s fast and the settlement bit is practically free. No more relying on lousy correspondent banks, nor on politically compromised SWIFT messaging, and definitely not on dinosaur remittance players like Western Union.

It’s easy to believe that WU’s issuing its own stablecoin is a cynical ploy by a sunset business, meant to delay its inevitable demise, but not to be taken seriously by the broader payments industry.

This could even turn out to be true, but there are reasons to take this seriously.

Revenues and costs

Western Union makes most of its money from fees and FX spreads on consumer money transfers. Its stablecoin, USDPT, is an attempt to protect those flows, but also to monetize them in a new way, by internalizing float and settlement economics. In short, the WU business model is expensive to run, and USDPT can in theory eliminate many of those internal costs.

Revenue is linked to transaction volume, principle amounts, corridors (and pricing per corridor). Digital flows provide WU a higher margin, but a lot of its business remains rooted in cash-to-cash transfers.

That requires an expensive set of enablers: agent commissions, payout partners, and network costs. Plus compliance, risk and operations, including AML/KYC, fraud monitoring, and regulatory overhead. This is a major part of WU’s administrative costs, separate from its operating costs: it’s overhead. Most of all, WU has to duplicate that overhead in every country where it operates, which is just about everywhere: the company says it’s active in more than 200 countries, and 600,000 retail agent locations. In 2025 it spent $200 million on licensing, risk, and compliance, according to MatrixBCG, an online research seller.

There’s a further cost that WU absorbs, which is capital. WU must pre-fund ‘nostro’ balances with agents and banks worldwide to make instant payout possible. This not only ties up capital, but can even result in negative float: in some jurisdictions, WU has to pay for that liquidity.

Fintechs like Revolut and Wise have the same model, with a corporate treasury that manages bank balances in the markets where they operate. The user experiences cheap, instant money transfers, but it’s due to the fintech being able to move internal balances. However, these fintechs focus on well-off consumers in well-off places. WU’s business is to cater to low-income people, micro business owners, and anyone who needs to get money in or out of a challenging market.

No growth

This heavy cost is also WU’s strategic advantage. It controls the last-mile of cash payouts, often in countries that other businesses don’t touch, including fintechs. In busy corridors such as US-Mexico, it also competes on its brand and on its physical presence. Of course it charges high fees: not just to cover its costs, but because few others bother to get down’n’dirty in so many markets. And, because it can.

That’s changing, though. Anything involving account-to-account payments, bypassing agents and middlemen, undermines the WU system.

Payment fintechs also specialize in last-mile services, such as Thunes, Remitly, or TerraPay. WU lost the China-related market to AliPay and WeChat Pay, and it struggles against business-oriented fintechs such as Nium and Airwallex. With a far lighter footprint, these digital companies can charge lower fees and more competitive FX rates.

Moreover, WU has seen its direct competitors pivot on-chain. Moneygram has introduced stablecoins into its consumer app. Its users can receive and store funds in Circle’s USDC, via the Stellar network. Moneygram has avoided marketing this as crypto; instead the app is a “digital vault” that defends against local currency volatility. The tool, behind the scenes, is USDC.

As a result of these pressures, WU’s revenues have been flat or down in recent years. Top-line revenues in 2023 of $4.3 billion have been eroding, to $4.1 billion in revenues for 2025. Although operating margins have improved, there has been no growth for three years. Its stock price has lost 66 percent of its value over the past five years: a real dog!

The new strategy

The company has responded with a large (but unspecified) investment into digital infrastructure. It is thinking boldly. Instead of just leveraging someone’s stablecoin, WU is launching its own, on top of its Digital Asset Network. WU intends to maintain its walled garden. Giuseppi Tomasi de Lampedusa would have been proud.

The company says its stablecoin, USDPT, will transform its costly, pre-funded liquidity- and correspondent-banking model into a treasury function that generates yield and offers more flexible economics.

It can hold customer settlement balances as tokenized dollars backed by T-bills and deposits. What’s been a negative float in some markets could become a way of generating positive interest on reserves. WU is working with Anchorage Digital Bank, a US-regulated trust bank, which handles the minting and burning. WU pays it for issuance but keeps the float yield. Anchorage settles on Solana, chosen for its high throughput and low fees, which is better suited to lots of small-value transactions rather than the kind of industrialized volumes of a corporate treasury. (See J.DB’s article on how Circle is building rails for nano-payments.)

DAN is the on/off-ramp and distribution system. It’s the connective tissue between USDPT and various fiat currencies and physical cash. It allows crypto holders to convert into local money.

With reserves earning interest, WU expects this will incentivize its partners and agents want to hold capital in their ecosystem for longer, rather than just to meet immediate liquidity needs for customer payouts.

This isn’t about making payments faster, but overhauling WU’s balance sheet and its income. WU will maintain its cash-out locations, where most crypto projects can’t handle last-mile distribution.

All the excited talk about stablecoins enabling fast and free settlement is true, but ignores FX, pay-in/pay-out, and compliance. WU is using its Digital Asset Network to remain the dominant on/off ramp for cash into crypto, and will sell that capability to other wallets and fintechs.

If WU launches a ‘stablecard’ offering similar to Moneygram’s, DAN (Solana) will be the settlement layer, giving Western Union the opportunity to engage in interchange-like economics. It doesn’t have to pitch the card as a crypto thing, just as a debit card. It’s not a play for credit-card customers, but to build retail products for people in high-inflation countries who want to spend off a a US dollar-based account. It’s a play for Tether customers.

So why should users not just stick with using USDT or USDC? These stablecoins are the most liquid in the world. They trade on multiple crypto exchanges, are more integrated into other financial networks, and have nascent but real track records in building resilience.

Treasury, agent, card

However, WU’s target users aren’t people who trade crypto. It’s people who need remittances, some of whom have made their way to Tether because it’s been the best alternative. Also, coin holders still need to rely on third parties to handle cash.

The logic for WU is to think of the stablecard as the final step. The intermediate stage is DAN and getting agents to connect with it for cash-out and FX services. This is a B2B2C model.

If WU can settle USDPT within minutes, agents reduce settlement risk and some banking friction. The agents won’t need to maintain their own large pre-funded balances with WU or a local bank. And by connecting to DAN, agents can become cash-out points for other wallets or exchanges; so far it appears WU is not forcing them into exclusive relationships.

WU also intends to use its proprietary coin to program compliance, transaction limits, and local partner incentives. It’s another way to cut operating costs. Working with Anchorage lends the network some compliance credibility (as opposed to Tether, particularly its primary business outside the US).

Rivals can always stitch together all the same components, but WU is betting it will get better economics by hubbing everything in-house. WU won’t win crypto-native users, and it will still struggle to make headway against fintechs and superapps with direct local rails and wallet ecosystems.

Sunset or new dawn?

Is Western Union’s strategy sound? Is this a blockchain company?

One sign of whether WU is beign strategic rather than extractive is to gauge how much of the margins from USDPT-based services flow back to customers, versus how much WU takes in high fees plus the float. If WU’s goal is to squeeze out the last penny, then we’ll know it regards itself as a sunset business (especially if it continues to charge the same FX fees). If it matches the pricing of its fintech and wallet competitors, that will signal that WU’s stablecoin gambit is meant for the long haul.

A second factor is openness. If DAN is positioned as low-cost infrastructure that third parties can leverage, that will indicate WU is confident about pivoting to a new kind of digital remittance company. But if it keeps others out, or charges high fees, then this suggests its main strategy is just a more capital-efficient machine to milk an old cow.

WU operates a toll booth. That hasn’t changed. But this stablecoin strategy will scare competitors if WU passes those efficiency gains to users and agents. If it’s just another means of defending pricing power, then WU would be acknowledging its no-growth phase is terminal. Fighting back harder – that is, choosing customers over shareholders, at least for now – implies it is ambitious and optimistic about regaining the lead in the growing world of digital payments.

Beyond the scare stories of “Q-Day” we also need to understand the impact that building for quantum resistance.

Although bitcoin is an obvious target, the same cryptography underpins many aspects of conventional digital banking, as well as the blockchains being used for stablecoins and tokenization projects. All of these projects face more than just a “make it safe” requirement. The making it safe changes what the blockchain can achieve. Anything requiring fast throughput – from digitally onboarding customers to payments – may need to be rethought.

That’s the most jarring conclusion from this discussion with Duncan Wong, a technologist and entrepreneur who has been early in both enterprise blockchain projects, and in studying the impact of quantum computing on security. Duncan began his career in academia and then in cybersecurity at ASTRI, a Hong Kong government-backed agency. As the founder of CryptoBLK, he participated in early consortia for restructuring trade finance around distributed-ledger technology. In early 2022 he co-founded Abelian, a blockchain ecosystem designed around privacy and quantum resistance.

Timecodes

0:00 - Duncan Wong, Abelian, and his ‘a-ha’ moment pivoting from enterprise blockchain to post-quantum computing safety

5:25 - What do banks get about PQC and what are they missing?

8:04 - What do we do about data already stolen from existing blockchain systems?

4:16 - What about stablecoins?

16:20 - Lessons from consortia experiences in early enterprise blockchain

18:06 - With PQC solutions so computationally heavy, what does that mean for performance, scale, and privacy?

23:43 - What happens to assets and liquidity on Q-Day?

28:00 - Defining “success” for PQC

28:52 - Abelian’s crypto-token and commercial challenges for PCQ digital assets

Circle Internet Group has gone beyond promoting its token, USDC, as the world’s second-largest stablecoin. It’s trying to assemble a full stack for machine-native commerce, with USDC at the center and software agents as the end users. If the early days of blockchain companies was about realizing the ‘internet of value’, it’s now about building the rails upon which the value will flow.

This is possible now because of the Genius Act in the US, which established a regulatory framework and license for issuers such as Circle; and Circle’s own $1.1 billion IPO on NYSE in June 2025.

“Companies and investors can now put a price on the stablecoin industry – our market cap,” said Yam-ki Chan, Asia managing director at Circle, told the J.DB Report.

Product blitz

The company is now rolling out several products make it easy for AI systems to hold funds, discover services, and pay for them programmatically. At the same time it says the underlying payment rail is compliant, predictable, and familiar to institutions.

These include agent wallets, an agent marketplace, and a nano-payments framework. Those are using USDC. Circle is also working above and below the digital-asset level. Below means at the settlement layer, introducing its own blockchain, Arc; above means Gateway, a cross-chain infrastructure that gives users a unified USDC balance that can be used across many blockchains.

Add it up, and Circle is broadening touch points beyond crypto investors who want to park bitcoin or other coins in a stable vault; it is targeting companies looking to deploy autonomous software in payments and capital markets.

“We’re now at a point where the question is, are you in the stablecoin business, or are you using stablecoins in your business?” Chan said.

Nano-nano

The nano-payments functionality is perhaps the most important part of this slate of initiatives. We have plenty of ways to pay. But paying tiny amounts at speed is beyond current financial systems. It’s beyond what humans can do, with our manual onboarding, approvals, and batch processes.

Circle’s answer is to let agents pay in USDC for compute, storage, APIs, data, and other services, by using infrastructure that abstracts away most of the blockchain complexity.

“We’ve tested nano-payments on Arc down to one-millionth of a penny,” Chan said. “It’s for x402 payments.” This refers to Coinbase’s protocol for agentic money movements at small scale. (See J.DB-R’s primer on agentic payment stacks.) Coinbase is a shareholder of Circle and receives a cut of USDC’s net interest income generated from the reserve backing of its stablecoin.

Rather than sending each micro-transaction on-chain, the system uses off-chain authorization and batched on-chain settlement, which lowers cost and latency enough to make small automated payments economically viable.

Agent wallets can hold and move funds within predefined guardrails, while developer interfaces and an agent marketplace help teams integrate agents into real commercial flows.

Circle wants to provide the basic account, payment, and discovery tools to allow machine actors to use, and depend on, USDC.

Insto-friendly

Despite everyone in the blockchain world tipping their hat to “interoperability”, Circle has built its own layer-1 blockchain, Arc, to gird all of this activity (although its Gateway does mesh with other blockchains). Arc is designed specifically for agentic payments. Circle is telling financial institutions that Arc offers predictable fees, payable in USDC rather than in another (usually volatile) governance token, along with validator accountability and a governance framework that institutions can work with.

These features are meant to ease the frictions that public chains such as Ethereum still create for enterprise use. Through Gateway, it also supports payments across Ethereum, Base, Arbitrum, Avalanche, and Polygon. Arc competes with these other blockchains by trying to be the best venue for transacting agentic payments, but if users wish to use other L1s, then Circle wants them to use USDC there.

These efforts are designed to enable financial institutions to facilitate high-frequency, high-volume nano payments: not to discourage larger ones, but rather to create competitive advantage in brand-new markets.

Banks and other institutions won’t just ask whether the agents can pay. They want to understand what controls exist, what data the agent can access, how liabilities are handled, and whether these payment rails are compliant.

They also don’t want to be exposed to the rampant hacks and chicanery common in crypto markets.

“DeFi things will remain in the DeFi world,” Chan said. “Institutions want to engage with known counterparties.” That means policy-controlled wallets, sanctions checks, and governance structures that provide some visibility into the identity behind an agentic counterparty.

Questions!

It’s early days, however, so while Circle has indicated its direction of travel, there remain plenty of legal, governance, and technical questions.

For example, Circle talks about “guardrails” for agent wallets, MPC custody, and sanctions screening. But how AI-controlled wallets are identified, attested, or distinguished from ordinary software accounts has yet to be spelled out.

Arc’s future is also unclear, as it is not decentralized. Circle has said Arc will launch under its stewardship and evolve into a broader validator participation and more distributed governance. The track record for other blockchains launched this way is checkered.

A third question: who is liable for agentic errors? Arc isn’t serving as a custodian, which puts a lot of the compliance heavy lifting on developers and enterprise users. To be fair to Circle, no one has yet to work out what happens if an autonomous agent makes a prohibited payment, misuses a service, or triggers losses through faulty instructions. But as a first mover, Circle has the burden and the opportunity to set standards.

It’s not alone. Coinbase, Ripple, Canton Network, Ethereum, Solana, and many other organizations are eager to make digital-asset payments go agentic. So are payment processing networks and banks.

“We’re just getting started on how to prepare for machine-to-machine payments,” Chan said.

Success will require solid infrastructure. It will also require mass adoption of stablecoins. They have to be useful. Nano-payments has to become a thing. The bigger story is not which technology company wins this race, but how useful agentic economics become to everyone else.

The anniversary seemed like a great excuse to speak with him about the most important trends in that period, the impact on incumbent financial institutions, and the opportunities it has brought to users of financial services.

This conversation is wider than usual for The J.DB Report, but the advent of generative AI is clearly leading us into a new era, including fintech. It can be useful to occasionally take stock in order to put today and tomorrow into a useful context.

Timecodes:

0:00 - Ben Quinlan, Quinlan & Associates

0:21 - The early days of fintech and ideas of doing finance better

04:08 - Fintech disruptors evolving into ‘frenemy’ relationships with incumbents

07:08 - Platform economics versus siloed financial verticals, and the ‘holy grail’ of superpps

10:00 - Fintech profitability and whether successful models are universal

13:12 - Financial inclusion, access, and creating new ecosystems

17:31 - Crypto and its institutionalization

22:42 - GenAI: “the biggest disruption”

29:09 - Pricing power and how to remain different in an AI world

The demand by Asian retail investors to trade US stocks during Asia’s daytime is pushing the US itself to extend its own trading hours to be open nearly around the clock. The longer term implications, should trading equities in tokenized form become prevalent, and which implies a 24/7 market, is that global equities markets are being pushed closer to a crypto-like environment, even if the drivers of this trend are unrelated.

The US equities market is the world’s largest, with a total market capitalization of $66 trillion. Daily trading volumes continue to reach record highs, hitting 17.6 billion shares and notional value of more than $1 trillion.

Investors in Asia and the Middle East have long desired to trade this market in their own daytimes, a wish that has recently become a reality. The boom in memestocks and raging tech names such as Nvidia and Tesla have added to the furore.

Early ATS

The first attempts emerged in Japan as long ago as 1998, when the first alternative trading systems launched.

ATSs are broker-dealers that share the trading mechanics, technology, and participants as stock exchanges. The difference is regulation. Exchanges are self-regulated organizations with listing standards and surveillance obligations. ATSs are broker-dealers supervised by securities regulators and with fewer disclosure requirements.

Japan labels its version of these ‘proprietary trading systems’. There were 10 PTSs active during the 2000s, but they failed to crack the market. Today there are now just two (Japannext, owned by SBI, and Osaka Digital Exchange; a third, Cboe Japan, closed in 2025 with Chicago-based Cboe taking stakes in the two survivors). It has taken that industry 28 years to achieve 12 percent market share in Japan.

Its impact in the US has been minimal: these PTSs are only allowed to trade in Japanese stocks. But they established the idea of ‘night trading’, allowing Japanese punters to observe US and European market activity before placing trades in Japan, with PTSs operating sessions in the evening.

Blue Ocean in Korea

Although these PTSs don’t touch US equities, they highlighted interest among Asian retail investors to trade after work and after dinner, and the fact that they actively tracked US markets.

In June 2021, a new US-based ATS called Blue Ocean connected the dots and pitched itself directly to Korean retail investors, offering to place trades in US stocks during the Korean day. Blue Ocean’s innovation was to create a new trading schedule in the US, operating from Sunday 8pm to Thursday 4am, US Eastern Standard Time.

That corresponds to daytime in Korea, and Korean retail makes up 40 percent of Blue Ocean’s volumes; other Asian markets comprise another 30 percent, while American investors who want to trade during their nighttime (especially meme stocks) make up the remaining 30 percent. Blue Ocean dominated US overnight trading volume, which has come to make up about 1 percent of total US equity volume.

The experiment almost collapsed. Blue Ocean relies on local Korean brokers, notably including Samsung Securities, to reach their investors. Rival brokers and Korean regulators were alarmed by the huge surge in uptake; Blue Ocean also suffered a system outage that led to questions about investor protections. Korean brokers suspended Blue Ocean’s service in 2024, and it only resumed in early 2025; the ATS has since opened an office in Seoul.

NexTrade

The wild success of Blue Ocean convinced South Korean regulators that they needed to upgrade their own market, lest they see more volume sucked into US firms. In 2025, shortly before Blue Ocean was allowed to resume service, the Korean Securities and Futures Commission broke Korea Exchange’s seven-decades long monopoly on stock exchange business by granting a license to the first homegrown ATS, NexTrade.

Like its Japanese peers, NexTrade only allows trading of domestic stocks, and it differentiated itself by offering extended trading hours into the Korean evening, along with lower fees. Unlike in Japan, the authorities in Seoul did not burden NexTrade with many rules designed to protect incumbent exchanges.

NexTrade took off like a rocket. It took it less than one year to secure 30 percent of the local market share, compared to the 12 percent that Japan’s PTSs have eked out in their market after more than 25 years.

At the same time, two more American ATSs have entered the Asian markets: Moon ATS, operated by OTC Markets Group, and Bruce ATS, operated by Bruce Markets, a company operated by PEAK6 Investments. Both ATSs were licensed in the US in late 2024, and explicitly target retail investors in Asia. Both were able to sign distribution deals with Korean domestic brokers, who were eager to break Blue Ocean’s monopoly as it resumed activity.

Going 23/5

These three US-based ATSs are now bringing liquidity to the US overnight market. Their flow is entirely retail, but that attracts market makers. These ATSs expect this will lead to interest from ETF brokers and designers of structured products. Should they realize their hopes of collectively winning up to 10 percent of total US equity volumes over the coming years, this amount of liquidity would finally encourage US institutional investors to participate in the overnight market.

Something like that may be bound to happen anyway. The rise of overnight trading in the US and the obvious appetite from Asian retail investors has pushed the US to transform its market to trade “23/5”, five days a week around the clock, with only a one-hour gap (at 8pm, EST) to reset the matching engines.

This new extended trading schedule is meant to launch on December 6 this year, pending full regulatory approvals.

Most market participants in the US don’t care about 23/5. They didn’t ask for it and it represents a new reality that will require thinking about risk management and operational flows.

But it’s not for US investors; it’s for Asians. For now, this market is dominated by three young ATSs, but when the US goes 23/5, the bulge bracket will jump in, offering access to a greater number of company stocks, including American depository receipts (synthetic representations of foreign-listed stocks).

Some participants also believe that more liquidity and attention will spur activity among US investors. Just as Asians want to trade their local market on the back of news out of the West, US investors may want to watch what happens in Asia to decide how to trade at home; the surprise announcement of DeepSeek in 2024 is one example of a market-moving event.

Building on T+1

The US decision to embrace a 23/5 system is not just a reaction to Asian demand. It is made possible by America’s own move to T+1 (settling one day after a trade) in 2024. This has compressed time allowed for brokers, asset managers, and custodians match, report, and close trades. So far the move from T+2 has gone smoothly, suggesting the processes are in place to handle additional flows during late hours.

The overnight ATSs have also impacted market efficiency. Spreads are narrowing. Market makers are now deploying smart-order routing to the ATSs, to enable best execution. (In the US, brokers are required to place an order at the exchange offering the best price, which is meaningful in such a big market with multiple stock exchanges; ATSs as broker-dealers are exempt from this rule, but competitive forces will probably enforce best-execution practices.)

Smart-order routing is a technology consideration. Moving to 23/5 requires some more tech upgrades and problems to be solved. It’s a big project, but it’s one that is well understood.

Challenges

There are bigger questions, mostly in the realm of tax and compliance, particularly regarding clients based overseas. These legalistic details will determine basic questions such as whether bulge-bracket firms serve Asian clients from teams in the US working the night shift, or if they place relationship managers (who are licensed with US SEC Series 7 credentials) in Asia.

There’s also going to be a mind shift: when the US working week begins on Sunday night, and the actual trading takes place “tomorrow” (crossing the international date line), firms will face personnel and management challenges.

Operations will pose more concrete issues for the industry. Some aspects of post-trade processing should remain straightforward, such as batching overnight trades to the following day’s work to calculate NAVs. But others are not. Corporate actions pose new risks when they involve many time zones. For now, the ATSs say they suspend trading in any ticker that announces a material action. This doesn’t provide the same assurance as the regulatory requirements on exchanges.

Another aspect that will need to be harmonized is order limits. When a stock’s price crashes (or surges), regulatory circuit-breakers force exchanges to freeze trading. ATSs don’t have to.

ATS executives say competitive forces will lead to harmonized rules, but without regulation, the ATSs will always be able to wriggle out of such obligations; which is why the big exchanges in the US may demand ATSs fall more under similar rules.

Retail investors are either oblivious to these details, or powerless to change them, but institutional investors have clout. It’s possible that regulation needn’t be heavy-handed, if overnight trading grows big enough to attract institutions, starting with hedge funds. Institutions would insist on tighter rules to protect themselves. That may lead to the necessary changes; if not, regulators will have to step in.

Regulation may or not be needed, but automation is going to be a must, if the markets are to maintain true straight-through processing 23/5. Ditto as more jurisdictions, including Europe and maybe Hong Kong, also move to T+1.

From 23/5 to 24/7?

While 23/5 is a big structural change to US equity markets, it might be just another step towards matching crypto’s 24/7 environment. NYSE and Nasdaq have already expressed interest in tokenizing equity assets. In January, NYSE said it will develop a blockchain-based paltform for trading and on-chain settlement of tokenized securities, which will operate as an ATS. The exchanges are already preparing to move beyond 23/5, in a phased approach.

The challenge isn’t tech: the DeFi world already supports fractionalized trading and round-the-clock trading. The challenge is how to explain this new world to the listed companies, whose leadership and investor-relations teams aren’t involved in crypto-anything, and could end up surprised by sudden volatility in their stock on a Sunday.

The best argument for caution is that people aren’t robots; we need a break. Technology and sensible rules around risk may make 24/7 – or even just 23/5 – possible. The direction seems clear to industry participants. The US is moving to 23/5 largely in response to Asian retail demand for overnight trading. On top of this, Wall Street firms are keen to adopt tokenization for its efficiencies, speed, and capital treatment. A non-stop market promises enormous volumes; it also guarantees new risks and new problems. Gradually, as overnight trading diversifies to include more institutional investors, it will serve as a stepping stone to enable at least part of the market to dance all night long.

Ned is an ex-banker, programmer at a hedge fund, and former CTO of SingLife during its time as an independent insurtech. He also shares his insights about AI on LinkedIn. Given this background, he’s in a good position to help execs in the financial world get a better handle on what agentic AI means for them. Ned brings a view that straddles incumbents and startups, which is also useful for this conversation. Today he runs his own startup, Mission+, an agentic AI engineering company.

The central proposition is that firms need to understand when to use AI as a product - a thing they prompt to get some kind of output - and when it’s a tool to build a product, which can mean an incredibly productive programmer. None of this is straightforward but it’s all pretty exciting.

We framed this conversation deliberately around AI’s potential. We don’t get into issues around security and reliability, which seemed like a separate conversation. If you’re looking for reasons to shun AI or to focus on its (very real) shortcomings, this conversation isn’t for you. We spent our thirty minutes talking instead about the impact on financial firms, from a technologist steeped in the industry.

Timecodes:

0:00 - Ned Lowe, Mission+

2:48 - “AI as a product” versus “AI to build the product”

6:41 - Governance around ensuring genAI is reliable

8:58 - “Agile is dead” and the new digital transformation in finance

14:29 - Lessons from the trading floor and why AI restores the value of high touch

18:23 - Cost implications of AI, the cloud example, and how to think about cost vs benefits

23:25 - Is AI good or bad for financial incumbents grappling with legacy tech?

26:32 - Is AI going to enable fintechs to return to disruptive innovation?

29:11 - About Mission+

The launch of the eMPF Platform is a genuine public-policy and technology accomplishment. It is the most significant reform to Hong Kong’s Mandatory Provident Fund system since inception, replacing fragmented, trustee-specific administration with a centralized digital platform designed to reduce costs through standardization, automation, and streamlined processing. In April 2026, it completed uploading all member and industry accounts to its digital dashboard.

That accomplishment, however, should be qualified. Although on its own it is helpful to administrating the HK$1.55 trillion (US$198 billion) pension system, it is only transformative if viewed by policymakers, administrators, asset managers, and members as a beginning rather than an endpoint.

The rollout exposed real onboarding and service problems. Those might prove to be teething problems, but they have kept the eMPF Platform Company—established to administer the online service—on the defensive, rather than expressing a long-term vision. The official articulation of eMPF’s long-term purpose still remains narrower than the opportunity before Hong Kong: to turn a digitized pension utility into a more open, portable and innovation-friendly financial infrastructure that serves members better and deepens the city’s financial-services ecosystem.

What eMPF has already achieved

The introduction of eMPF is a foundational shift. Before this electronic platform was built (by PCCW, a local telco), MPF administration was fragmented across trustees and remained burdened by paper-heavy processes, high administrative costs, and weak member engagement. The platform created, for the first time, the possibility that members could see and manage their holdings across schemes through a single interface.​

According to the Mandatory Provident Fund Schemes Authority (MPFA), as of end-March 2026, more than 2 million users had registered on eMPF, including over 1.8 million scheme members and 200,000 employers, while the platform had processed more than 9 million administrative instructions, over 70% of them electronically.​

That is evidence that eMPF is not a cosmetic digital layer but a major operational infrastructure that is already changing how MPF is administered.​ Hong Kong’s working population is about 3.7 million, so if 2 million people have registered, that’s more than half.

Eric Lui, CEO of eMPF Platform Company (established to administer the online system), argues the service is already more ambitious than electronic dashboards used by foreign pension systems. Citing data from the Organization of Economic Cooperation and Development (OECD), Lui saysoverseas pension interfaces mainly display information, whereas eMPF combines visibility with transactional capability, including account opening, contributions, fund switching, changes to investment instructions, and account consolidation.​

Where the rollout fell short

Glass half full, or half empty? Nearly half the members haven’t registered. Many who did so may not become active users. The registration process was cumbersome (which is acceptable given security and privacy concerns) but also non-persistent: people had to go through the same process to revisit the site. This has now been fixed, but this was a poor user experience that should never have happened. Moreover, the MPF system has never been popular in Hong Kong, and this initial failure reinforces the sense that retirement savings are remote and not truly member-centric.

MPFA acknowledges these problems, citing challenges of adapting to a new operating environment, the continued use of old trustee reference numbers, and the cleansing and standardization of member data from different trustees.​

The eMPF Company says it responded with more manpower, longer hotline and service-centre hours, a contribution inquiry hotline, dedicated complaint officers, and closer contractor oversight.​ However, Lui did not respond to questions specifically about the rollout or PCCW’s performance or accountability.

Nor did MPFA respond to our request to disclose metrics for active users, defined by those who have used the platform more than once. Active usage is a better benchmark of whether members value or trust the eMPF platform enough to make it a regular part of their financial lives.

The official vision and its gaps

Lui said eMPF “paves the way for future digital reform initiatives” and that the eMPF Company will work with the MPF sector and the wider finance industry to explore collaboration and data sharing, where permitted by law, to enhance user experience and offer more integrated financial services.​

This comment should be welcomed. It recognizes eMPF as more than an administrative cost-saving tool and sees potential for it to become part of Hong Kong’s broader financial infrastructure.​

Still, the official framing remains cautious and incomplete. The primary policy objective, as stated by MPFA, is still cost savings and administrative efficiency.Those goals are important, but they are not sufficient.

The true promise of eMPF lies in using this centralized architecture to enable open APIs, data portability, independent digital advice, fuller fee transparency, and eventually greater portability and competition among providers.​

On these questions, MPFA’s response is an acknowledgement, not a roadmap. It signals openness to collaboration and enhancement, but offers no concrete policy agenda for APIs, no timetable for portability or consent standards, no framework for third-party advice, and no indication that member-directed market competition is yet a strategic priority.

Why openness matters

This matters because MPF is not a minor savings pool. It is one of Hong Kong’s largest long-term domestic capital bases, and one that sits largely outside the day-to-day financial awareness of most members.​

One of its handicaps is structural, beyond the scope of digitalization: the system is mandatory but the minimum monthly contributions are small, and capped at a low base (although members can supplement this with voluntary contributions). In aggregate, MPF assets are large, but they play only an ancillary role in most people’s retirement finances. Launched in 2002, the system is young compared to those in Singapore, Australia, Japan, or Great Britain, both in absolute and in per capita terms. Kept within its own silos (in terms of investments, administration, and regulation), MPF matters but it doesn’t matter enough.

If eMPF remains chiefly a centralized back-office utility, it may succeed on administrative terms while falling short of its potential to improve retirement outcomes, stimulate product innovation, and connect retirement savings more intelligently to the broader financial system.​

An open-finance approach would not mean abandoning regulation or member protection. On the contrary, it would require carefully governed access, consent-based data sharing and clearly licensed participation by trusted third parties. But if designed well, it could let members view MPF alongside bank savings, insurance, mortgages and investments; receive more tailored retirement planning; compare fees and products more clearly; and use specialized digital tools developed by fintech firms rather than relying only on the narrow interfaces of incumbent providers.

MPFA’s own response hints at this logic when it says trustees can redirect resources toward higher-value functions such as investment management, analysis and advisory services.​ The natural next question is whether those higher-value functions will remain largely internal to incumbents, or whether eMPF will evolve into a platform on which a broader set of authorized firms, including technology companies, can compete to serve members better.

In short, open finance would leverage MPF into something that matters a lot more for Hongkongers, and for the financial services industry.

An ambitious way forward

The strongest version of this argument is that Hong Kong has already done the hard and important work of building the core rails. That deserves recognition. Yet building the rails should create the confidence to ask what should run on them next.

An agenda combining practicable steps and a medium-term vision would include four priorities.

• First, stabilize and improve the user experience, with more transparent reporting on complaints, repeat usage, onboarding success and service-resolution times.​ The eMPF Platform Company has already gone some distance in ameliorating the onboarding process, but this could be enhanced, and a better marketing effort may be required.

• Second, publish a clearer long-term policy vision for eMPF as financial infrastructure, not just as administrative reform. This is traditionally a challenge for MPFA, whose culture is one of administration, not policy nor taking career risk. Any substantial measures must come from higher up in government, at the level of the Financial Services and Treasury Board, chaired by the finance secretary of the Hong Kong government. But MPFA houses the expertise. Other financial regulators such as the Hong Kong Monetary Authority and the Securities and Futures Commission have in recent years adopted a more proactive stance toward promoting fintech and digitalization, including market promotion and legislative agendas in areas including blockchain and artificial intelligence. It is time for MPFA to do the same, in dialogue with other regulators, lawmakers, and market participants.

• Third, revisit portability, fee unbundling, independent advice, and participation of vetted technology companies, so the system becomes more genuinely member-driven over time.​ These are within MPFA’s remit to propose. The previous structure of decentralized administration mitigated against such competitive moves, and reform was incremental and insufficient. Over time, if user engagement grows, there will be a grassroots demand for a more competitive and responsive MPF system. MPFA has the opportunity to prepare now and articulate what may be possible in the medium term. Notably this would set the stage for open finance.

• Fourth, begin formal work on open API and consent frameworks that would allow secure participation by banks, insurers, advisers and fintechs. This is a longer-term goal but one that can be articulated today. Hong Kong has a broader challenge when it comes to open finance, and there is little the MPFA could do without deeper changes to how Hong Kong legislates and governs open finance. However, a show of interest by MPFA could represent new business opportunities for financial institutions to build use cases for personal financial management. MPFA may not be able to act alone on building open-finance rules, but it can stimulate discussion within the broader community, which would be welcome even beyond pensions-related opportunities.

The MPFA has shown it is willing to engage in at least parts of this conversation, even if it has not fully embraced the implications of the eMPF Platform and putting this information in the hands of its users. This article argues for the MPFA to assume new initiatives, but it is also a call for market participants to encourage the MPFA and the FSTB to take these proposals seriously.

With the eMPF onboarding complete, it is time to start a new dialogue that moves toward a more expansive public vision: one in which eMPF lowers costs, wins trust, broadens access to better advice and opens a major pool of long-term savings to wider forms of innovation and value creation within Hong Kong’s financial system.

There are some good reasons why ESG is politically bankrupt in the US. The “G” of governance is already an established aspect of financial and business analysis. “S”, social factors, is too fuzzy a concept, one that changes radically from one country to the next, to be neatly calculable. “E” is critical to human flourishing, but it’s more than just about carbon, and this complexity has led to too many solutions and not enough standards.

ESG was invented by management consultants, so it’s not a surprise that it’s become so complex as to be meaningless.

But the physical risks to businesses are still there, and the lights are flashing red. Moreover, US politics aside, boards and investors worldwide are beholden to ESG reporting requirements, and in Europe and China, regulation around biodiversity and carbon footprints have teeth. And everywhere, such exposures are being baked into infrastructure and energy policies through the lens of national security.

Dunya Analytics is part of a new generation of ESG-related tech companies that are using data to help CFOs and risk managers understand where their exposures lie when it comes to nature. Its founder and CEO, Megan Pillsbury, has served in senior tech and AI roles at Goldman Sachs and Morgan Stanley, in Asia and the US. She is now based in Wilmington, Delaware.

Timecodes:

0:00 - Megan Pillsbury, Dunya Analytics

2:36 - Political divergence in ESG

4:42 - Lessons from on-chain voluntary carbon-credit markets for the nature space

9:21 - Regulation, incentives, and tech in building new markets

12:17 - Helping companies and investors measure their exposure to nature; and the challenges of many measurements and too few benchmarks

18:39 - AI and where it’s valuable and where it’s not

20:56 - Trends in fintech in nature and carbon, and where globally to find the most action

25:07 - Stranded assets in biodiversity and carbon

Last week, mid-April, the payments and fintech conference group Money20/20 staged its annual Asia leg, in Bangkok. This was the organizer’s third year there, and Thai banks mostly ignored it: Kasikornbank was a minor sponsor, but Bangkok Bank, Siam Commercial Bank, Krung Thai Bank, and other lenders were a no-show.

This is more a loss for Thai banks than for Money20/20. It’s a testament to the inward focus of Thailand’s financial institutions, which has hampered the flourishing of Thailand’s fintech industry. Might change be coming?

Any national bank should be focused on its domestic business. But Thailand is part of the Association of Southeast Asian Nations, whose members continue to build infrastructure to connect their financial systems. Its central bank was a member of mBridge, a BIS-blessed platform for exchanging central-bank digital currencies, with China, Hong Kong, and the UAE. More than 1 million Thais work abroad, remitting money home. Bangkok is a travel hub between Europe, the Middle East, and East Asia.

Having a global finance and fintech conference hosted in Thailand’s capital would have given local banks exposure to new ideas and companies. Event fees weren’t an issue: the top banks are highly profitable, and the conference was discounted compared to its US and European sleeves.

The snub was because Thai banks feel comfortably ensconced. They have been good at fending off startup competition. Although they have their own digital agendas and venture investment arms, local banks deploy these to ring-fence the status quo: the imminent launch of three digital-only banks is another iteration of that strategy. The presence of many stablecoin-related companies at Money20/20 was not a draw; possibly the opposite.

Although Thailand’s leading banks are adept at serving retail customers, they continue to mostly ignore SMEs. They are weak at cross-border business. These gaps have not overly bothered the banks. But the possible arrival of open-banking frameworks could shake things up, by making SMEs and their cross-border payments needs a meaningful opportunity for startups and new entrants.

Fintech false dawn

Thailand’s fintech sector no longer looks like the easy growth story it once promised.

Its history goes back to 2003, with the launch of TrueMoney, later restructured as Ascend Group, which runs the country’s leading mobile wallet; and of 2C2P, an online payment provider that later moved to Singapore (and has since been acquired).

The mid-2010s made fintech a trend, with the debut of companies including payment gateway Omise (today, Opn), cross-border payments player DeeMoney, wealthtechs Finnomena and Robowealth, and insurtech Roojai.

They are the survivors of a wave that included dozens of startups. Indeed, today the country claims up to 177 active fintechs (depending on who’s counting), led by payments and alternative lending. But those numbers are surely misleading.

“Eighty percent of Thai fintechs are zombies,” said Kris Supavatanakul, strategy director at Finnomena and a former corporate VC at Siam Commercial Bank.

One reason is the loss of venture-capital funding, a global trend. At the height of the zero-interest-rate funding boom, in 2021, Thai fintech firms raised $216 million. That number obscures the fact that most of it involved Ascend Money’s monster $105 million Series C round. Fintech funding has fallen off a cliff since, both in Thailand and across Southeast Asia.

Bank dependent

There are more fundamental challenges to Thai fintech. In most areas of finance, fintechs depend on commercial banks for infrastructure, technology, and distribution.

Payment infrastructure is monopolized by National ITMX Company, established by the Thai Bankers’ Association under the direction of the Bank of Thailand’s payments division. ITMX is responsible for developing and maintaining the electronic payment infrastructure, including mobile, internet, ATM, and other rails, such as the QR system PromptPay.

“The national switch serves the banks,” said Aswin Phlaphongphanich, co-founder and CEO of DeeMoney. “That means fintechs can’t be agnostic. We don’t have technological independence, which means we don’t have commercial independence.”

The problem for fintechs is simple. The industry is almost entirely focused on retail customers. To serve them requires using ITMX’s switch, operated by the commercial banks (at arm’s length). In theory, a fintech could build its own payments infrastructure. But four banks control more than 80 percent of retail deposits. They are also on top of digital offerings.

Things get even more complicated for fintechs. The majority choose to simply serve banking partners with user-interface design, KYC services, or other operational services. But if a fintech wants to touch customer money – to collect, disburse, or settle – they are locked out. They can participate on ITMX rails if they are licensed, but these are hard to get. Nor are all licenses equal: often, licenses granted to fintechs are restricted, and come with the sort of red tape that big banks can absorb but that startups cannot.

Finally, in the mid-2010s, banks began eliminating fees on mobile payments, back when few people saw these taking off in Thailand; today, mobile wallets are a big business – for retail users. They don’t make any money for fintechs, and banks absorb the cost into deposit businesses.

Local heroes

There are, of course, fintech success stories in Thailand. They involve companies that have found a way to avoid relying on banks for moving money or access to users.

• Ascend Money is owned by CP Group, a massive conglomerate whose empire includes the domestic 7-11 franchise. The fintech has more than 20 million users and it can charge a fee for facilitating consumer purchases from its retail affiliates.

• Finnomena has built its own brokerage business to sell mutual funds. It continues to build this out, and is seeking a full brokerage license, so it can also execute orders for individual stocks and bonds. But it does not use a bank channel for acquiring customers.

• DeeMoney has found a niche in cross-border payments, because Thai banks ignore this space. Omise specializes in online payments for businesses in the digital economy, because banks ignore SMEs.

A few foreign fintechs have also succeeded in Thailand.

Funding Societies, based in Singapore, has become the biggest fintech lender to SMEs. It entered in 2021 as one of the first fintechs to receive a debt crowdfunding license from the Thai Securities and Exchange Commission. Funding Societies already had a thriving business in regional markets, matching SME borrowers and investors looking for yield. Its story shows what happens when a competent company that spends years on obtaining a license is able to serve credit-starved SMEs.

Singapore-based insurtech Igloo has announced a joint venture with local telco JMT Network Services to launch Thailand’s first fully digital insurer. Early days!

Wise Platform is about to launch in Thailand. After many years of assiduous courting, in March the remittance platform secured five licenses (for payments, electronic money, and FX) from Bank of Thailand and the Ministry of Commerce. This makes Wise the first non-bank in the country to be fully licensed to issue foreign-currency wallets and cards. But the licensing was only one part of London-based Wise’s breakthrough. Its global remittance business relies on having a bank account in the local market, from which it transfers customer debits and credits. One of the Thai commercial banks broke ranks and has agreed to provide a deposit account to Wise; its identity has not been announced.

Enter the virtual banks

One factor that could explain this class betrayal is the advent of three licensed digital banks, which are slated to go live this summer. These consortia are more likely to cannibalize the commercial-banking market than innovate any new products or services.

Two of them are partly owned by big local banks. Siam Commercial Bank is partnered with South Korea’s KakaoBank and China’s WeBank. Krungthai Bank has a more domestic consortium, with telco AIS and PTT Oil & Retail. The third group includes CP Group’s Ascend Money.

These three virtual banks are all focused on the retail population. They bring capital, data, and distribution. They do not include disrupters or banks with wholesale arms. There is no equivalent to, say, Grab’s leading position in Singapore’s retail digital bank, GBX, or an e-commerce outsider like Shopee (a stakeholder in Mari Bank).

Indeed, a look at Singapore shows that its retail-focused digital banks face major obstacles to growth. The population is already banked. Trust Bank (backed by Standard Chartered) has a huge retail footprint, thanks to its shareholder, NTUC, but it can’t make a profit. The two wholesale players, ANEXT Bank (Ant Group) and Green Link Digital Bank focus on SME trade and supply-chain finance, and are flourishing.

There doesn’t appear to be an equivalent story among Thailand’s new trio of digital banks. The consortia appear designed to protect incumbents, not to unleash new categories of competition.

This could bring risks to the banking industry. Thailand’s population is fully banked. It’s so well banked, that it also has a huge household debt problem. With a debt-to-income ratio of 88 percent (as of Q3 2025), Thailand’s consumers are the most indebted in ASEAN. Virtual banks tend to make headway by offering higher interest on deposits combined with slick user interfaces. What’s likely to happen is a huge refinancing of debt, which will move the problem out of traditional banks and onto the books of the three virtual banks. This is a recipe for rising non-performing loans, which will eat their capital base, obstructing rather than enabling them to innovate with fintech partners.

Although the three new banks could provide some new distribution or offer infrastructure, they are unlikely to help Thailand’s fintech industry to grow. Most fintechs focus on retail, for payments, wallets, lending, and investing. As we’ve seen, only a handful of them control their own destiny by avoiding depending on banks for distribution, tech, and licensing. As a class, it is hard to see Thai fintech scaling beyond the nation’s borders.

Open doors

The key to creating new opportunity for fintechs is not virtual banks, but open banking.

And there is good news on this front. The Bank of Thailand has declared an open data framework gives customers the right to port data across deposits, loans and payment services through secure and standardized digital channels. This is meant to phase in at the end of 2026, initially for individual deposit data. Later, business data and other categories are meant to go live.

If implemented seriously, the BoT’s policy would begin to loosen one of the deepest constraints in Thai fintech: dependence on banks not only for settlement, but also for customer data, onboarding pathways, and product distribution.

The promise is clearest in lending and SME services. Open banking could allow fintechs to refinance debt, consolidate deposits and build better borrowing journeys once data and rails are truly accessible.​ The Bank of Thailand has also explicitly tied digital finance policy to household and SME financial inclusion, while acknowledging that SME access to credit remains structurally weak.

But policy intent is not the same as implementation. Thailand’s open banking push could still devolve into a compliance exercise if APIs are technically available but commercially weak, or if major banks delay, limit or shape access in ways that protect their franchise. The framework only changes the market if a few big banks actually lead, rather than stall.​ Given how concentrated Thai banking remains, skepticism is warranted.

The SME opportunity

The strongest argument for a second wind in Thai fintech is not another retail super-app. It is SMEs. SMEs account for nearly all Thai enterprises, yet only about half of them can access formal credit from banks or specialized financial institutions, and SME loan growth has been weak or negative.

Existing fintechs and banks alike still skew toward consumer products because retail is easier to score, market and distribute at scale. With open banking, the incentives to tackle SMEs become too great to ignore. A few fintechs such as DeeMoney already operate an API-based platform for global remittance companies such as Western Union and Remitly to disburse funds into Thailand without touching a commercial bank branch.

There are plenty of new business ideas: collecting baht for multinationals who want to repatriate money home; stablecoin settlements; global QR-based settlements. These don’t require a bank partner, but they do require a license or regulatory green lights. Open banking would make it hard for regulators to say no.

Thai fintechs are most competitive when they solve coordination problems that banks don’t prioritize: cross-border remittances, SME collections, overseas e-commerce settlement, regional treasury flows, fragmented ASEAN payment corridors. (The exception is Bangkok Bank, the biggest Thai lender, which also operates more than 30 branches overseas, mostly in Southeast Asia and China, and a controlling stake in Indonesia’s PermataBank. About 25 percent of its loan book is sourced internationally.)

Thailand’s domestic economy is not large enough to support endless new consumer-fintech clones, but Thailand as a node in ASEAN trade, labor mobility and cross-border commerce is much more promising. That is particularly true for SMEs that import, export, sell online or rely on regional supplier networks yet still struggle with FX pricing, slow settlement, poor visibility and bank-centric onboarding.

Because licensing is so slow and painful for fintechs, they need a bank shareholder or partner to survive. Open banking as real infrastructure, not a regulatory slogan, would pave the way for standardized APIs and consent frameworks. This would pressure banks to make data and payments usable for third parties. It would create incentives to allow fintechs and banks to pivot toward SME pain points. And it would put pressure on regulators to create licenses that allow non-banks to scale on their own.

Cross-border and SME services are where innovation is needed, and can happen. It’s notable, therefore, that a leading global conference that’s all about financial connectivity and has taken place in Bangkok for three years is shunned by Thai banks. It’s not a conversation they want to have.

But open initiatives often stall, or get bogged down in costly compliance or tech requirements. These barriers derive from the source of open finance: regulation.

The United Arab Emirates is taking a new approach. The Central Bank of the UAE has set up a new, commercial business called Nebras, to serve as an API hub, providing standardized connectivity. Financial institutions of a certain size are mandated to plug in across banking, insurance, and FX.

Jonathan Holman has been tasked with bringing Nebras to life. As the CBUAE’s head of open finance, he has been named chief executive of Nebras. His background includes academia, consulting, and three years as head of digital for SME, commercial, and corporate banking at Santander in the UK.

Timecodes:

0:00 - Jonathan Holman, Nebras - now incorporating an ecosystem entity running national infrastructure for open finance

4:58 - A federal initiative for fintech and data consumption and interaction, with API connectivity as a condition of financial licensing

7:41 - The pros and cons of building a centralized infrastructure for APIs

11:15 - Who is obliged to participate in Nebras - banks, insurers, fintechs, wallets, third-party users of data?

13:47 - Nebras’ applicability within the UAE’s patchwork of regulatory zones

16:03 - Use cases in open finance and how “open banking” has evolved

18:27 - The ambition for open finance in the UAE

21:13 - AI and agentic capabilities in open finance

23:59 - Liability in agentic use

26:23 - A single point of failure?

28:01 - How Nebras fits alongside blockchain rails

29:46 - Prospect for cross-border open finance

Is DeFi dead? One of the leading lending platforms of decentralized finance, Aave, has been torpedoed by a de-facto run. It is one of multiple cybersecurity failures hitting the industry. Dead or reborn is not fated but a choice, by the many people in blockchain finance. But the time of casual disregard for fusty TradFi protections is over.

As a lending protocol, Aave is kind of like a giant crypto bank, where anyone can deposit coins and earn interest, and anyone can also borrow coins if they put up enough collateral. It’s all run by code instead of bankers, and until recently it was seen as one of the safest places in DeFi.

Now imagine a special kind of crypto token – call it “staked ETH points” – that’s supposed to be backed 1:1 by real ether locked somewhere safe. A separate project (KelpDAO) issued those points and used another piece of infrastructure (LayerZero, a type of bridge that moves tokens between blockchains) to move them around. The important bit: everyone treated those points as solid, reliable collateral, including Aave.

Then someone found a way to break that setup. On Saturday, April 18, they managed to pull out a huge amount of those “staked ETH points” without proper backing, and then went to crypto lending platforms like Aave and said: “Here’s my collateral, please lend me real ETH and stablecoins against it.” The platforms couldn’t tell the difference between good and bad tokens, so they handed over hundreds of millions of dollars in real assets.

By the time the problem was noticed and the bad token was blocked, it was too late. The attacker had borrowed real money and disappeared. Perhaps about $290 million’s worth was stolen. What remained inside Aave and other platforms was a hole: lots of fake or worthless collateral, perhaps as much as $230 million’s equivalent, and a big chunk of loans that will never be repaid.

Run run run

On paper, Aave still has more assets than debts. In theory, that means it’s not bankrupt. But that is not what users experience.

Because of the exploit and the panic it triggered, a lot of big players rushed to withdraw their money from Aave. That drained the pools of assets that everyone shares. For many key coins – especially ether and major stablecoins like USDT (Tether) and USDC (Circle) – almost all the money in the pool ended up being lent out, and almost no spare liquidity was left.

If you deposit money into a pooled lending system, your ability to withdraw depends on some cash being left in the pool. When that “available cash” goes close to zero, you simply cannot get your money out, even if you’re technically entitled to it. The code won’t let you withdraw what isn’t there.

That is exactly what happened. For some markets on Aave, utilization – the share of deposits that are lent out – shot up to nearly 100%. (Unlike in traditional banking, there is no reserve requirement.) Users opened the app and found they couldn’t withdraw. Some tried a messy workaround: borrowing different coins against their stuck deposits, then selling those new coins elsewhere at a loss just to escape. In other words, they accepting taking a haircut.

To make matters worse, people who had borrowed stablecoins against ether as collateral suddenly could not repay their loans normally either. The markets where their collateral sat were frozen: about $5 billion worth of USDT and USDC are, for now, frozen, like deposits that a bank won’t redeem.

If ether’s price had crashed during this period, Aave’s systems would have struggled to liquidate positions, which could have created even more bad debt. Fortunately that hasn’t happened.

Nonetheless, from the outside, what has happened on Aave looks and feels a lot like a bank run: the first to rush out get paid, everyone else is stuck. Users have pulled more than $6 billion of ETH-denominated positions from the platform since news of the exploit got out. Aave’s TVL, total value locked, fell from about $26 billion to $20 billion.

Three problems

While industry insiders are still investigating the details of what’s happened, three big problems are obvious.

First, as we’ve said before, it’s the plumbing that matters. But in DeFi, the plumbing is treated as an afterthought. Most people, and most risk models, focus on the visible token: how volatile it is, how much you can safely borrow against it, what price feeds are used. But the real risk was hidden below: who runs the bridge that moves the token between chains, who holds the keys, how that system can fail, and what happens if it does.

When Aave accepted this “staked ETH” token as collateral, it wasn’t just trusting the token. It was trusting an entire stack of software and operations it didn’t control or deeply understand. That’s like a bank accepting a new type of mortgage asset without really examining the company that created it, the custodian that holds the paperwork, and the system that tracks ownership. Remember subprime mortgages? The evils of TradFi that DeFi was supposed to transcend?

Second, shared pools are transmission engines. Aave and similar platforms use shared pools: everyone deposits into one big pot, everyone borrows from the same pot, and interest rates adjust automatically. That’s efficient and convenient. It also means that when a single type of collateral blows up, its effects spread everywhere.

In this case, a problem with one token tied to ether ended up freezing markets in ether itself and even major stablecoins. People who had never heard of KelpDAO or LayerZero suddenly found they couldn’t move their USDT or USDC in Aave. Their only mistake was using the same pool as everyone else. Ah, remember how Lehman didn’t separate customer assets under its prime brokerage business, and we all had to learn how to pronounce “rehypothecation”?

Third, who’s on the hook? When a big hole appears, someone has to pay to fill it. In traditional finance, we have a whole hierarchy: shareholders, junior bondholders, senior creditors, deposit insurance, government backstops.

In Aave’s case, there is a sort of insurance system called Umbrella. People stake ether into a pool that can be slashed (cut) to cover bad loans, in exchange for rewards. The problem is that Umbrella was designed for relatively ordinary problems – like sudden price swings and liquidation cascades – not for a single event that might wipe out hundreds of millions of dollars linked to a bridge bug or misconfiguration.

So now the system is in a bind. If the loss is larger than this insurance pool, the platform’s community treasury might have to step in. If even that isn’t enough, some of the loss may have to be pushed onto ordinary depositors. The rules for who gets hurt, and by how much, are being figured out on the fly. The DeFi industry must use this disaster to establish, uh, rules? Enforceable by law, not just code?

Vercel and centralized compute

Governance is not just specific to bank-like runs in DeFi. Cybersecurity problems are plaguing all of DeFi. In this regard, crypto isn’t difference from TradFi, where the same risks are manifest. But crypto is, well, crypto native, which makes the industry even more vulnerable.

While the Aave mayhem was going down, a separate incident occurred. Vercel, a popular cloud service that many crypto projects use to host their websites, reported a security breach. Attackers may have accessed internal systems, including keys and deployment credentials for customer projects.

What this means: even if the smart contracts running your money are safe, the website you use to interact with them could be compromised. A hacker who controls a project’s frontend can trick you into signing malicious transactions that drain your wallet, all while showing you a normal‑looking interface.

What else this means: many “decentralized” projects still rely heavily on centralized, traditional tech companies for critical parts of their stack. So even if the blockchain is resistant to censorship or tampering, the path you use to reach it might not be.

For ordinary users, that’s yet another reason to feel that DeFi is unsafe: hacks are coming not just from clever contract exploits, but from weak links in hosting, software supply chains, and development tools.

Sink or swim

Again, not limited to crypto, but crypto is more vulnerable. Specifically, the DeFi story is no longer viable. Putting finance on-chain doesn’t make it safer. Clever software engineering plus a few audits is not enough to handle serious amounts of money. Cutting out bureaucracy and oversight, without replacing them with equally robust software, is efficiency-maxxing – for criminals.

Traditional finance has become disparaged as “TradFi” because it too experienced this kind of blowup. And more. Controls, capital buffers, governance, and regulation didn’t materialize because anyone asked for them: they came after many painful lessons. DeFi’s undergoing a similar education, but a lot faster, and visibly, as the transactions occur as hashes visible to everyone on-chain. That transparency is a feature of DeFi, one of its best attributes. But code alone isn’t protecting the marketplace. Code is not law; it’s just code.

Once the dust settles, how does DeFi recover?

• First, we may see a winnowing of the kind of tokens that circulate. People will trust plain ether, major stablecoins, and well-scrutinized tokens. Others will be eyed as a risk. Bridged tokens, complex derivatives, and many restaking products will be tagged as risky; they won’t vanish but they will be restricted to the shark tank, not the pool for the general public.

• Teams have to undergo root and branch reform. It’s time to get Old Testament on those teams that laugh at compliance culture or think speed is all you need.

• Insurance and other backstops need to be sized to match the level of flows transacting across a platform. TradFi bankers always chafe against capital reserve rules, so this isn’t a dynamic unique to crypto, but the pendulum in DeFi has to swing a little harder.

• Institutionalization in this space has been on the rise for the past two years, enabled by new regulation and licensing regimes. A lot of that activity is going to DLT rather than DeFi, to protocols such as Canton Network that allow like-minded institutions to transact among each other, with no riff-raff allowed. Institutions can benefit from DeFi’s greater reach and liquidity, but they need confidence to venture here.

DeFi needs to work with institutions to learn what they can without sacrificing the promise of permissionless, decentralized, efficient capital markets. There are plenty of traditional brokers, market makers, and traders who want to play in DeFi-like environments: the shark tank is fine, so long as everyone knows what’s swimming in there, and the sharks can’t jump into other pools.

These things will take time, the one thing that DeFi doesn’t have. The immediate issue is restoring liquidity so user stablecoins on deposit can be withdrawn. Aave will have to find a way to convince users not to pull out, but it has to restore their ability to do so. Beyond one platform, DeFi should rethink the story about itself. Otherwise it will be remembered as just another speculative bubble.