Stablecoin payments and global capital flow models

Payment goes far beyond the "peer-to-peer transfer" stage; true enterprise-level scenarios are much more complex than simply "sending money from A to B."

Written by: A Wang

Stablecoins are the most representative practical tools in the field of digital currency, demonstrating how blockchain provides a new and efficient infrastructure for traditional financial payment systems. Over the past year, the total market capitalization of stablecoins has increased by more than 50%; since Trump's re-election in November, it has accelerated sharply. Currently, the total market capitalization of stablecoins exceeds $250 billion and is at the forefront of the explosive growth period. This volume has already facilitated the efficient circulation of trillions of dollars in global payment funds.

Industry insiders are well aware of the value of stablecoins: they fully embody the core capability of blockchain to "instantaneously transfer funds and value," making it possible to build a business closed loop on-chain—payments. However, payments go far beyond just the "peer-to-peer transfer" aspect; real enterprise-level scenarios are much more complex than simply "sending money from A to B."

Currently, most enterprise-oriented stablecoin applications adopt a "Stablecoin Sandwiched" architecture, a term first proposed by Ran Goldi, Senior Vice President of Payments and Network at Fireblocks, in 2021: replacing traditional payment channels with blockchain for horizontal value/fund transfer, while still relying on the outdated financial payment systems at both ends.

This design, while bringing significant improvements, also limits the full realization of the advantages of blockchain. This is also the point that Airwallex CEO Jack criticized, noting that he has not seen stablecoin payments lead to cost reduction and efficiency enhancement.

Therefore, we will rely on Jesse's article Unpacking the Stablecoin Sandwich to examine how stablecoins are applied to global cross-border payments from the perspective of global capital transfer. This article will:

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

1. Background of Stablecoin Payments

Among the many applications of stablecoins, B2B enterprise payments are the most noteworthy. The latest Artemis report provides data from leading payment companies: last year, the monthly B2B enterprise payment volume grew from $770 million to $3 billion. Fireblocks also reported that stablecoins account for nearly half of its platform's trading volume, with 49% of customers actively using stablecoins for payments.

The internal data of leading enterprises better reflects the scale of niche markets. According to a report by FXCIntelligence, BVNK (considered one of the largest players in the field) has an annual processing volume of about $15 billion, with approximately half coming from B2B corporate payments—this is also the largest segment in cross-border payments. Conduit's annualized transaction volume is $10 billion, and the company estimates this accounts for about 20% of the global B2B stablecoin cross-border payment market; Orbital's announced annualized scale is $12 billion.

Specifically, the use of global payments is becoming increasingly popular, as the advantages of stablecoins based on blockchain infrastructure are amplified when financial payment infrastructures become more outdated; the SWIFT and correspondent banking networks successfully facilitate over $100 trillion in global payments each year, yet enterprises and banks still face significant complexities and delays.

2. Various Models of Global Cross-Border Payments

2.1 Bank Infrastructure Based on SWIFT

First, let's take a look at how the current SWIFT global payment system operates.

For interbank transactions between different countries, the entire process is divided into two parts: "message transmission clearing" and "fund settlement": SWIFT is responsible for transmitting transfer instructions between banks, while the actual flow of funds only occurs between those banks that have pre-established correspondent accounts and can directly conduct debit/credit transfers.

Jesse, Unpacking the Stablecoin Sandwich

Only when both banks have connected to the SWIFT system and are partners can the final transfer - fund settlement - be completed. If the two parties have not established a direct cooperative relationship, they must connect through correspondent banks that have the appropriate interfaces and positions in order to complete the fund settlement.

The image below shows a typical transaction on the SWIFT network: connecting two banks that have no direct relationship through a common correspondent bank.

Jesse, Unpacking the Stablecoin Sandwich

As more intermediary banks are needed, issues such as settlement times extending to several days, rising costs, tracking challenges, and other problems also emerge. This has resulted in cross-border payments between neighboring countries with underdeveloped financial infrastructure also needing to go through banks in the Global North, which brings significant inconvenience.

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2.2 Cross-Border Fund Pool Model Based on PSP

The process described above is exactly the path that companies must go through when handling international wire transfers today: banks must connect to SWIFT and have clearing and settlement capabilities in the target payment corridor.

Therefore, the service model of Cross Border Money Transmitters (XBMT), also known as the cross-border payment companies we are familiar with, has emerged. They aim to enable businesses to complete global payments without directly going through the SWIFT channel, a capability also referred to as "global multi-currency accounts" or "local receiving accounts."

Its essence is: cross-border fund pool model.

The core of its service: to provide enterprises with a multi-currency fund pool, enabling them to make flexible payments between different countries.

XBMT is responsible for managing compliance and banking relationships, while businesses or individuals obtain a single multi-currency banking product, forming a "closed loop," meaning there are no external operators or dependencies to increase costs or complexity. If compared to a sandwich, the internal ledger is the meat inside the sandwich, while the local receiving accounts in each region are the bread. Liquidity is managed internally between the various accounts:

Jesse, Unpacking the Stablecoin Sandwich

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

Despite its polished surface, XBMT is still built on the SWIFT framework, relying on sophisticated liquidity management techniques to "create" an instant payment experience. However, the speed and scale of this design is always constrained by the available liquidity of XBMT in specific countries and the settlement efficiency of its underlying clearing infrastructure.

Considering the capabilities of bank accounts and liquidity management, Airwallex has already built a relatively complete "global multi-currency account" or "local collection account" in the currently developed G10 countries, and can achieve relatively "zero-cost" fund distribution. In comparison, the "stablecoin sandwich" model incurs deposit and withdrawal costs at both ends, which provides a greater cost advantage.

Therefore, the adoption of stablecoin payments also requires clear scene advantages; it cannot be generalized.

2.3 Stablecoin Mode

If XBMT is a "structured product" carefully designed for B2B enterprise payment scenarios, then stablecoins represent a more fundamental leap: they leverage blockchain technology to restructure the way internet commerce operates.

The settlement cycle of stablecoins is equivalent to the block time of their issuing blockchain—this is an order of magnitude faster compared to SWIFT and correspondent bank transfers. Any system relying on traditional methods can be replaced by a shared, verifiable ledger that can track the issuance and ownership of stablecoins.

More importantly, stablecoins are often deployed on smart contract platforms, enabling innovative systems and workflows that traditional banking rails cannot achieve. For example, if XBMT wants to overlay a certain logic, it would need to do API integrations with banks in various countries one by one; whereas on open and verifiable protocols (such as Ethereum's ERC or Solana's SPL standards), anyone can add functionality to stablecoins without permission.

From a macro perspective, faster and more interactive financial payments can directly enlarge global GDP: companies can receive payments more quickly, allowing funds to enter downstream processes more rapidly, thereby reducing management costs and capital occupancy caused by settlement delays. When the settlement cycle is compressed from "days" to "seconds" or "minutes", its ripple effect will sweep through the entire economy. At the same time, the existence of verifiable standards allows financial innovation to occur globally without permission for the first time—an unprecedented qualitative change that traditional financial systems cannot achieve.

3. The Application of Stablecoins in Global Payments

Given the advantages of the aforementioned stablecoins, we can now see some specific global payment use cases that benefit from stablecoins. We will explore how global fund management, B2B corporate payments, and card organization network settlements operate today, as well as the applications and advantages of stablecoins in various fields.

3.1 Enterprise Capital Management

Taking corporate fund management as an example: for instance, a company has an obligation to make a payment in currency b in country B on a certain date. They must prepare for a fund transfer in currency a from country A before the payment is due:

Jesse, Unpacking the Stablecoin Sandwich

This is the prepayment process, and the corporate finance team must consider the preparation time required to execute the payment in a timely manner.

The team must open a local bank account to execute payments on time. Sometimes, to support this, the company may seek short-term loans from partners in the region. The longer the global fund settlement delays, the greater the foreign exchange risk exposure and the higher the capital requirements for the corporate finance department. For companies that only want to execute global payments, managing derivatives to hedge currency risk and calculating short-term liquidity will significantly increase operational expenses.

Stablecoins simplify this system by eliminating the requirement for control over international settlement delays.

Jesse, Unpacking the Stablecoin Sandwich

We can see the role of the "stablecoin sandwich" structure: although the initial deposits and withdrawals at both ends still have to touch the fiat currency system, the existence of stablecoins enables the smooth flow of funds between the two fiat "ramps."

By using stablecoins, the entire processing procedure is divided into local transfers conducted within country A and country B, while the blockchain completes the global liquidity settlement between the two parties in the middle. (Note: For this exchange to be successful, there must be sufficient liquidity on-chain to convert A's stablecoin into B's stablecoin. )

3.2 B2B Enterprise Payment

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

In this type of payment, banks in different countries are usually directly linked to the delivery of a certain service or goods. This means that all parties are more sensitive to the tracking of payment progress. For example, in the "pre-financing" diagram mentioned earlier, the cost of pre-financing may depend on the real-time status of an inbound payment.

In addition, if the payment channels required by enterprises are relatively niche, they often need to go through multiple international transit routes to complete the fund transfer—such paths may lack a clear progress reporting mechanism, and due to banks' non 7×24 operating hours, the payment time can easily be extended.

Let’s look at another example: A company in country A wants to make a payment to a company in country B, but the banks of the two countries do not frequently conduct business with each other. If the bank in country A does not have a direct connection on any suitable channel to country B, this payment must take an additional detour.

Jesse, Unpacking the Stablecoin Sandwich

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

• Both parties can clearly and in real-time manage and monitor the payment status.
• Financing can be directly linked to time-sensitive raw materials or delivery milestones, allowing businesses that heavily rely on the timely arrival of goods to avoid significant risks or delays.
• As the risk decreases, the cost of capital subsequently declines, and the turnover rate of capital accelerates; with the maturation of stablecoin integration solutions, this effect will bring considerable productivity improvements globally.

Similar to the scenario of corporate fund management, the agency bank links, pre-financing needs, and most foreign exchange exposures have basically been removed. The entire process has been compressed from the past 3 days to just a few seconds, and there is no need to consider market closures, significantly reducing and simplifying the demand for working capital.

3.3 Card Organization Network Settlement

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

Visa began piloting the use of stablecoins for settlements between acquiring banks and issuing banks as early as 2021. This method of using stablecoins replaced the wire transfer process, utilizing USDC on Ethereum and Solana instead. After completing card authorizations on specific dates, Visa will debit or credit the banks of both parties using USDC:

Jesse, Unpacking the Stablecoin Sandwich

As this system operates within VisaNet, its net effect benefits partners in the network. This is most similar to the closed-loop system of XBMT, but the vast scale of the card organization network benefits issuers/acquirers (as they previously had to manage global payments).

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

IV. Final Thoughts

Through the previous discussion, we have seen that the "stablecoin sandwich" is indeed useful in certain scenarios; however, most stablecoin applications currently remain at this sandwich structure itself and have not further broken through. Why is this the case?

In reality, very few companies truly use on-chain payments and stablecoins. As long as any link still needs to touch the fiat currency track, we have to sandwich the bread again at both ends. We are just adding some protein to the original vegetarian sandwich, but it is still a sandwich.

The ultimate goal of stablecoin payments is to completely eliminate the "bread" at both ends. Once businesses and consumers fully embrace stablecoins, the entire financial and commercial cycle can be completed on the blockchain, and we will no longer be constrained by outdated traditional rails. Once financial institutions and businesses fully settle in stablecoins, it will unleash an unprecedented scale of commerce. As global friction in business building, operation, and service significantly decreases, the growth curve of global GDP will align more closely with the true consumption speed of goods, services, and content enabled by the internet.

So the essence of PayFi is: Stablecoin Payments + On-Chain Finance. If we can completely get rid of the sandwich structure and build more on-chain financial services at both ends, then the speed of global funds/value circulation will reach an unprecedented height.