Deconstructing Stablecoin Applications: Reshaping a New Paradigm for Global Capital Flow

Stablecoins, as an important tool in the digital currency sector, are providing a new and efficient infrastructure for traditional financial payment systems. In the past year, the total market value of stablecoins has grown by more than 50%, currently exceeding $250 billion, facilitating the efficient flow 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 for "instant transfer of funds and value," making it possible to build business loops and payments on-chain. However, real enterprise-level payment scenarios are far more complex than simple "peer-to-peer transfers."

Currently, enterprise-focused stablecoin applications often adopt a "stablecoin sandwich" architecture: using blockchain to replace traditional payment channels for horizontal value/fund transmission, while both ends still rely on the traditional financial payment system. Although this design has brought improvements, it also limits the full potential of blockchain advantages.

This article will explore how stablecoins are applied in global cross-border payments from the perspective of global capital transfer.

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

1. Background of Stablecoin Payments

Among the many applications of stablecoins, B2B enterprise payments are the most noteworthy. The latest report shows that last year, the monthly B2B enterprise payment amount increased from $770 million to $3 billion. Stablecoins account for nearly half of the transaction volume on certain payment platforms, with nearly half of the customers actively using stablecoins for payments.

The internal data of leading companies can better reflect the scale of niche markets. A leading company has an annual processing volume of about 15 billion USD, of which about half comes from B2B enterprise payments. Another company's annual transaction volume is 10 billion USD, which is estimated to account for about 20% of the global B2B stablecoin cross-border payment market.

The use of global payments is becoming increasingly popular, as the advantages of blockchain-based stablecoins are amplified when financial payment infrastructures are outdated. Although traditional payment networks facilitate over $100 trillion in global payments annually, businesses and banks still face significant complexity and delays.

2. Various Models of Global Cross-Border Payments

2.1 Based on Traditional Banking Infrastructure

Traditional cross-border payments are divided into "message transmission clearing" and "fund settlement": certain networks are responsible for transmitting transfer instructions, while the actual flow of funds only occurs between banks that have previously opened correspondent accounts.

Only when both banks are connected to the system and are partners can the final transfer be completed. If the two parties have not established direct cooperation, they must connect with intermediary banks that have the corresponding interfaces and positions to complete the fund settlement.

With the need for more intermediary banks, issues such as settlement times lasting several days, rising costs, and difficulties in tracking have emerged. This also leads to cross-border payments between neighboring countries with underdeveloped financial infrastructures needing to route through banks in developed countries, causing significant inconvenience.

2.2 Based on the Cross-Border Fund Pool Model

The service model of the cross-border fund transfer provider (XBMT) has emerged, allowing businesses to complete global payments without directly using traditional channels. This is known as "global multi-currency accounts" or "local receiving accounts."

Its essence is a cross-border fund pool model, with the core being to provide enterprises with a multi-currency fund pool, allowing them to make flexible payments between different countries. XBMT manages compliance and banking relationships, providing enterprises with a single multi-currency banking product, forming a "closed loop".

XBMT occupies an important position in the global B2B enterprise payment and corporate fund management market. They operate in a closed-loop model, preparing and dispatching the required liquidity in advance, and then distributing it to customers as needed. Due to their control over the end-to-end process, XBMT has set strict limits and risk control rules for customers.

However, XBMT still builds on traditional tracks, relying on sophisticated liquidity management to "create" an instant arrival experience. Its speed and scale are always constrained by the available liquidity in specific countries, as well as the settlement efficiency of the underlying settlement tracks.

Some payment companies in developed countries have built relatively complete "global multi-currency accounts", which can achieve relatively "zero-cost" fund distribution. In contrast, the "stablecoin sandwich" model requires deposit and withdrawal costs at both ends, which will have a greater cost advantage. Therefore, the adoption of stablecoin payments still needs clear scenario advantages.

2.3 stablecoin mode

Stablecoins represent a deeper leap: they reconstruct the way internet commerce operates through blockchain technology.

The settlement cycle of stablecoins is equivalent to the block time of the blockchain on which they are issued, representing a significant acceleration. Any system that relies on traditional methods can be replaced by a shared, verifiable ledger.

More importantly, stablecoins are usually deployed on top of smart contract platforms, enabling innovative systems and workflows that traditional banking rails cannot achieve. On open, verifiable protocols, anyone can add features to stablecoins without permission.

From a macro perspective, faster and more interactive financial payments can directly amplify global GDP: businesses can receive payments more quickly, allowing funds to flow into downstream processes faster, thus reducing management costs and capital occupancy. When the settlement cycle is compressed from "days" to "seconds" or "minutes," its ripple effects 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.

3. The Application of Stablecoins in Global Payments

3.1 Enterprise Fund Management

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

This is the prepaid funding process, and the corporate finance team must consider the preparation time required to execute payments in a timely manner. The team must open accounts with local banks to execute payments on time. Sometimes, the company may seek short-term loans from partners in the region. The longer the settlement delay, the greater the foreign exchange risk exposure and the higher the capital requirements.

Stablecoins simplify this system by eliminating the need for control over international settlement delays. We can see the role of the "stablecoin sandwich" structure: although the initial deposits and withdrawals at both ends still need to touch the fiat currency system, the existence of stablecoins allows for smooth capital flow between the two fiat "ramps."

By using stablecoin, the entire processing procedure is split into local transfers conducted within Country A and Country B, while the blockchain completes the global liquidity settlement between both parties in the middle. ( Note: To ensure the success of this exchange, there must be sufficient liquidity on-chain to convert A stablecoin into B stablecoin. )

3.2 B2B enterprise payment

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

In this type of payment, banks in different countries are usually directly linked to the delivery of a service or goods. This means that all parties are more sensitive to the tracking of payment progress. If the payment channel required by the business is relatively obscure, they often need to complete the fund transfer through multiple international transit routes.

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 points, allowing companies that heavily rely on the timely arrival of goods to avoid significant risks or delays.
• After the risk is reduced, the cost of capital decreases, and the capital turnover speed accelerates.
• Agency chain links, pre-financing requirements, and most foreign exchange exposures have basically been eliminated.
• The entire process has been compressed from the past 3 days to just a few seconds, without having to consider market closures, significantly reducing and simplifying the working capital requirements.

3.3 Card Organization Network Settlement

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

A certain card organization began trialing the use of stablecoins for settlement between acquiring banks and issuing banks as early as 2021. This method of using stablecoins replaces the wire transfer process, opting instead for stablecoins on the blockchain. After completing card authorization on a specific date, the card organization will use stablecoins to debit or credit the banks of both parties involved in the transaction.

Since the system operates within the card organization network, its net effect benefits the partners within the network. This is most similar to the closed-loop system of XBMT, but the large scale of the card organization network benefits the issuing/acquiring institutions.

The advantages of stablecoins are similar to those of fund 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 blockchain lay the foundation for credit and other financial services between banks within the card organization network.

IV. Looking to the Future

Currently, most stablecoin applications remain at the "sandwich" structure itself and have not further broken through. In reality, very few companies truly use on-chain payments and stablecoins. As long as any link still needs to touch fiat currency, we have no choice but to add bread at both ends of the "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 limited by outdated traditional rails. Once financial institutions and businesses fully settle in stablecoins, it will unleash an unprecedented scale of commerce. As the global friction in building, operating, and servicing businesses is significantly reduced, the growth curve of global GDP will be closer to the true consumption speed of goods, services, and content driven by the internet.

The essence of future financial payments 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 capital/value circulation will reach unprecedented heights.

![Deconstructing the stablecoin "sandwich": How to reshape global capital flow?](