Ethereum Ecosystem Leader: Why Banks No Longer Fear Stablecoins

Original Author: James, Snapcrackle

Original Translation: Ken, ChainCatcher

How a Citigroup veteran concluded that the $300 billion deposit threat is actually a $36 billion revenue gift and established a clearing system to prove it.

Last year, I spoke with Tony McLaughlin for the first time, shortly after he left Citibank and founded a company called Ubyx. What shocked me immediately was that a person who had worked for one of the world's largest banks for twenty years could confidently discuss public blockchains like a cryptocurrency native, while also basing every argument on the mechanisms of check clearing and correspondent banking.

McLaughlin is a seasoned professional who has dedicated his life to the payments industry, and he sincerely concluded that the infrastructure he has operated for his entire career is about to be replaced.

McLaughlin is not the type of startup founder we usually imagine (which I think is a good thing).

He is a career payments executive who has worked at one of the largest banks in the world, and the way he built his company reflects this: formulating an argument, pushing it to the market, and then letting the market tell you whether you are right.

How can stablecoins truly become ordinary currency?

That ordinary, mundane currency that directly appears in your bank account and is equivalent to cash.

His answer involves an extremely unremarkable infrastructure that most people in the cryptocurrency space have never considered. And most bankers have yet to realize they need it.

The Person Who Built This System and Then Walked Away

Here is a brief summary of McLaughlin's career, as this experience is crucial for understanding this story.

He worked at Citigroup for nearly twenty years, rising to the position of Managing Director of Treasury and Trade Solutions, focusing on emerging payments. During this time, he became the chief architect of the "Regulated Liability Network," which may be one of the most influential institutional-level blockchain concepts in the past five years.

The RLN proposed a shared private ledger on which central banks, commercial banks, and electronic money institutions could issue tokenized versions of their liabilities on a single platform, which is also seen as a response from the regulated space to public cryptocurrencies.

McLaughlin collaborated with the Federal Reserve and the UK Finance Association on a proof of concept, which also served as a reference for the Monetary Authority of Singapore's related work. The Bank for International Settlements acknowledged that RLN inspired its own "Unified Ledger" concept. The Agorá project brought together seven central banks and over forty financial institutions to collaborate around a similar architecture. By any standard, this is serious infrastructure work.

Then, McLaughlin resigned, leaving it all behind.

McLaughlin spent years arguing that private permissioned blockchains are the future of regulated money. The technology itself works well.

The problem is that no one could solve the "cold start" dilemma.

You are asking all the major banks and central banks on Earth to join a network that does not yet exist, and no one wants to be the first to take the plunge. In a podcast, he referred to it as the "startup problem." You need to start the network before anyone will use it, but no one will help you start it because no one is using it yet.

Public blockchains have already solved this problem. They have users, liquidity, and developers. The cold start phase is long gone.

The moment of clarity for him came during the 2024 U.S. elections. He observed the political trajectory and concluded that stablecoin legislation is inevitable, which means banks will inevitably be allowed to operate on public chains, because that is where stablecoins exist. The signing of the GENIUS Act into law in July 2025 proved him right.

He described this decision with his trademark bluntness. He "decided that day to no longer spend even a second of his life pushing for the adoption of private permissioned blockchains." He left Citibank and founded Ubyx in March 2025.

The Real Misunderstanding of Banks Regarding Stablecoins

On March 3, 2026, President Trump publicly accused the U.S. banking industry of "sabotaging" the GENIUS Act and "hijacking" his cryptocurrency agenda. The focus of this struggle is on yield.

Banks have been lobbying vigorously against interest-bearing stablecoins, arguing that they would siphon deposits out of the traditional banking system.

For the same reason, the Bank of England has proposed limits on the holdings of "systemic stablecoins." This fear is real; the global supply of stablecoins has exceeded $300 billion, and if this represents deposits flowing out of commercial banks' balance sheets, the impact on lending capacity would be enormous.

But McLaughlin believes this issue is fundamentally misguided. Over the past year, he has expressed the same point on every stage and podcast willing to invite him: stablecoins are not a threat to deposits.

They are a revenue gift.

And this misframing begins with how people classify this financial instrument.

He said, "If regulators define stablecoins as a crypto asset referencing fiat currency, I think they are making a fundamental mistake.

To me, that is equivalent to saying that the definition of a check is a piece of paper referencing fiat currency."

What he means is that regulators are making a mistake with stablecoins that they would never make with checks. They define it as "a crypto asset referencing fiat currency," which is defining the financial instrument by its technology (crypto tokens) rather than by its actual function (the promise to pay you at face value). The technology is merely ancillary; the promise is core.

Whether it is written on a clay tablet, a piece of paper, or an ERC-20 token on Ethereum stating "I owe you $10," as a legal document, they are the same. The key is who makes the promise and whether that promise is enforceable.

In his framework, stablecoins are not a novel native construct of cryptocurrency. They are the latest manifestation of one of the oldest tools in commercial law—negotiable instruments.

He specifically compared it to American Express traveler's checks from 1891.

If you are under 35, you may have never used or heard of them.

Before the global proliferation of debit cards and ATMs, traveler's checks were a common way to carry funds abroad. You would purchase them from American Express or your bank before traveling, prepaying the face value of the checks.

Then, you could spend them anywhere in the world like cash, as merchants or local banks would accept them at face value because a clearing network guaranteed they could recover the money from the issuer.

I still remember the painful experience of using them while backpacking in Asia: waiting in line at the bank counter, signing and countersigning, waiting for someone to call the issuer to verify, and finally getting a poor exchange rate.

No wonder traveler's checks nearly vanished overnight once card systems caught up.

However, their attributes are strikingly similar to stablecoins: a dollar-denominated instrument issued by non-bank entities, pre-funded, fully collateralized, not interest-bearing, transferable to the holder, and redeemable at face value.

McLaughlin's analogy is correct, but it may lack resonance for most of the people he speaks with.

Most people fail to see the clearing issue with stablecoins precisely because most people have never used the last financial instrument that solved this problem. Traveler's checks are extinct.

The clearing infrastructure behind them has become invisible history. So when McLaughlin says, "Stablecoins need what traveler's checks once had," the audience politely nods but lacks personal experience.

Once you view the issue from this perspective, the focus shifts from "How do we protect deposits from stablecoins?" to "How do we handle stablecoins like we have handled every other negotiable instrument for the past 200 years?"

The Boring Yet Crucial Part

The reason traveler's checks could be redeemed at face value globally is not because of anything special about that piece of paper. They worked because the clearing networks established by American Express, Visa, and Thomas Cook ensured that any merchant in any country could redeem those checks for cash at face value.

When the accepting network was eroded, the usage of traveler's checks collapsed. It was not that this financial instrument became ineffective; it was that the underlying clearing network failed.

Stablecoins are currently in this predicament. They can cross borders in seconds on public blockchains. However, there is currently no universal mechanism to redeem them at face value through regulated financial institutions.

If you are a stablecoin issuer, you must build your own distribution network from scratch, establishing one bilateral relationship at a time. If you are a bank wanting to accept stablecoins for your customers, you must negotiate individually with each issuer. This complexity grows geometrically.

McLaughlin's favorite example is credit cards. There are thousands of different banks around the world issuing credit cards. This sounds like it should be a disaster.

But I bet you rarely walk into a store and are told, "Sorry, we don't accept cards from your bank."

This fragmentation is invisible to users because Visa and Mastercard sit in the middle, allowing every card to be used anywhere.

Stablecoins face this same fragmentation, but without a clearing network to support it. This is precisely the gap Ubyx is trying to fill.

Its operational mechanism is deliberately designed to be very simple, and the distinction from cryptocurrency exchanges is key.

On exchanges, stablecoins are bought and sold at fluctuating market prices. No one guarantees you will get the face value. Exchanges are merely trading venues. If demand falls, prices will drop accordingly.

Ubyx does not do this. It operates on a collection model, not a sales model. Its goal is face value redemption, just like the result you get when you deposit a check at the bank.

You do not care who issued the check. You do not care which bank issued the check. You simply hand it to your bank, and your bank credits your account at face value, while somewhere behind the scenes, the clearing system recovers the money from the issuing bank. If the check bounces, it is returned to you. It's that simple.

Ubyx's process works the same way. Customers deposit stablecoins (like USDC) into their custodial wallets at their banks. The bank submits the tokens to Ubyx. Ubyx routes them to the issuer (in this case, Circle).

The issuer verifies the legitimacy of the tokens and releases fiat dollars from the pre-funded reserves at the settlement bank. These dollars flow back to the receiving bank through Ubyx, which credits the customer's account, usually after earning a foreign exchange spread, in local currency.

If the issuer fails to pay, the bank returns the tokens to the customer. Just like a bounced check. The bank does not bear any balance sheet risk in the clearing process itself.

McLaughlin describes the system as a "black box" with three modes:

• Stablecoins in, cash out (redemption)
• Cash in, stablecoins out (issuance)
• Stablecoin A in, stablecoin B out (conversion)

Its design principles do not rely on specific issuers, blockchains, or currency types. At launch, the roster of issuers includes Paxos, Ripple, Agora, Transfero, Monerium, GMO Trust, BiLira, and about a dozen others, covering dollars, pounds, euros, and emerging market currencies across multiple blockchains.

For banks, the technical requirements are deliberately kept to a minimum. Most banks will not build blockchain infrastructure internally (and even if they did, they would still face the issue of how to get other banks to trust it).

The $36 Billion Figure

This is where the narrative around the "deposit fear" flips.

McLaughlin's rough calculation is as follows: assume the stablecoin market reaches $1 trillion (currently $300 billion and still growing). Assume that 0.5% of circulating tokens are redeemed daily, which is a conservative velocity for a payment instrument. This results in an annual redemption amount of about $1.8 trillion. If banks earn 100 basis points on processing fees and another 100 basis points on foreign exchange spreads for cross-border redemptions, the annual revenue pool would be $36 billion. These are his assumptions, and they are just assumptions. But the arithmetic derivation is sound; now the only question left for any bank is: how much of a slice do they want to take?

This economic calculus is particularly attractive for non-U.S. banks.

Every dollar-denominated stablecoin that enters the European or Asian banking system and is exchanged for local currency is pure foreign exchange (FX) income for the receiving institution. Foreign exchange profits are extremely attractive to banks.

Over the past year, McLaughlin has referred to incoming stablecoins as "happy little blind boxes" and "gifts" in every public appearance. He has dubbed this strategy the "Pokémon strategy: you gotta catch them all."

Beyond the revenue figures, its alignment with central bank objectives is what makes it truly compelling.

When stablecoins are redeemed through regulated institutions into custodial wallets, they become visible to the tax system, undergo anti-money laundering/know your customer (AML/KYC) scrutiny, and convert into local currency stored on the balance sheets of local banks. Central banks gain compliance and monetary transparency. Commercial banks earn fee income and expand their balance sheets. And customers receive face value conversion.

McLaughlin's advice to bank CEOs is very specific: receive first, then issue. "In the case of stablecoins, receiving is better than paying out (issuing). Why? Because by receiving, you can earn a lot of 'lovely' money."

The current direct business model lies in accepting and converting third-party stablecoins. Once a shared acceptance network is established, and any bank can clear any stablecoin like clearing any Visa transaction, the barriers to issuance will crumble.

At that point, issuing your own stablecoin will be as straightforward as issuing your own credit card. You will no longer need to build an acceptance network. You just need to plug into the system.

Who Believes This Argument

This equity structure chart is worth interpreting as a signal map because the names on it will tell you which interest groups believe this is serious.

Ubyx raised $10 million in seed funding in June 2025, led by Galaxy Ventures. The rest of the round brought together big names from various sectors that you typically wouldn't see on the same equity structure chart: Peter Thiel's Founders Fund, Coinbase Ventures, VanEck, and LayerZero.

That is the liberal capital of Silicon Valley sitting alongside one of the largest cryptocurrency exchanges and a major traditional asset management company, all writing checks for the clearing infrastructure of stablecoins. Several investors are also participants in the network: Paxos and Monerium have invested and integrated as issuers into the network, while Payoneer and Boku have invested as strategic partners.

The alignment of interests between investors and network users is intentional. McLaughlin explicitly compared it to the early ownership structure of Visa and Mastercard, where the banks using the network were also the banks owning the network.

Then, in January 2026, Barclays made a strategic investment. This is the second-largest bank in the UK by market capitalization, and it is its first investment in a stablecoin company. Ryan Hayward, Head of Digital Assets and Strategic Investments at Barclays, stated, "Interoperability is crucial to unlocking the full potential of digital assets."

Reading between the lines: one of the most systemically important banks in Europe examined the argument for stablecoin clearing and decided to back it with real money.

A month later, Arab Bank's fintech accelerator AB Xelerate followed suit with its own strategic investment. So now you see U.S. venture capital, European banking, and Middle Eastern financial infrastructure all backing the same bet.

What Could Go Wrong?

Circle launched its own Circle Payments Network in mid-2025, providing proprietary infrastructure for USDC settlements. Circle has the scale to build a distribution network on its own. The market faces the question of whether we will end up with a single issuer network (Circle's path) or a multi-issuer clearing system (Ubyx's path). McLaughlin's argument is that history favors diversified clearing models. However, Circle's first-mover advantage and dominant market share are very real.

The yield battle between banks and cryptocurrency companies remains unresolved. The proposed rules from the U.S. Office of the Comptroller of the Currency include a "rebuttable presumption" against stablecoin yield arrangements.

If providing yield is prohibited, banks can breathe a sigh of relief, as stablecoins will still be less attractive than savings accounts for anyone wanting to store cash. But this also means stablecoins will continue to be limited to payment and settlement use cases, which is a smaller market and will grow more slowly for Ubyx.

If providing yield is allowed, the market will experience explosive growth, as stablecoins will directly compete for idle funds with deposits, money market funds, and Treasury bills. Banks will have ample reason to quickly build infrastructure, both defensively (to prevent customer attrition) and offensively (to capture foreign exchange and fees).

Ubyx has committed to adopting an open-source rulebook and ultimately achieving decentralized autonomous organization governance through tokens. This is philosophically consistent with the decentralized networks it connects to. But for the regulated financial market infrastructure that banks rely on, this remains untested.

Six Words

The first phase of McLaughlin's career was dedicated to defending the fiat currency system against the challenges of cryptocurrency. In the second phase, he built a private blockchain for banking institutions. In the third phase, he concluded that private blockchains cannot solve the problem of widespread adoption.

Through all this, what changed was his view of where money should exist. On public blockchains, in wallets, cleared through infrastructure, making every regulated stablecoin as mundane and reliable as a check.

He believes the entire transition hinges on six words. They are not technical.

Banks can process stablecoins like checks.

If an authority says this, every bank and fintech company on Earth will know exactly what to do.

Ubyx is betting that soon someone will say this.

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