Whether Stablecoins will Replace the Swift System

Abstract

This paper discusses the question of whether stablecoins have the technical, economic and institutional ability to substitute the SWIFT system in international payments. The analysis is based on comparative evaluations of settlement velocity, operational structure, liquidity depth, regulatory framework and geopolitical considerations that affect international networks of transactions. The results highlight that stablecoins can be beneficial in terms of finality of transactions, programmability, and cost-efficiency in particular corridors, where liquidity on chain and regulated off-ramp infrastructure are highly developed. These strengths are however limited due to poor fragmented regulation, lack of reserve transparency in wholesale adoption, and non-existence of globally harmonized compliance frameworks. SWIFT continues to be entrenched in correspondent banking with a strong network effect and internal institutional trust as well as wide-scale interoperability with a variety of financial infrastructures. The facts indicate that stablecoins will complement rather than substitute SWIFT in the predictable future, inspiring innovation within the niche market and triggering progress within cross-border financial messaging. The paper notes that the intentional displacement would need strong legal clarity, standardized forms of governance, improved AML controls and sanction controls, and cooperation across jurisdictions. The paper concludes that stablecoins will keep transforming the strategy of cross-border payment but will coexist with old infrastructures when it comes to their modernization.