The integration of stablecoins into the traditional banking system raises interest among experts. While it opens new opportunities, it also carries certain risks.
Stablecoins and Traditional Finance
As a new stablecoin-backed bank launches, experts are raising questions about significant structural trade-offs. Mitchell Amador, CEO of Immunefi, emphasizes that while the proposal seems natural, it is associated with risks.
> "This proposal to use stablecoins so ambitiously is actually very natural. And it’s probably going to be, at this rate, the future of fintech and banking more broadly. However, this approach carries risks. By exporting most of your underlying ledger and making your bank products widely interoperable with a broader financial ecosystem, you become reliant on that ecosystem — especially on stablecoin standards and the smart contracts behind them — and responsible for securing them," Amador noted.
DeFi Security for Banks
Most banks rely on regulated and closed systems for transfers, such as SWIFT and Fedwire. In contrast, DeFi protocols depend on third parties and smart contracts that may have vulnerabilities.
> "You also develop a very particular focus on crypto authentication and crypto security, especially in the context of treasury management. Not all banks will succeed in this endeavor. Consider that most exchanges are effectively stablecoin-based banks today, with one loose bridge out into the fiat world. That’s basically what is being proposed here as well," Amador added.
Banking Challenges for Crypto Companies
In recent years, crypto companies have faced challenges in accessing banking services, as banks deemed the business too risky. One example is SVB, a bank that regularly served crypto clients and collapsed in 2023 due to its reliance on U.S. Treasury yields.
The integration of stablecoins into the traditional banking sector represents a complex and multifaceted process that requires attention to security and risks associated with DeFi.
