DeFi and stablecoins are frequently positioned as a fundamental departure from traditional financial infrastructure. The core narrative is compelling: remove intermediaries, replace trust with code, and enable faster, cheaper, borderless payments.
There is substance behind this narrative. On-chain transfers can be near-instant. Smart contracts can automate rule enforcement. Public blockchains introduce transparency that legacy systems were never designed to deliver.
However, when stablecoins are examined as payment instruments used by banks and other regulated institutions, the operational reality is materially more complex.
This paper traces a stablecoin transaction end-to-end — not just the on-chain transfer, but the full lifecycle required for it to function in the real world: reserve custody, data dependencies, compliance controls, FX conversion, redemption, and settlement into fiat bank accounts. When viewed holistically, one conclusion becomes unavoidable: trust has not been eliminated. It has been redistributed.
On-chain finality is not the same as legal or economic settlement finality.
Key dependencies remain off-chain and outside the control of the blockchain itself. Stablecoins rely on custodians to safeguard reserves. Oracles supply data that blockchains cannot independently verify. Governance frameworks permit contracts to be paused, modified, or overridden. Compliance obligations introduce discretionary controls. Redemption into fiat re-introduces banking hours, FX costs, settlement latency, and legal enforceability.
These are not exceptions or edge cases. They are structural characteristics of stablecoin-based payment flows. And they concentrate trust and risk in areas that are less visible, less auditable, and more difficult to assign accountability when failures occur.
For banks and NBFIs, this distinction is critical. Liability does not disappear simply because a transaction is recorded on-chain. Regulators, courts, and counter-parties evaluate responsibility across the entire transaction lifecycle. In many DeFi-enabled stablecoin models today, that responsibility is fragmented across issuers, developers, custodians, oracle providers, and off-chain intermediaries.
This paper is not anti-DeFi or anti-stablecoin. It applies a practical trust and risk lens: where trust is required, where it concentrates, who bears it, and which controls are preventive versus reactive.
The findings are uncomfortable, but important. Many of the inefficiencies in cross-border payments are not resolved by changing the asset alone. They persist because workflows remain fragmented, data is not shared in real time, and risk, compliance, and settlement controls are applied after funds move rather than before.
Payall approaches this challenge from first principles — digitizing risk, compliance, data sharing, FX, and settlement rules upfront and enforcing them consistently across institutions. Trust is not assumed, deferred, or redistributed across opaque intermediaries. It is engineered, verified, and continuously maintained within a shared, regulated framework.
If DeFi and stablecoins are to scale responsibly into mainstream payments, progress will come not from removing trust, but from designing and governing it deliberately.
The full paper details this analysis, separating operational reality from narrative — and facts from hype.
Whether you’re looking to make stablecoins safer, operate as an originating institution, leverage Mastercard Move, or digitize counterparty risk as a correspondent bank — Payall provides the infrastructure to do it securely and efficiently. Book a call with us to learn more.
