Paxos Urges Banks to Embrace Stablecoins as Core Infrastructure

Key Takeaways

• Stablecoins are evolving into core financial infrastructure, not just crypto tools.
• Banks must now decide how – not whether – to integrate them.
• Paxos outlines four models: issue, white-label, support existing coins, or join shared networks.
• Institutional adoption is accelerating as regulatory clarity improves.

In its latest Stablecoin Strategy Guide for Banks, the firm argues that the industry has moved past experimentation and into what it describes as a “systems phase.”

According to the report, the debate is no longer about whether banks should engage with stablecoins – but how they should structure a compliant and scalable strategy.

A Shift From Closed Tokens to Open Infrastructure

Paxos says the “old playbook,” where institutions experimented with proprietary, closed-loop digital tokens, no longer reflects market reality. Stablecoins are now embedded in global liquidity flows, and issuers collectively hold more U.S. Treasuries than several sovereign nations, making them systemically relevant players in debt markets.

The company outlines four strategic paths for banks:

• Issuing their own branded stablecoin using regulated infrastructure
• White-labeling a partner-issued token
• Supporting established regulated coins such as PayPal USD (PYUSD) or USDP
• Joining shared settlement networks focused on cross-border payments

At the core of Paxos’ framework is what it calls the “regulated trust company” model. This structure, it argues, offers bankruptcy remoteness, strict 1:1 asset backing, and risk management standards aligned with bank-grade requirements.

Stablecoins Enter the “Systems Phase” in 2026

The guidance comes as the stablecoin sector evolves beyond a single dominant token model. New launches such as USAD – designed for confidential B2B transactions – reflect a growing trend toward segmented, use-case-specific digital dollars rather than one universal coin.

Institutional adoption is also accelerating. Mitsubishi UFJ Trust and Banking Corp. is preparing stablecoin initiatives for cross-border settlements, while a consortium of nine European banks is reportedly developing joint deployments aimed at improving payment efficiency across jurisdictions.

Paxos CEO Charles Cascarilla has described blockchain infrastructure as a once-in-a-generation opportunity, particularly for community banks seeking to compete with larger institutions. By leveraging stablecoins for faster settlement and global reach, smaller banks could narrow the competitive gap without building costly proprietary systems from scratch.

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Regulatory Validation and Expansion

Paxos’ positioning is reinforced by a key regulatory milestone. In July 2024, the U.S. Securities and Exchange Commission formally closed its investigation into BUSD without recommending enforcement action, marking a legal victory for the company’s regulated issuance model.

Since then, Paxos has expanded its infrastructure footprint. The firm continues to issue PYUSD for PayPal and recently acquired digital asset custody provider Fordefi to strengthen institutional services.

The broader message is clear: stablecoins are transitioning from crypto utility to financial plumbing. For banks weighing their next move, Paxos argues the competitive risk now lies not in participation – but in standing still.

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