In a relatively short space of time, stablecoins and other digital assets have moved from the fringes of alternative finance to a practical tool for liquidity management. Where they were once viewed with scepticism, they’re now maturing and finding their place in the rapidly evolving treasury landscape. As their profile grows, however – accompanied by a seemingly non-stop influx of regulatory updates and technological announcements – many are left more confused than ever as to where the hype ends and the real operational value begins.
At Sibos in Miami, Eleanor Hill, Treasury Editor at Trade Treasury Payments, was joined by Dominic Lynch, Co-Founder of Your Treasury, in a TTP Studios podcast discussion that cut through the industry jargon to explore how stablecoins, tokenised deposits, and tokenised money market funds are really reshaping modern cross-border finance.
Digital rails are maturing
The technology around tokenised deposits has matured significantly in recent years; so too has the conversation around them shifted. Commercial banks have been a big driver of this shift, championing tokenised deposit rails as a way to tackle one of the perennial pains in treasury management. “A big issue that has always been in the life of a treasurer has been the cut off times with banks,” Lynch explains. Tokenised deposit solutions allow organisations to secure liquidity “in the right place at the right time,” which allows treasurers to solve critical operational constraints of liquidity and accommodate unpredictable business demands.
This technological shift also offers benefits in the form of significant financial optimisation. By reducing the size of cash buffers traditionally held to cover forecast misalignments, treasurers can free up idle capital to increase potential interest income. Tokenised money market funds are also increasingly being utilised to meet collateral requirements within derivatives, streamlining operations without adding unnecessary burdens. Hill notes her personal experience of corporates contacting her asking for “case studies” of other corporates utilising tokenised assets as an indicator of a growing corporate appetite for the benefits tokenised deposits can provide.
This change in narrative has also been largely driven by regulatory milestones, particularly in Europe. The Markets in Crypto-Assets (MiCA) regulation has moved past its initial phases and been grandfathered in to become fully mandatory as of July, helping instil confidence among retail individuals and businesses alike. Under MiCA, compliant stablecoins must maintain a strict one-to-one peg backed by high-quality liquid assets like AAA-rated securities, while adhering to stringent jurisdictional compliance reporting.
The view outside of the US
Stablecoin developments have inherently had something of a US bias, but European-denominated stablecoin initiatives are gaining serious momentum. While Lynch acknowledges that tokenised deposits have traditionally functioned “within a particular bank’s own infrastructure, bank-to-bank,” stablecoins operate as “an asset class on its own,” capable of bridging multiple banking institutions without complex bilateral legal agreements.
This digital infrastructure, Lynch observes, is gaining traction in the background of everyday commerce. He highlights how outsourced payroll providers serving high-growth businesses are utilising stablecoin rails behind the scenes to eliminate liquidity shortfalls and get payments across different currencies and countries to the right place at the right time.
“A funny thing I found out,” he explains, “is that quite a lot of payroll providers who are doing outsourced payroll services are using stablecoin at this moment in order to get transactions around different currency, different countries, in the right place at the right time. Because if you’re having a high-growth business, obviously you’re getting data last minute”. In gig-economy models and emerging markets – where local clearing requirements create heavy friction – stablecoins also offer a cost-effective alternative that satisfies stakeholder demands for real-time payments.
One area where stablecoins appear to offer a real edge over traditional rails is intercompany funding and cross-border transactions. “The biggest problem we always have in treasury is time,” Lynch explains. Traditional cross-border funding can impose heavy strains on lean treasury teams; stablecoins and tokenised deposits provide a fast, low-friction mechanism for executing these transfers. This is of particular benefit to smaller treasuries, where the strain might be felt the keenest. “So, I think straight away the use case is there,” in Lynch’s view.
Hurdles to overcome
Even with such compelling, real-world use cases, practical adoption hinges on resolving certain accounting, tax, and audit questions. Treasurers understandably have concerns about how stablecoins are recognised on the balance sheet, with many historically fearing they would be treated under restrictive derivatives rules.
Although there is still no specific IFRS standard for stablecoins, regulatory clarity from frameworks like MiCA is now helping to resolve some of these concerns and pave the way for stablecoins to be evaluated as cash and cash equivalents under standards like IAS 7, provided they meet the necessary criteria that Lynch pithily summarises: “Is it highly liquid? Is it readily convertible into a known cash amount? And is there a very low probability of a change in value of it?”
Lynch advises corporate teams perform rigorous counterparty due diligence before integrating stablecoins into day-to-day operations. This means verifying whether a stablecoin is held with a bank or broker that has a sound credit rating and the appropriate electronic money institution (EMI) licences under MiCA. He also stresses the importance of education: “I would say the first thing is, when bringing in a new technology like this – whether it be something like we’ve seen before with AI – the first thing is education. First understanding, as well, what that use case is that you’re going to be starting off with it. Because then you can straight away look at the workflows and infrastructure [it] is going to be touching”.
With regards to integrating new technologies in a way that prevents them becoming isolated, “siloed” treasury projects that stall out, Lynch stresses the importance of cross-functional collaboration. Bringing accounting and tax teams into the conversation early ensures that treasury management systems can seamlessly reconcile stablecoin entries against invoices and intercompany transactions without creating extra administrative overhead. “If we’re able to bring a good pack of understanding to teams… at the right time before the implementation,” he explains, “… those parts of their workflow go much smoother as well”.
The path forward for treasurers
So, what should treasurers do if they are looking to experiment with digital assets? Lynch has a simple recommended starting point: begin internally. “The easy one to start out with is an intercompany transaction,” he suggests, or a transaction within the same entity – something low-risk that offers the opportunity to gain familiarity with data reporting, approval workflows, and payment processes.
Looking ahead over the next 12 months, the advice to treasurers is not to try and keep on top of every press release or master every piece of fintech jargon. Instead, the key to success is to monitor how the technology evolves within existing systems. When a treasurer identifies a tangible operational problem, asks whether stablecoins or tokenised deposits can solve this problem and solve it faster, and confirms to their satisfaction that the solution avoids adding undue team overhead, that’s when the potential of the technology is tangibly realised.
That’s “the tipping point, and that will be also where success really happens,” Lynch concludes.
