Stablecoins continue to dominate industry headlines as transaction volumes surge. Reported volumes totaled $4.51 trillion in the first quarter of 2026 — more than double the amount at the same time last year — and market capitalization grew 49% from January-November 2025, according to crypto analytics platform DefiLlama.
Some question these numbers, however, along with the widely publicized stablecoin benefits driving them. In February, McKinsey & Co. published a report, “Stablecoins in Payments: What the Raw Transaction Numbers Miss,” arguing that the headlined volume numbers represent a very small percentage — about 0.02% at the time of publication — of real-world payments. They instead reflect trading activity, internal transfers and automated blockchain transactions. The report contends that volumes should be measured as the number of stablecoins in circulation — and that number totaled $390 billion in 2025.
The debunking does not stop there. The report’s author, McKinsey Partner Matt Higginson, maintains that stablecoin are not always as straightforward or as cheap as claimed. “They are not just a one-click solution; there are additional steps and intermediaries, even though the goal was to [make them] peer-to-peer and very simple,” Higginson says. Stablecoin payments also incur on- and off-ramp costs and other fees that are often left out of the positive spin.
The Case for Stablecoins
Stablecoin proponents’ claims are rooted in genuine advantages. Even Higginson notes that stablecoin in circulation had about doubled in 2025 from the prior year. By moving value over blockchain rails, the transactions are transparent and settle in near-real time, 24/7. The process is seamless if both parties have a digital wallet. And the transactions cost far less than international wire transfers; on-chain, wallet-to-wallet transfers can be made for less than a dollar, versus the median $45 for outgoing international wires and $15 for incoming, according to NerdWallet.
Not surprisingly, stablecoins’ strongest use case is said to be cross-border payments — including supplier and vendor payments, payroll and remittances. They provide a low-friction way to transfer digital dollars almost instantly in markets with volatile local currencies, and where traditional payment channels are slowed by intermediaries, foreign exchange costs, limited banking access or currency controls.
A Looming Threat to Banks?
Financial institutions are taking stablecoins’ rapid growth and cross-border efficiencies seriously. Nervous about losing commercial deposits — and customers — to the coins and their nonbank issuers, some financial institutions are placing their bets on a stablecoin alternative: tokenized deposits, which offer similar, on-chain benefits like programmability and continuous availability. They operate on the same regulated banking infrastructure as traditional deposits, offering commercial customers the familiarity of existing, trusted banking relationships and processes.
“The stablecoin story is generally framed as digital assets potentially entering the banking and finance world. With tokenized deposits, the banking industry is bringing regulated commercial bank money into digital finance,” notes Elena Casal, chief client officer at The Clearing House, which is teaming with large banks such as JPMorgan Chase & Co., Citigroup and others to set up a tokenized deposit network that will launch next year. This and other initiatives, like the Cari Network, which several regional banks plan to roll out later this year, will help to overcome tokenized assets’ main disadvantage: they are tied to a single bank and not yet widely interoperable across institutions and networks.
Separating Hype From Reality
While industry observers laud financial institutions’ efforts to bring the benefits of blockchain into the established banking system, the fear underlying these initiatives may be exaggerated. Stablecoin transactions on-chain are well-suited to many of their touted use cases, but transaction costs depend on the full payment flow — which can include not only on- and off-ramp fees, but also transaction and redemption fees from intermediaries such as exchanges or payment providers and network transaction fees. These costs and complexities are limiting adoption at scale.
Higginson notes, “Maybe in the future, when we’re all holding stablecoins in wallets and using them directly, it gets simpler. But for today, cash is still king, and we need that on- and off-ramping.”
According to Boston Consulting Group, the on- and off-ramp charges are substantial. They vary by channel, fiat currency and geography, with major exchanges charging 0.1%-1.0%, specialized financial services providers charging 1%-3%, and crypto-enabled ATMs as much as 7%.
Chris Dean, co-founder and CEO of Treasury Prime, a provider of embedded banking platforms, believes these costs will decrease as stablecoins become more mainstream. “Traditional businesses are much more fee-sensitive,” he points out. “There’s no inherent reason these costs need to remain high. They’re expensive now because providers can charge for a unique service.”
Even so, Higginson believes stablecoins face another, chicken-and-egg challenge: The low number of coins in circulation is “far too little to provide the liquidity needed to support commercial cross-border payments at scale.”
“There just isn’t enough volume to support the commercial payments that would make all this so valuable,” he contends.
If the Bubble Bursts, Will Tokenized Deposits Win?
If reality sets in and subdues the hype, tokenized deposits could win out as a better, safer alternative to stablecoins. But Higginson, Dean and much of the industry agree that the two currencies are not competitors; rather, they will each mature into separate payment types for different use cases and users, providing different forms of value.
Dean believes that stablecoins will be used primarily for international payments and tokenized deposits for “everything else” in 24/7 payments. Stablecoins will replace international wires, which can be “slow and confusing,” he says. Stablecoins “don’t break because an intermediary bank got involved and created an exception.” Tokenized deposits, meanwhile, are “often more convenient because they’re integrated into a customer’s existing banking relationship. … Customers don’t have to trust another institution because they already trust their bank,” he says.
Higginson maintains that “stablecoins are for money in motion, while tokenized deposits are much more for money at rest.” He foresees a strong use case for stablecoins as a real-time payment vehicle for trading stocks, bonds, equities and other assets on chain. Stablecoins have other emerging use cases, too, like liquidity management, moving funds between counterparties and subsidiaries and programmable payments.
Time (and the Customer) Will Tell
Dean is bullish on the success of U.S. financial institutions’ foray into on-chain digital payments, be they tokenized deposits, stablecoins or some other digital currency. “In the United States, you generally should bet on banks,” he says. “Banks are very good at what they do.”
Ultimately, customers will decide how the hype-versus-reality story ends. “No customer is going to say ‘no’ to faster, cheaper, and more secure payments,” Higginson points out. “Are they specifically asking for stablecoins or tokenized deposits? I don’t think so, but they are looking for improvements in payments architecture and infrastructure, and these are potential solutions.”
What customers want must drive banks’ strategies for these innovations, Dean advises. “The worst thing a banker could do is ignore all of this, but the second-worst thing would be launching a large, expensive initiative without first knowing whether customers actually want it,” he says. The winners will choose practical value over the latest trend.
Previous