Colin Swain, Global Product Head at Bottomline
Central banks and national authorities are investing heavily in upgrading and maintaining legacy instant payment networks, real-time payment systems, and clearing mechanisms. At the same time, a new form of digital money is emerging. Until recently, stablecoins, digital tokens designed to hold fixed value against a currency like the pound or the dollar, operated largely outside financial regulation. That is changing, posing the question: are we building and sustaining systems designed for a different payments era, or are they designing infrastructure for the next decade?
In the U.S., the Treasury is developing the first licensing framework for stablecoins under the GENIUS Act – with the rules taking effect in 2027. The act will turn stablecoin issuance into a licensed supervised activity, meaning that anyone issuing a payment stablecoin must be supervised by a federal regulator, namely the OCC, FDIC, Federal Reserve or hold a state licence, which is an option for smaller issuers with under $10 billion in outstanding tokens. In the U.K., the Bank of England and the Financial Conduct Authority have set out a two-tier framework to bring stablecoins into regulation. Applications open in autumn 2026 with the strictest rules reserved for systemic stablecoins, those judged large enough to pose a financial stability risk. These face a £40 billion issuance cap each, and reserve rules allowing up to 70% to be held in short-term UK government debt.
These developments matter because by making stablecoin behave less like a speculative token and more like a reliable claim on cash, they change how money moves through the economy. Clear rules on reserves and redemption guarantees will give banks and payment providers the assurance they need to begin settling real transactions using stablecoins on blockchain rails.
However, the risk for central banks and policymakers is one of timing. Infrastructure programmes of this scale take years to design and deliver, and by the time they are completed, the model they were built around may already be outdated. Much of the regulatory effort so far is focused on fitting new forms of money safely into the existing system, rather than asking whether that system is still the right foundation. Because stablecoins with blockchain can act as new payment rails and are becoming embedded into a system as fundamental as the Treasury market, regulators must consider not only how to supervise them, but whether the payment architecture around them needs to evolve.
The road to innovating tomorrow’s payment architecture must therefore begin with regulators challenging the design of existing architectures.
The Limitations of The Legacy “IOU” Model
For decades, the dominant corporate payment model has operated on a complex web of banks, multilateral clearing houses, and batch processing. This means that when a company moves money, nothing physically moves at the point of authorisation. Instead, the system relies on creating and settling a chain of “IOUs” across disparate institutions. For example, a payment from a U.K. manufacturer to a supplier in Singapore may pass through two or three intermediaries, each updating its own records. That model was built for a world of paper, fixed banking hours, across fragmented national systems, and with settlement processes that could take days to complete.
Today’s economy does not operate in that way. Businesses are increasingly trading across borders and consumers expect services instantaneously, which means the model needs to change.
Challenging The Traditional Model
The emergence of regulated stablecoins demonstrates what becomes achievable when payment infrastructure is designed ground-up for an always-on, digital-first global economy. With a regulated stablecoin, the asset being sent is the money itself rather than a promise to pay it. The payment and the settlement occur simultaneously through a blockchain, and there is no waiting for correspondent banks to reconcile ledgers across time zones, nor is there a need to keep money sitting idle in foreign jurisdictions simply to manage settlement risk.
For a corporate treasurer, that has real impact. Money can be moved at all times of the day, and payments scheduled to release automatically. What this doesn’t mean is that stablecoins will replace banks or existing payment schemes overnight. Nor should policymakers assume that newer technology is inherently safer, or more efficient, simply because it is built on blockchain.
An Opportunity to Rethink Rather Than Replace
Understanding the structural advantages of blockchain rails does not mean existing domestic payment schemes should be abandoned. Banks have been running them since the 1960s, and legacy systems are set up to handle trillions of pounds in transaction volume daily. These systems are dependable, and the protections around them have been built over decades. It is also important to consider whether, with new systems, transactions can be reversed, fraud risk can be reduced and if data privacy is properly protected.
Instead of choosing an all-or-nothing path, policymakers, central banks, and payment providers have an opportunity to rethink the architecture of domestic payment systems by striking a careful balance between what stablecoins make possible, against the stability and protection that existing schemes already deliver.
The Future of Payment System Architecture
As governments invest in the next generation of domestic payment infrastructure, the challenge is clear: modernisation cannot mean rebuilding legacy models with newer technology.
Rethinking domestic payment infrastructure requires policymakers to view regulated stablecoins and commercial bank money as complementary rails serving different jobs within the system. So, central banks should focus on building open, pluggable infrastructure that allows fiat currency, central bank digital currencies (CBDCs), and regulated stablecoins to co-exist and exchange value seamlessly. A truly forward-looking payment scheme is one designed to allow interoperability between these systems.
By establishing clear legal definitions, strict reserve backing rules, and robust risk controls, regulators can integrate stablecoins into mainstream payment workflows safely. This approach allows businesses to select the ideal rail for each use case, keeping more traditional systems for domestic consumer payments and using tokenised rails for cross-border settlements, so they can complete with less friction.
The next decade of financial technology will belong to the institutions and jurisdictions that recognise how money itself has changed shape. As regulatory deadlines approach, authorities must look beyond temporary upgrades and make sure the public infrastructure being built today, is ready for the digital economy that will use it tomorrow.