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Financial institutions and major banks have had ten years to explore crypto solutions for cross-border and interbank settlements. They could have conducted trials, developed internal knowledge, and created compliant models ready for real-world application once regulators approved. They did not.
Summary
- Banks have had a decade to establish blockchain-based settlement systems but have largely failed to do so, leaving the world dependent on outdated, costly legacy systems that create unnecessary economic friction.
- Blockchain technology reduces settlement times, changes liquidity dynamics, and enables real-time capital movement — advantages already observed in crypto markets, particularly beneficial for emerging economies.
- Until financial institutions implement these systems on a large scale, both businesses and consumers will continue to suffer from preventable delays, idle capital, and outdated infrastructure.
A few exceptions (such as JPMorgan’s Onyx project, now rebranded as Kinexys) have demonstrated that institutional blockchain settlements could succeed. However, these remain isolated instances rather than the norm. When regulators finally permitted innovation, the industry should have launched with production-ready solutions. This inaction is costing the global economy billions due to unnecessary friction. We all bear the burden of banks’ reliance on slow legacy systems in an age dominated by the Internet.
The cost of inaction
Traditional finance is full of inefficiencies. Securities settlement delays, bank cut-off periods, and even standard foreign exchange transactions still operate on a multi-day timeline. Each delay represents an effective fee on capital, a hidden cost associated with idle funds held in intermediary accounts. That capital could otherwise be generating returns, funding new initiatives, or growing in other markets.
For example, in Brazil, retail cross-border payments often go through offshore banks (often located in the Caribbean) before reaching other locations in the U.S., Europe, or elsewhere in Latin America. Each extra checkpoint incurs costs, delays, and compliance challenges. For retail users, this results in higher fees, while institutions face reduced liquidity and capital efficiency.
Longer settlement times invariably mean someone is bearing the cost of that delay. Just as risk in credit markets translates to interest rates, inefficiencies in payments are reflected in spreads and fees.
Banks are aware of this. They should have seized the opportunity to enhance the system, even to gain a competitive edge. Why haven’t they?
“Smart contract risk” will disappear
At the turn of the century, analysts commonly included “internet risk” in their assessments, highlighting the potential for online infrastructure failures to disrupt operations. Two decades later, no valuation model considers “internet risk,” despite the fact that a single day offline could cost billions. The internet has become an accepted infrastructure.
A similar transformation will occur with blockchains. In 2030, factoring in “smart contract risk” will seem as outdated as considering “email risk” today. Once security audits, insurance norms, and redundancy systems mature, the default mindset will shift: blockchains will be seen not as a liability, but as a means of mitigating risk.
Liquidity premium altered by new capital velocity
The financial sector’s inefficiencies translate into opportunity costs for investors.
In conventional private equity or venture capital, investors often remain locked in for 10–20 years before accessing liquidity. In the crypto space, tokens typically vest in a fraction of that time, and once they do, they are traded freely on global liquid markets (exchanges, OTC desks, DeFi platforms), drastically simplifying what was historically a multi-stage process comprising VC, growth, and private equity rounds preceding an IPO.
Intriguingly, unvested tokens can occasionally be staked for yield or employed as collateral in structured transactions, even while remaining non-transferable.
In essence, the capital that would remain idle in traditional finance is kept in circulation in web3. The notion of a “liquidity premium”, the additional return investors seek for holding illiquid assets, begins to diminish when assets can be partially unlocked or re-hypothecated in real time.
The impact of blockchain technology extends to fixed income and private credit markets as well. Traditional bonds issue semiannual coupons, and private credit transactions provide monthly interest, while yields on-chain accumulate every few seconds, block by block.
Furthermore, in traditional finance, addressing a margin call can take days as collateral moves through custodians and clearinghouses. Conversely, in decentralized finance, collateral transfers instantaneously. When the crypto market experienced its largest nominal liquidation event in October 2025, the on-chain ecosystem programmatically handled billions in capital within hours. This efficiency was also evident during other significant crypto disturbances, such as the Terra collapse.
Blockchains transform opportunities for developing countries
Emerging markets bear the most severe consequences of the banking industry’s inefficiencies. For instance, Brazilians cannot hold foreign currency directly in local bank accounts, which means every international transaction inevitably involves a foreign exchange intermediary.
Moreover, Latin American FX pairs often require settlement through the U.S. dollar as a mediator. To convert Brazilian reals (BRL) to Chilean pesos (CLP), two transactions are necessary: BRL to USD, and then USD to CLP. Each step introduces added spread and delay. In contrast, blockchain technology permits BRL and CLP stablecoins to settle directly on-chain.
Legacy systems impose strict cut-off periods as well. In Brazil, same-day (T+0) FX transactions must generally close between noon and 1 p.m. local time. Missing this window incurs additional spreads and time requirements. Even T+1 trades face end-of-day cut-offs around 4 p.m. For businesses operating across different time zones, true real-time settlement is unattainable. Blockchains, however, function 24/7, eliminating this limitation entirely.
These are tangible instances of issues banks could have resolved years ago. It’s worth noting that Brazil faced less opposition to crypto from lawmakers than the United States did. There is no justification for these ongoing challenges.
In finance, waiting has always been viewed as a risk, and rightfully so. Blockchain technology mitigates that risk by significantly reducing the time from transaction to settlement. The capacity to liberate and reallocate capital instantaneously represents a remarkable shift. Yet, banks are depriving customers of these advantages for no valid reason.
Unless banks, payment companies, and financial service providers fully embrace blockchain-based settlement, the global economy will continue to bear the costs of their inaction. And in a world where time equates to value, that cost accumulates daily.
