Cryptocurrency as Backend

Why they are starting to lean towards using cryptocurrency as a backend, and the role cryptocurrency companies play in this upgrade.

Written by: Prathik Desai

Compiled by: Block unicorn

Last year, a company settled securities transactions worth approximately $47 trillion, equivalent to more than 35 times the global GDP. This month, the company—Depository Trust & Clearing Corporation (DTCC)—began using blockchain technology to process these transactions.

One of the largest upgrades in the global financial sector involves replacing infrastructure. Clearinghouses are not the only ones. Information cooperatives connecting over 10,000 banks globally and card organizations covering 200 million merchants are rebuilding asset transfer infrastructure, with blockchain at the core of this upgrade.

Some industries that have long been dismissive of cryptocurrency are now adopting cryptocurrency infrastructure more rapidly.

In today’s article, I will explain why they are starting to lean towards using cryptocurrency as a backend, and the role cryptocurrency companies play in this upgrade.

Cost Issues

Today, when you buy Microsoft stock on the New York Stock Exchange (NYSE), it still takes a full day for it to legally transfer to your name. This is because the infrastructure for transferring stock ownership was designed for the era of paper stocks. It took humans over 60 years to achieve the dematerialization of stocks and speed up everything in the stock market. However, the infrastructure for transferring funds and assets still follows the design of the paper stock era.

If you think this is just a convenience issue, you are too naive. Any delay in processing asset and cash flows can lead to economic losses.

Take cross-border bank payments as an example. Most global banks pre-fund accounts in different countries and currencies so that payments can clear across different time zones. They use local deposits and central bank reserves to settle cross-border transactions without waiting for real-time arrivals across different time zones.

Even if stock traders have deposited margin, that money sits idle and cannot generate any returns. Settlements stop on Friday night and resume after work on Monday, while people continue their lives over the weekend. Although the original intention was not to cause inconvenience, we still have to pay to use this infrastructure even when faster and cheaper alternatives emerge.

Meanwhile, major exchanges are extending trading hours to respond to market changes. The London Stock Exchange has just announced the launch of the LSE 24 trading platform, which will start in the first half of 2027, providing 23.5 hours of trading service from Monday to Friday. The Chicago Mercantile Exchange (CME) switched its cryptocurrency futures trading to 24/7 in May. Nasdaq also plans to launch a 23-hour trading day later this year.

Despite the trading departments extending their hours, trade settlements still lag behind. This further hinders trading and leads to frozen funds.

This tax has grown to account for more than one-fifth of global GDP.

Last year, global corporate cross-border payments exceeded $30 trillion, with annual transaction costs exceeding $120 billion.

This is the cost that traditional financial infrastructure operators have begun to notice due to this problem.

In July 2026, they began taking concrete steps to replace traditional infrastructure with crypto rails.

Infrastructure Swap

On July 15, DTCC, a pillar of the U.S. financial market, conducted its first real-world trading of tokenized securities. These transactions involved tokenized versions of original publicly traded company stocks, government bonds, and ETFs.

As part of DTCC’s first on-chain transactions, JPMorgan converted its holdings of the Invesco QQQ Trust (QQQ, one of the most actively traded and liquid ETFs globally) into token form and deposited it as collateral with the Chicago Mercantile Exchange (CME). More than 30 companies, including Goldman Sachs, BlackRock, Vanguard, and the New York Stock Exchange, participated in this transaction. These tokens were traded on production infrastructure through repurchase, collateral, securities lending, and clearinghouse margin.

Only a few months remain until DTCC’s tokenization service is set to launch in October 2026.

This infrastructure improvement allows us to quantify the economic benefits that a more efficient system can bring to capital markets. In May 2024, the U.S. stock settlement cycle was shortened from two days to one day. The reduction of one day in the settlement cycle meant that the margin that members had to keep at the clearinghouse decreased by $3 billion, a drop of 23%, from an average of $12.8 billion in the T+2 cycle to $9.8 billion in the T+1 cycle.

If a country's stock market can release $3 billion in collateral by saving one day, then shortening the settlement time for stocks, government bonds, repos, and foreign exchange to a few minutes—whether cross-border or over the weekend—could yield exponential value.

This is the commodification of blockchain. Stablecoin transfers cost only a few cents, settlements can be completed in seconds, and they can be done anytime, anywhere. On the other hand, tokenized securities can be traded anytime and can also be used as collateral without waiting for the infrastructure to open on Monday.

This is why traditional infrastructure operators are gradually beginning to accept using crypto rails as backend services. Because if they do not do so, they risk handing their business over to competitors who provide the same services to customers at lower prices and faster speeds.

Crypto infrastructure allows clients to utilize their funds more efficiently by eliminating idle time. Securities that can only settle tomorrow cannot be used as collateral today. Tokenized securities can be pledged and lent in minutes, operating 24/7. The liquidity of collateral determines whether capital operates intermittently or continuously.

Nine days ago, SWIFT, responsible for coordinating payment information among over 11,500 institutions, announced that 17 banks from six continents, including Citibank, HSBC, UBS, Standard Chartered, and MUFG, are preparing to pilot tokenized deposits on its new shared ledger.

Tokenized deposits are bank deposits that are not time-restricted. Blockchain technology enables rapid transfers of funds overnight or even over the weekend while still retaining the bank's claim to the funds. For users who avoid using bank-issued stablecoins due to a lack of Federal Deposit Insurance Corporation (FDIC) protection, tokenized deposits are an ideal alternative. Tokenized deposits provide users with the same convenience as stablecoins while ensuring the safety of their funds without regulatory concerns.

I previously wrote about this in my article "Defending Deposits."

Even credit card networks like Visa are adopting crypto infrastructure.

On July 16, Cuy Sheffield, head of Visa Crypto Labs, announced the launch of a platform that allows banks to mint, transfer, and redeem stablecoins within their existing treasury systems, hiding each key, gas fee, and chain from customers.

The biggest attraction for traditional financial giants to adopt crypto infrastructure as a backend is the ability to pass on cost and time efficiencies to their vast customer base. Currently, around 15,000 financial institutions and over 200 million merchants are connected to the Visa network.

Its competitor Mastercard has expanded its bank stablecoin settlement options for six regulated stablecoins based on its early pilots and initial real-world deployments.

Mastercard now supports settlements using Circle's USDC, Paxos' PYUSD, USDG, and USDP, Ripple's RLUSD, and SoFi's SoFiUSD. These stablecoins will be enabled across a range of supported blockchain networks, including Arbitrum, Base, Canton, Ethereum, Polygon, Solana, Tempo, and XRPL.

Internally, banks have already proven that such infrastructure can operate at scale. JPMorgan's Kinexys system has processed over $40 trillion in transaction volume and now handles over $7 billion in funds daily, even on days when other financial institutions are closed.

Those who remain skeptical about crypto infrastructure need only look at how money market funds are adopting blockchain. BlackRock's BUIDL, a tokenized treasury fund with approximately $2.5 billion in assets, is now accepted by major exchanges as collateral for derivatives. Standard Chartered and fintech and cryptocurrency trading platform OKX have teamed up to build this framework.

This is the practical application value of adopting cryptocurrency as backend technology. It allows collateral to earn treasury yields while serving as margin.

If someone asks me, "Why should anyone choose crypto rails?" I would provide the most compelling explanation.

The most important task of any new financial innovation should be to help you transfer, appreciate, and store funds more effectively.

By driving these innovations, existing cryptocurrency companies are finding new roles.

Join them, rather than fight against them

Many cryptocurrency advocates once envisioned that cryptocurrency companies would replace traditional financial firms, but that is not the case; cryptocurrency companies are becoming builders of the infrastructure that traditional firms need.

Six cryptocurrency companies worked together to make DTCC's activities in July a reality. Chainlink was responsible for connecting various networks; Digital Asset's Canton network carried government bonds; Fireblocks and BitGo provided custody support; Circle and Ondo designed services for the entire working group.

Some of these companies spent a decade building a parallel financial system, but now they are helping traditional financial firms build faster and cheaper funding and asset transfer infrastructure. Their revenue model has also shifted from replacing Wall Street to charging the companies they serve.

These invoices even cross half the globe.

On July 16, Ondo Finance, the world's largest tokenized stock company, announced a partnership with Japan's SBI Group to tokenize Japanese stocks. The tokenized stocks will be distributed within SBI's ecosystem and settled using SBI's yen stablecoin, JPYSC.

SBI manages assets exceeding $250 billion. If it were to build tokenization capabilities on its own, it would have to start from scratch. But it did not do that; instead, it sourced the relevant technology directly from a supplier already operating blockchain technology and paid for the expertise. Ondo currently holds over 70% of the tokenized equity issuance market and has established a distribution partnership with Clearstream, a subsidiary of Deutsche Börse, in Europe.

Securitize has played a similar role by supporting BlackRock's BUIDL issuance.

What Happens Next?

What happens next has precedents.

In 1956, a truck driver named Malcolm McLean loaded goods into standard metal containers. This reduced loading costs from $5.86 per ton to $0.16 per ton. World trade was reorganized around containers. Ironically, carriers that owned the ships made little profit from it. This is because containers became commodities, and freight became a price war. Wealth flowed to those companies that rebuilt their businesses around cheap, reliable transportation models. The biggest beneficiaries of container innovation were retail giants like Walmart, not logistics giants like Maersk.

A similar pattern may emerge in the fintech sector.

For container innovation to fundamentally change the logistics industry, the entire ecosystem composed of cranes, ports, chassis, and customs must be rebuilt around it. Similarly, tokenization can only take effect once aspects like custody, compliance, and interoperability are also rebuilt. As banks and financial institutions commoditize the settlement layer, value accumulates accordingly. Companies like Chainlink, Fireblocks, and Digital Asset are currently targeting this ecosystem.

Tokens or blockchains will no longer hold significant value. Instead, value will converge in two places.