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Financial institutions and big banks have had a decade to experiment with crypto rails for cross-border and interbank settlement. They could’ve run pilots, built internal expertise, and designed compliant models ready for real-world deployment once regulators gave the nod. They didn’t.
Summary
- Banks had a decade to build blockchain-based settlement rails but largely failed to act, leaving the world stuck with slow, costly legacy systems that impose unnecessary economic friction.
- Blockchain collapses settlement times, rewrites liquidity dynamics, and unlocks real-time capital mobility — benefits already proven in crypto markets and especially impactful for emerging economies.
- Until financial institutions adopt these rails at scale, businesses and consumers will keep paying the price for avoidable delays, idle capital, and outdated infrastructure.
A few exceptions (such as JPMorgan’s Onyx project, now rebranded as Kinexys) proved that institutional blockchain settlement could work. But those efforts remain isolated cases, not the industry standard. When regulators finally cleared the runway, the industry should have hit launch with production-ready solutions. That inaction now costs the world economy billions in unnecessary friction. We all keep paying the price for banks’ reliance on legacy infrastructure that moves money at a crawl in the Internet age.
The cost of indolence
Traditional finance is rife with inefficiencies. Securities settlement queues, bank cut-off times, and even routine foreign exchange trades still move at a multi-day pace. Each of those delays is effectively a fee on capital, a hidden cost paid in the form of idle funds sitting in intermediary accounts. That capital could be earning yield, financing new ventures, or compounding in other markets.
In my native Brazil, for example, retail cross-border payments often pass through offshore bank branches (frequently in the Caribbean) before reaching destinations in the United States, Europe, or even other Latin American nations. Each additional checkpoint adds cost, time, and compliance complexity. For retail users, this delay translates directly into higher fees. For institutions, it’s a drag on liquidity and capital efficiency.
If it takes longer to settle, you can bet that someone, somewhere, is paying for that delay. Just as risk in credit markets translates directly into interest rates, inefficiency in payments is priced into spreads and fees.
Banks know this. They should’ve jumped at the opportunity to streamline the system, even if just to get a leg up on their competitors. Why didn’t they?
“Smart contract risk” will fade away
At the turn of the millennium, analysts routinely factored “internet risk” into their models, referring to the possibility that online infrastructure could fail and disrupt entire operations. Two decades later, no valuation model includes a line item for “internet risk,” even though a single day offline could cost billions. The internet simply became an assumed infrastructure.
The same evolution will happen to blockchains. Pricing “smart contract risk” into a business model in 2030 will sound as outdated as pricing “email risk” today. Once security audits, insurance standards, and redundancy frameworks mature, the default assumption will flip: blockchains won’t be seen as a risk, but as the infrastructure that mitigates it.
Liquidity premium rewritten by capital’s new velocity
The financial system’s inefficiencies translate into opportunity costs for investors.
In traditional private equity or venture capital, investors are locked in for 10–20 years before seeing liquidity. In the crypto sector, tokens often vest in a fraction of the time, and once they do, they trade freely on global liquid markets (exchanges, OTC desks, DeFi platforms), collapsing what used to be a multi-stage process of VC, growth, and private equity rounds followed by an IPO.
Even more interesting, unvested tokens can sometimes be staked to earn yield or used as collateral in structured operations, even while remaining non-transferable.
In other words, the value that would sit idle in traditional finance keeps circulating in web3. The concept of a “liquidity premium”, meaning the extra return investors demand for holding illiquid assets, starts to erode when assets can be fractionally unlocked or re-hypothecated in real time.
The difference made by blockchain technology is also felt in fixed income and private credit markets as well. Traditional bonds pay semiannual coupons and private credit operations dole out monthly interest, whereas on-chain yields accrue every few seconds, block by block.
And in traditional finance, meeting a margin call might take days as collateral moves through custodians and clearinghouses. In decentralized finance, collateral moves instantly. When the crypto market suffered its biggest nominal liquidation event in October 2025, the onchain ecosystem programmatically settled billions in capital within hours. The same efficiency was on display in other crypto black swan events, such as the Terra collapse.
Blockchains change the game for developing nations
Emerging economies bear the brunt of the banking sector’s inefficiencies. Brazilians, for instance, can’t hold foreign currency directly in local bank accounts. That means any international payment automatically involves a foreign exchange step.
Worse, Latin American FX pairs must often settle through the U.S. dollar as an intermediary. If you want to convert your Brazilian reals (BRL) to Chilean pesos (CLP), you need two trades: BRL to USD, then USD to CLP. Each leg adds spread and delay. Blockchain technology, by contrast, enables BRL and CLP stablecoins to settle directly onchain.
Legacy systems also impose strict cut-off times. In Brazil, same-day (T+0) FX operations generally must close between noon and 1 p.m. local time. Miss that window, and extra spreads and time apply. Even T+1 trades have end-of-day cut-offs around 4 p.m. For businesses operating across time zones, this makes true real-time settlement impossible. Since blockchains operate 24/7, they remove that limitation entirely.
These are concrete examples of the problems that banks could’ve fixed years ago already. And bear in mind that Brazil didn’t face the same pushback on crypto from lawmakers as the United States did. There is no excuse for these problems to still be troubling us.
The world of finance has always priced waiting as risk, rightfully so. Blockchain minimizes that risk by collapsing the time between transaction and settlement. The ability to free and reallocate capital instantaneously is a paradigm shift. But banks are depriving their customers of these benefits for no good reason.
Until banks, payments companies, and financial service providers fully embrace blockchain-based settlement, the global economy will continue to pay for their laziness. And in a world where time is yielding, that bill compounds larger every day.
