## Traditional Banking Under Pressure: How Polygon Sees Stablecoins Reshaping Finance

**The Mass Issuance Wave Is Coming**

As blockchain technology matures, the stablecoin landscape is approaching a critical inflection point. Aishwary Gupta, Global Head of Payments and RWA at Polygon, projects that the sector will witness explosive growth in the coming years, with digital currencies potentially reaching six figures in total issuance volume by 2030. This anticipated surge represents far more than technical innovation—it signals a fundamental restructuring of how capital flows through the global financial system.

The emergence of thousands of stablecoins will reshape payment infrastructure, settlement mechanisms, and the role of traditional financial institutions in the digital economy.

**Banks Racing to Retain Deposits in a Blockchain-Enabled World**

The real challenge for traditional banking lies not in regulation but in competition. As on-chain yield opportunities attract depositors, conventional institutions face mounting pressure to retain capital. The outflow of customer funds to decentralized protocols threatens to erode banks' lending capacity and increase their cost of capital.

In response, forward-thinking financial institutions are exploring innovative retention strategies. Polygon's vision includes the development of "deposit tokens"—blockchain-native instruments that represent customer deposits while keeping those funds within bank custody. A practical example would be a major bank issuing a tokenized deposit product that clients can trade seamlessly on digital exchanges while the underlying assets remain under the institution's control and regulatory oversight.

This dual-layer approach allows banks to offer blockchain functionality without surrendering the traditional banking relationship or losing access to customer deposits.

**Stablecoins as Tools of Economic Sovereignty, Not Subversion**

A persistent misconception frames stablecoins as threats to central bank authority. Gupta counters this narrative with evidence from real-world adoption. Japan's experience with stablecoins like JPYC in government bond markets demonstrates that digital currencies can amplify monetary reach rather than diminish it. These instruments provide governments with enhanced tools for economic stimulus and policy implementation across global markets.

Stablecoins remain fundamentally responsive to traditional monetary levers. Interest rate policy, for instance, continues to influence stablecoin economics, ensuring that central banks retain meaningful control over their economies. The technology extends governmental capability; it does not circumvent it.

**Settlement Layers: The Missing Infrastructure**

Today's fragmented stablecoin ecosystem creates friction. Multiple standards, incompatible networks, and complex conversion processes hinder adoption by institutions and everyday users alike. Polygon anticipates that specialized settlement layers will emerge to solve this fragmentation, enabling near-instantaneous currency conversions across chains.

In this evolved ecosystem, end users become indifferent to which stablecoin they hold—the settlement infrastructure handles conversions transparently, much like the invisible backbone of traditional payment networks (SWIFT, ACH, etc.). This abstraction layer is essential for stablecoins to achieve mainstream utility.

**The Institutional Adoption Catalyst**

Polygon's broader strategic momentum supports this vision. Recent partnerships, including collaboration with institutional players focused on digital asset adoption, underscore the organization's commitment to building the foundational infrastructure for a tokenized financial future. The push toward mainstream adoption of blockchain-native assets like the POL token reflects industry maturation.

The banking sector now faces a choice: adapt proactively by integrating blockchain infrastructure and issuing digital deposit products, or cede market share to decentralized alternatives. The next five years will determine which institutions thrive in this transition.