Having spent 35 years on FX desks at Deutsche Bank, Crédit Agricole, Standard Chartered and Jefferies, the market today is bigger and faster than it was then, yet structurally it looks almost exactly the same.

In September, 21 of the world’s largest financial institutions, including banks and asset managers, agreed to build a dollar stablecoin, targeting a launch in the first half of 2027 in what became a serious step and a sign that on-chain money is no longer considered a side project. However, whilst a dollar token solves the dollar, most cross-border money does not stay in dollars.

Consider a Dominican importer paying a supplier in India, a family in Mumbai funding a semester in London, or a fund hedging emerging market local debt. Each of those flows is a currency pair. A stablecoin gets you to the edge of the trade; the FX then happens the way it always has – through a small number of dealers, at a price that depends on who you are, and settled on rails built for business hours.

The gaps nobody has closed

Start with liquidity, which most of the market rents rather than owns. FX turnover is close to $10 trillion a day, yet price formation in spot still sits with a handful of bank dealers and the non-bank market makers that fill in around them; everyone else is a price taker. As balance sheets became more expensive after the 2008 financial crisis, dealers pulled back from smaller pairs. The result is a two-speed market: G10 is deep, while much of the emerging market world is thin, wide and closed outside local hours.

Access to that liquidity is then tiered by size. A large corporate treasury receives institutional pricing, while a small business or individual sending the same currency at the same moment pays several hundred basis points more. That spread does not reflect risk in the currency. It is the price of not having a credit line with a bank.

Meanwhile, the cash that could fund that liquidity sits idle. Trillions of dollars in multicurrency balances are held in operating accounts, collateral accounts and wallets, earning little or nothing for the holder. Banks earn on that money; the depositor mostly does not. Stablecoins cannot change this – the US GENIUS Act bars payment stablecoin issuers from paying interest, so the issuer keeps the yield on the reserves and the holder is left with a token that pays nothing. A tokenised deposit, by contrast, is a bank deposit, and it can pay.

Even once a trade is priced, settlement still runs on correspondent banking: prefunded nostro accounts, cut-off times, two-day settlement and principal risk between the legs. CLS covers the major currencies, but many of the corridors where growth is happening sit outside it, so capital that should be working is parked simply to make payments possible.

Emerging markets bear the brunt of all four problems. They face thinner dealer coverage, wider spreads and heavier prefunding, and their savers have few ways to hold anything other than local currency or dollars. Yet these are the markets where FX touches everyday economic life most, from remittances and trade finance to families paying school fees abroad. When banks de-risk, smaller corridors are the first to lose correspondent relationships – and they rarely get them back.

What is often missed is that these problems share a root. The capital FX liquidity needs and the capital sitting idle are the same money; what separates them is infrastructure.

Turning deposits into liquidity

The obvious answer is to issue stablecoins in every currency and swap them on chain. In practice, non-dollar stablecoins are a rounding error next to dollar coins, so those pools are thin and the real price still comes from the same dealers off chain. They also carry the same restriction on yield. Putting more currencies on chain does not fix the market structure; it copies it.

The better question is: what if the deposit and the market maker were the same thing?

Tokenised bank deposits make that possible. The money stays at regulated banks, while the token moves on a public ledger in seconds, at any hour of any day. Pooled across currencies, those deposits can become the liquidity behind spot FX, alongside the institutional liquidity providers already in the market.

Depositors earn a share of the FX activity their money supports, and liquidity is built currency by currency – including in the corridors dealers have walked away from. A small business gets pricing from the same pool as a fund. Both legs of a trade settle together on the ledger, removing the risk between them and the need to prefund.

For a small business or an individual, that turns FX from a cost centre into a source of yield: the balance earns while it waits and converts at a fair price when it is needed.

None of this is new to FX. Pooling liquidity and paying for balance sheet are what every FX desk has always done. The difference is who gets to participate and who gets paid. It is the same money – it simply works a lot harder.

Banks are not the problem – the plumbing is

This is not an argument against banks. A tokenised deposit is still a bank deposit and a liability of a regulated institution, which is exactly why it fits inside existing frameworks in a way most stablecoins do not. Banks keep the deposit and the client; what changes is that the money stops sitting still.

It is also a new deposit channel for banks. Platforms built on tokenised deposits can bring them customers from segments and countries they would struggle to reach on their own, without the cost of branches or retail distribution. For a bank, that is growth on the funding side of the balance sheet, not just another fee line.

The opportunity is largest where today’s model works worst. In corridors such as India, Latin America and the Caribbean, FX costs are high, dealer appetite is low and demand for multicurrency savings is growing fast. Regulators in jurisdictions such as India’s GIFT City are already building frameworks for exactly this kind of infrastructure.

The 21 institutions are right that money is moving on chain. The question is whether FX moves with it, or whether the industry rebuilds the dollar rails and leaves the currency pair running on the old ones. Tokenising a currency is the easy part. Tokenising the exchange between currencies is where the value lies.