New markets, new users, new revenue—blockchain is safeguarding the future development of traditional financial institutions.
Authors: Pyrs Carvolth & Maggie Hsu & Guy Wuollet
Translation: Deep Tide TechFlow
Blockchain is a brand new layer for settlement and ownership, characterized by programmability, openness, and a default global nature, capable of stimulating new forms of entrepreneurship, creativity, and infrastructure development. The overall growth trend of monthly active crypto addresses aligns with the trajectory of internet users reaching a billion, while stablecoin trading volume has surpassed traditional fiat trading volume. Relevant laws and regulations are gradually catching up, while crypto companies are being acquired or going public.
The combination of regulatory clarity and competitive pressure, along with the significant enhancement of business outcomes through blockchain and the increasing maturity of technology, is driving the traditional finance (TradFi) sector to urgently embrace blockchain technology as its core infrastructure. Traditional financial institutions are re-evaluating blockchain, viewing it as a transparent and secure value transfer tool that not only provides future assurance for institutions but also unlocks new sources of growth.
Executive teams are posing a new question: not "if" or "when," but "how now" to make blockchain have a real impact on business. This question is driving a wave of exploration, resource allocation, and organizational restructuring. As institutions begin to make real investments in this area, two key themes emerge:
The business case for blockchain-driven strategy
The technical foundation for implementing the strategy
This guide aims to help answer these questions. It is not a comprehensive survey of all blockchain use cases or protocols, but rather an action guide from zero to one, clarifying key early decisions, sharing emerging patterns, and helping to redefine blockchain as no longer symbolic hype but as core infrastructure. With the right application, blockchain can not only provide future assurance for traditional financial institutions but also unlock new growth potential.
Due to differences in how banks, asset management companies, and fintech companies (including the increasingly well-known PayFi) interact with end users, traditional infrastructure limitations, and regulatory requirements, we have categorized the following content to provide solid and actionable understanding of blockchain applications for leaders in these industries, helping them move from conceptual design to actual product implementation.
Banks
Banks may seem modern, but they still operate on outdated software systems—primarily COBOL, a programming language that originated in the 1960s. Despite its age, it still supports systems that comply with banking regulations. When customers click on flashy web pages or use mobile apps, these front-end interfaces are actually just translating operations into instructions for decades-old COBOL programs. Blockchain offers a way to upgrade these systems without compromising regulatory integrity.
By integrating and leveraging blockchain technology, banks can move away from an internet era akin to "bookstores with websites" towards a model similar to Amazon: adopting modern databases and better interoperability standards. Asset tokenization—whether stablecoins, deposits, or securities—could occupy a central position in future capital markets. To avoid being left behind in this transformation, adopting the right systems is just the first step. Banks need to truly master and lead this change.
On the retail side, banks are exploring ways to provide customers access to crypto assets, such as offering access to Bitcoin and other digital assets through their affiliated brokerage firms as part of the overall customer experience. This access can be indirect through exchange-traded products (ETPs) or, as the U.S. Securities and Exchange Commission (SEC) abolishes accounting rule SAB 121 (which previously effectively prevented U.S. banks from participating in digital asset custody), eventually direct participation. However, in the institutional and backend aspects, the potential of blockchain is even greater, primarily focused on three emerging use cases: tokenized deposits, reassessment of settlement infrastructure, and collateral liquidity.
Use Cases
Tokenized deposits represent a fundamental shift in how commercial banks operate with money. This is not a speculative concept; tokenized deposits are already in practical use, such as JPMorgan's JPMD token and Citibank's Token Services for Cash project. These tokens are not synthetic stablecoins or digital assets backed by government bonds, but rather are backed by real fiat currency held in commercial bank accounts, presented as regulated tokens at a 1:1 ratio, and can be traded on private or public chains.
Tokenized deposits can reduce settlement delays from days to minutes or seconds, applicable in areas such as cross-border payments, cash management, and trade finance. As a result, banks can lower operational costs, reduce reconciliation work, and enhance capital efficiency.
Additionally, banks are actively reassessing their settlement infrastructure. Several tier-one banks are participating in distributed ledger settlement experiments, often in collaboration with central banks or blockchain-native companies, to address the inefficiencies of the "T+2" system. For example, zkSync (zkSync is an Ethereum Layer 2 solution that optimizes Ethereum performance by processing transactions off-chain) is working with global banks to demonstrate near-real-time settlement in cross-border payments and intraday repurchase agreement (repo) markets. The business impacts of these practices include improved capital efficiency, optimized liquidity usage, and reduced operational costs.
Blockchain and tokens can also enhance banks' ability to quickly and efficiently transfer assets between business units, geographic regions, and counterparties, known as "collateral liquidity." The U.S. Depository Trust & Clearing Corporation (DTCC) recently launched the Smart NAV pilot project aimed at modernizing collateral liquidity through tokenized Net Asset Value (NAV) data. The pilot demonstrated how collateral can operate like a highly liquid programmable currency, which is not only an upgrade for bank operations but also an innovation supporting its broader strategy. Improving collateral liquidity allows banks to lower capital buffers, access a broader liquidity pool, and be more competitive in capital markets with a streamlined balance sheet.
For all these use cases—tokenized deposits, reassessment of settlement infrastructure, and collateral liquidity—banks need to make key decisions, starting with whether to use private or public chain networks.
Choosing Blockchain
In the past, banks were prohibited from accessing public chain networks, but with the latest guidance from banking regulators, including the Office of the Comptroller of the Currency (OCC), this restriction has been relaxed, expanding the possibilities for blockchain applications. For example, the collaboration between R3 Corda and Solana is a landmark case. This partnership will allow Corda's permissioned network to settle assets directly on Solana.
Using tokenized deposits as a use case, we will discuss early decisions in product launch, from choosing a blockchain to the level of decentralization. While there are many methods for choosing a blockchain, building products on decentralized public chains has several advantages:
Neutral developer platform: Provides a neutral developer platform where anyone can contribute, which not only increases trust but also expands the ecosystem supporting the product.
Accelerated product iteration: Because anyone can contribute, the ability to accelerate product iteration through the use, adjustment, and combination of others' components (i.e., modular composability).
Enhanced platform trust: Top developers are more likely to choose decentralized blockchains because these platforms do not suddenly change rules or conduct censorship, ensuring their products can remain profitable.
In contrast, centralized public chains may lose developers' trust due to rule changes or application censorship, while non-programmable blockchains cannot enjoy the advantages of modular composability.
Although the current speed of blockchain is still slower than centralized internet services, performance has significantly improved over the past few years. Layer 2 rollups on Ethereum (various types of off-chain scaling solutions), such as Coinbase's Base, and faster Layer 1 blockchains like Aptos, Solana, and Sui have already achieved transaction fees below one cent and kept latency under one second.
Considerations of Decentralization
When banks choose a blockchain, they must weigh the appropriate level of decentralization based on specific application scenarios. The Ethereum blockchain protocol and its community prioritize ensuring that anyone globally can independently verify every transaction on the chain. In contrast, Solana relaxes this restriction by increasing the hardware requirements for validation, significantly enhancing the chain's performance.
Moreover, even in the realm of public chains, banks need to carefully consider the extent of their centralization impact. For instance, if the number of validating nodes in the network is relatively small, and the foundation of that network controls a large proportion of the validating nodes, then the chain is effectively subject to significant centralization, and the level of decentralization may be lower than it appears. Similarly, if entities associated with the public network (such as foundations or labs) hold a large number of tokens, they may leverage these tokens to influence or control network decisions.
Privacy Considerations
Privacy and confidentiality are critical considerations for any bank-related transaction, partly due to legal regulations. The rise and use of zero-knowledge proofs can help protect sensitive financial data even on public chains. This system can prove that an institution possesses certain necessary information without revealing specific details. For example, it can prove that someone is over 21 years old without disclosing their birth date or place of birth.
Zero-knowledge-based protocols (such as zkSync) can facilitate private on-chain transactions while meeting regulatory compliance requirements. Banks need to be able to view and roll back transactions when necessary, and a "view key" (developed by Aleo, a privacy-supporting L1 key) can provide access to transactions for regulators and auditors while maintaining privacy.
Solana's token extension feature offers compliance capabilities, making privacy features more flexible. Avalanche's Layer 1 has a unique capability to enforce verification logic encoded through smart contracts.
These privacy features also apply to one of the most popular blockchain applications today—stablecoins, which have become one of the cheapest ways to send one-dollar remittances. In addition to reducing costs, they offer permissionless programmability and scalability—allowing anyone to integrate fast global currency into products while developing new fintech functionalities. Following the introduction of the GENIUS Act, banks face higher demands for transparency in stablecoin transactions and reserves. Companies like Bastion and Anchorage are providing transparent solutions for transactions and reserves to help banks meet this demand.
Custody Strategy Choices
When formulating a custody strategy for crypto assets (i.e., who will manage and store the crypto assets), most banks tend to collaborate with custody service providers rather than manage crypto assets themselves. Some custody banks, such as State Street, are actively exploring the possibility of offering self-custody services for crypto.
If choosing to collaborate with a custody service provider, banks need to focus on the following factors: licensing and certification, security, and operational practices.
In terms of licensing and certification, custody institutions must adhere to strict regulatory frameworks, such as federal or state banking or trust licenses, virtual currency business licenses, state trading licenses, and compliance certifications like SOC 2. For example, Coinbase operates its custody business under a New York trust license, Fidelity's custody services are provided by Fidelity Digital Asset Services, while Anchorage manages its custody business through a federal OCC license.
Regarding security, custody institutions must possess robust encryption technology, hardware security modules (HSMs, to prevent unauthorized access, data extraction, or tampering), and multi-party computation (MPC, where private keys are distributed among multiple parties to enhance security). These measures effectively guard against hacking and operational failures.
In terms of operational practices, custody institutions should adopt other best practices, such as asset segregation to protect client assets from bankruptcy risks; providing transparent proof of reserves to facilitate user and regulatory verification of reserves against liabilities; and conducting regular third-party audits to prevent fraud, errors, or security vulnerabilities. For instance, Anchorage uses biometric multi-factor authentication and geographically distributed key sharding technology to enhance governance capabilities. Additionally, custody institutions should establish clear disaster recovery plans to ensure business continuity.
What role do wallets play in custody decisions? Banks are increasingly recognizing that crypto wallet integration is a strategic necessity for maintaining competitiveness, especially in the face of emerging banks and centralized exchanges as auxiliary service providers. For institutional clients (such as hedge funds, asset management companies, or corporations), wallets are positioned as enterprise-level tools for custody, trading, and settlement. For retail clients (such as small businesses or individuals), wallets serve as embedded features to help users access digital assets. In both cases, wallets are not merely simple storage solutions but are key tools for secure and compliant access to assets (such as stablecoins or tokenized assets) through private keys.
“Custodial wallets” and “self-custodial wallets” represent two extremes in terms of control, security, and responsibility. Custodial wallets are managed by third-party services that help users safeguard their private keys, while self-custodial wallets are managed by users themselves. This distinction is crucial for banks to meet varying needs—from the strict compliance requirements of institutional clients to the autonomy sought by high-end clients, and the convenience preferred by mainstream retail clients. Custody service providers like Coinbase and Anchorage have integrated wallet solutions to meet institutional demands, while companies like Dynamic and Phantom are helping banks upgrade their applications by providing modern wallet functionalities with complementary products.
Asset Management Companies
For asset management companies, blockchain technology can expand product distribution channels, automate fund operations, and unlock on-chain liquidity.
Tokenized funds and real-world assets (RWAs) provide new packaging forms for asset management products, making them more accessible and combinable, especially to meet the growing demand from global investors for 24/7 access, instant settlement, and programmable trading. At the same time, on-chain tracks can significantly simplify backend workflows, from net asset value (NAV) calculations to equity structure management. Ultimately, these innovations lead to lower costs, faster time-to-market, and more differentiated product offerings—these advantages will continue to compound in a competitive market.
Asset management companies are focusing on enhancing product distribution and liquidity, particularly for products that attract capital from digital-native audiences. By launching tokenized stock categories on public chains, asset management companies can reach a new investor base without sacrificing the record-keeping functions of traditional transfer agents. This hybrid model can leverage the unique new markets, features, and functionalities of blockchain while maintaining regulatory compliance.
Blockchain Innovation Trends
Tokenized U.S. Treasuries and money market funds have grown from nearly zero to an asset under management (AUM) of tens of billions, including BlackRock's BUIDL (BlackRock U.S. Dollar Institutional Digital Liquidity Fund) and Franklin Templeton's BENJI (representing shares of Franklin's on-chain U.S. government money fund). These financial instruments are similar to yield-stablecoins but possess institutional-level compliance and asset backing.
Through blockchain technology, asset management companies can meet the needs of digital-native investors, providing greater flexibility, such as achieving automatic portfolio rebalancing or yield layering through asset segmentation and programmability.
On-chain distribution platforms are becoming increasingly mature. Asset management companies are collaborating with blockchain-native issuers and custodians, such as Anchorage, Coinbase, Fireblocks, and Securitize, to tokenize fund shares, automate investor onboarding processes, and expand their coverage and investor categories globally.
On-chain transfer agents manage KYC/AML, investor whitelists, transfer restrictions, and cap tables natively through smart contracts, thereby reducing the legal and operational overhead of fund structures.
Leading custodians ensure the secure custody, transferability, and compliance of tokenized fund shares, increasing distribution options while meeting internal risk and audit standards.
Issuers aim to use **their funds as the foundational assets of *Decentralized Finance* (DeFi)** and access on-chain liquidity to expand their Total Addressable Market (TAM) and enhance Assets Under Management (AUM). By listing tokenized funds on protocols like Morpho Blue or integrating with Uniswap v4, asset management companies can tap into new liquidity. In mid-2024, BlackRock's BUIDL fund was introduced as a yield-bearing collateral option on Morpho Blue, marking the first instance of traditional asset management products achieving composability in DeFi. Recently, Apollo's tokenized private credit fund (ACRED) was also integrated into Morpho Blue, launching a new yield enhancement strategy that could not be realized in the off-chain world.
The ultimate result of collaborating with DeFi is that asset management companies transition from expensive and slow fund distribution models to direct wallet access, creating new yield opportunities and capital efficiency for investors.
When issuing tokenized Real World Assets (RWAs), asset managers have largely moved beyond the dilemma of choosing between permissioned networks and public chains. In fact, they are clearly leaning towards adopting public chains and multi-chain strategies to achieve broader distribution of their products.
For example, Franklin Templeton's tokenized money market fund (represented by the BENJI token) is distributed across blockchain platforms such as Aptos, Arbitrum, Avalanche, Base, Ethereum, Polygon, Solana, and Stellar. By collaborating with well-known public chains, the liquidity of these products is also enhanced by blockchain ecosystem partners (such as centralized exchanges, market makers, and DeFi protocols). Companies like LayerZero further support these multi-chain strategies by enabling seamless cross-chain connectivity and settlement.
Tokenized Real World Assets (RWAs)
We observe a rising trend in the tokenization of financial assets (such as government securities, private sector securities, and stocks), rather than physical assets like real estate or gold (although these assets can also be tokenized and there are existing cases).
In the context of tokenizing traditional funds—such as money market funds backed by U.S. Treasuries or similar stable assets—the distinction between "wrapped tokens" and "native tokens" becomes particularly important. This distinction primarily involves how tokens represent ownership, the primary record-keeping location of shares, and the degree of integration with the blockchain. Both models drive tokenization by connecting traditional assets with the blockchain, but wrapped tokens prioritize compatibility with traditional systems, while native tokens are dedicated to achieving a comprehensive on-chain transformation. To clarify the differences between wrapped tokens and native tokens, here are two typical cases.
BUIDL is a wrapped token that tokenizes shares of a traditional money market fund that invests in cash, U.S. Treasuries, and repurchase agreements. The BUIDL token in ERC-20 form digitizes these shares for on-chain circulation, but the underlying fund still operates as an off-chain entity regulated by U.S. securities laws. Ownership is limited to qualified institutional investors who have been whitelisted, and the minting and redemption of tokens are managed by custodians Securitize and BNY Mellon.
BENJI, on the other hand, is a native token representing shares of the Franklin OnChain U.S. Government Money Fund (FOBXX), which has a size of $750 million and invests in U.S. government securities. Under the BENJI framework, the blockchain serves as the official record-keeping system for processing transactions and recording ownership, making it a native token rather than a wrapped token. Investors can subscribe by exchanging USDC through the Benji Investments app or institutional portal, and the token supports direct on-chain peer-to-peer (P2P) transfers.
In the process of issuing tokenized funds, asset management companies typically require a digital transfer agent to adapt the functions of traditional transfer agents to the blockchain environment. Many institutions choose to collaborate with Securitize, which not only assists in the issuance and transfer of tokenized funds but also ensures the accuracy and compliance of the books and records. These digital transfer agents enhance efficiency through smart contracts and expand the possibilities for traditional assets. For example, Apollo's ACRED is a wrapped token that provides access to an off-chain diversified credit fund and optimizes its lending and yield strategies through DeFi integration. In this process, Securitize assisted in creating sACRED (the ERC-4626 compliant version of ACRED), allowing investors to implement leveraged looping strategies through Morpho (a decentralized lending protocol).
Compared to wrapped tokens, which require hybrid systems to coordinate on-chain actions with off-chain records, native tokens achieve further innovation through on-chain transfer agents. Franklin Templeton has closely collaborated with regulators to develop a proprietary on-chain transfer agent that enables instant settlement and 24/7 transfers for BENJI. A similar case is the Opening Bell launched by Superstate in collaboration with Solana, which also supports 24/7 transfers through its internal on-chain transfer agent.
Where should wallets fit in? Asset management companies should not view wallets—the tools through which clients access their products—as a secondary issue. Even if they choose to "outsource" issuance and distribution to transfer agents and custodians, asset management companies still need to carefully select and integrate wallets. These decisions will impact every aspect from investor adoption to regulatory compliance.
Many asset management companies often adopt "Wallet-as-a-Service" solutions to generate wallets for investors. These wallets are typically custodial, with service providers automatically executing KYC and transfer agent restrictions. However, even if the transfer agent "owns" the wallet, asset management companies still need to embed the relevant APIs into their investor portals and choose software development kits (SDKs) and compliance modules that align with their product roadmaps.
Other key considerations for tokenized funds involve fund operations. Asset managers need to determine the level of automation for net asset value (NAV) calculations, such as whether to use smart contracts for intraday transparency or rely on off-chain audits to determine the final daily NAV. Such decisions depend on the type of token, the nature of the underlying assets, and the specific compliance requirements of the fund. Redemption mechanisms are another critical consideration; tokenized funds can achieve faster exits compared to traditional systems, but they also need built-in restrictions to manage liquidity. In these scenarios, asset management companies often rely on transfer agents for advice or integration with key service providers (such as oracle services, wallets, and custodians).
Additionally, special attention must be paid to the regulatory status of custodians in custody decisions. According to the U.S. Securities and Exchange Commission (SEC) custody rules, qualified custodians must be qualified and are obligated to ensure the safety of client assets.
Fintech Companies
Fintech companies, especially those focused on payments and consumer finance (referred to as "PayFi"), are leveraging blockchain technology to create faster, lower-cost, and globally scalable services. In a competitive market where innovation speed is crucial, blockchain provides ready-made infrastructure for identity verification, payments, credit, and custody, often requiring fewer intermediaries.
These fintech companies are not trying to replicate existing systems but are aiming for leapfrog advancements. This makes blockchain particularly attractive for cross-border applications, embedded finance, and programmable money. For example, Revolut's virtual card allows users to make everyday purchases with cryptocurrency; Stripe's stablecoin financial accounts enable business users to hold account balances in stablecoins across 101 countries.
For these companies, blockchain is not just an improvement in infrastructure or efficiency; it is about building new types of services that were previously unattainable.
Tokenization enables fintech companies to embed real-time, 24/7 global payments directly on-chain while unlocking new fee services around issuance, exchange, and capital flow. Programmable tokens also support native functionalities such as staking, lending, and liquidity provision, integrating these features directly into applications to enhance user engagement and create diversified revenue streams. All of this helps companies retain existing customers and attract new ones in an increasingly digital world.
Stablecoins, tokenization, and verticalization are becoming significant trends in industry development.
Three Key Trends
Stablecoin payment integration is revolutionizing payment channels, providing real-time transaction settlement services 24/7/365, breaking through the limitations of traditional payment networks constrained by bank operating hours, batch processing, and jurisdictional restrictions. By bypassing traditional card networks and intermediaries, stablecoin channels significantly reduce transaction fees, foreign exchange costs, and service charges, especially in peer-to-peer (P2P) and business-to-business (B2B) scenarios.
With the help of smart contracts, businesses can embed functionalities such as conditions, refunds, royalties, and installment payments directly into the transaction layer, opening up new profit models. This has the potential to transform companies like Stripe and PayPal from aggregators of banking services into platform-native programmable cash issuers and processors.
Global remittances continue to be plagued by high costs, long delays, and opaque foreign exchange spreads. Fintech companies are leveraging blockchain settlement technology to redefine the way cross-border capital flows. By using stablecoins (such as USDC on Solana or Ethereum, or USDT on Bitcoin), businesses can significantly reduce remittance costs and settlement times. For example, Revolut and Nubank have partnered with Lightspark to enable real-time cross-border payments on the Bitcoin Lightning Network.
By storing value in wallets and tokenized assets rather than through banking channels, fintech companies gain greater control and speed, especially in regions where the banking system is unreliable. For companies like Revolut and Robinhood, this transformation positions them as global capital flow platforms, rather than just shells of digital banks or trading applications. For global payroll service providers like Deel and Papaya Global, offering options to pay employees in cryptocurrency or stablecoins is becoming increasingly popular, as it enables instant payments.
Crypto-native fintech companies are focusing on underlying infrastructure, launching their own blockchains (L1 or L2) or acquiring companies that can reduce reliance on third parties. Strategies like those of Coinbase's Base, Kraken's Ink, and Uniswap's Unichain—all built on the OP Stack—are akin to transitioning from developing applications on Apple iOS to owning the entire mobile operating system, reaping the substantial benefits of platform empowerment.
By launching their own L2, fintech companies like Stripe, SoFi, or PayPal can capture value at the protocol level to complement their front-end products. Autonomous chains can provide customized performance, whitelisting features, KYC modules, etc., which are crucial for regulated application scenarios and enterprise clients.
By utilizing OP Stack on Optimism (an Ethereum L2 blockchain) to launch a dedicated "payment" blockchain, fintech companies can transform from a closed ecosystem to a diversified, open financial innovation market. This not only attracts other developers and businesses to participate in its ecosystem development but also creates revenue through network effects.
Many fintech companies typically start by offering basic crypto services, such as buying, selling, sending, receiving, and holding a small number of tokens, gradually expanding into other services like yield and lending. SoFi recently announced plans to re-enable crypto trading after exiting the space in 2023 due to regulatory restrictions. One advantage of crypto trading is that it allows SoFi's customers to participate in global remittances, while the greater potential lies in combining its core lending business with on-chain lending (similar to Morpho's collaboration with Coinbase for Bitcoin collateralized lending) to optimize terms and enhance transparency.
Building Dedicated Blockchains
An increasing number of crypto-native "fintech companies"—such as Coinbase, Uniswap, and World—are building dedicated blockchains to customize infrastructure for specific products and users, reducing costs, enhancing decentralization, and capturing more value within their ecosystems. For example, Uniswap's Unichain can integrate liquidity and reduce fragmentation, making decentralized finance (DeFi) faster and more efficient. Similar vertical integration strategies are applicable to fintech companies looking to enhance user experience and internalize more value, such as Robinhood's recently announced L2 blockchain plan. For payment companies, dedicated chains may focus on user experience (UX), creating infrastructure that can abstract or hide crypto-native operations while optimizing stablecoin applications and compliance features.
When building dedicated blockchains, different levels of complexity come with different trade-offs, and here are some key considerations.
L1 is the heaviest burden among all partnerships, the most complex to build, and also benefits the least from any partnership. However, L1 also allows fintech companies the greatest control over scalability, privacy, and user experience. For example, companies like Stripe can embed native privacy features to meet global regulatory requirements or customize ultra-low latency consensus mechanisms for high-frequency merchant payments.
One of the core challenges in building a new L1 is the economic security of the launch chain—attracting a large amount of staked capital to ensure network security. EigenLayer provides democratized access to high-quality security by transforming isolated and capital-intensive L1 models into shared, efficient models, which can accelerate blockchain innovation while reducing the failure rate of development.
L2 is often a very good compromise, allowing fintech companies to achieve a certain degree of control through a single sequencer while accelerating the development process. The sequencer is responsible for collecting user transactions, determining the order of processing, and submitting them to L1 for final validation and storage. The single sequencer design not only ensures reliability and fast performance but also captures more revenue while simplifying operations. Additionally, by utilizing Rollup-as-a-Service (RaaS) services on Ethereum or joining established L2 alliances like Optimism Superchain, fintech companies can leverage shared infrastructure, standardized resources, and community support to quickly create their own L2.
For example, PayPal could build a "payment superchain" based on OP Stack, optimizing its PYUSD stablecoin to support real-time scenarios, such as in-app transfers on Venmo. They could also enable seamless cross-chain bridging of PYUSD within the Optimism Superchain ecosystem, initially using a centralized sequencer to provide predictable low fees (e.g., less than $0.01 per transaction) while inheriting Ethereum's security. Furthermore, by collaborating with RaaS providers (like Alchemy and its partner Syndicate), PayPal could significantly shorten deployment times from months or even years to weeks.
The simplest approach is to deploy smart contracts on existing blockchains, which is also a strategy that companies like PayPal have already adopted. Blockchains like Solana are particularly attractive to fintech companies looking to quickly enter the L1 blockchain space due to their mature scale, broad user base, and unique assets.
Open and Non-Open
To what extent should fintech applications and/or blockchains achieve openness? The core advantage of blockchain lies in composability—the ability to combine and remix protocols to create an ecosystem where the overall value far exceeds the sum of its parts.
If an application or blockchain is non-open, composability will be limited, and the likelihood of innovative applications emerging will significantly decrease. Take PayPal as an example; choosing to build a permissionless chain not only aligns with the trend of fintech moving towards open ecosystems but also helps PayPal achieve profitability through its competitive barriers. Global developers can leverage PayPal's compliance layer to attract more users, and this user growth will drive increased network activity, bringing more value to PayPal.
Unlike L1 blockchains (like Ethereum), L2 offloads much of the work through sequencers, achieving higher throughput while still inheriting the security attributes (and advantages) of L1. As mentioned above, the single sequencer design of rollups (like Soneium) provides an interesting development path, where operators can influence transaction latency and impose restrictions on specific transactions, thus finding a balance between openness and control.
Building blockchains based on modular frameworks (like OP Stack) not only drives additional revenue growth but also expands the utility of core products. For example, with PayPal and its PYUSD stablecoin, having an autonomous L2 can not only generate sequencer revenue but also tightly integrate the chain's economic model with PYUSD. As the initial sequencer operator, PayPal can collect a portion of transaction fees (also known as "gas fees"), similar to the revenue Coinbase's OP Stack L2 Base earns from its sequencer. By modifying OP Stack's gas payments to accept PYUSD, PayPal can offer "free" transactions (e.g., withdrawal fees) to existing PayPal users and enhance the speed of use cases like Venmo transfers and cross-border remittances. Similarly, PayPal can incentivize developer activity by offering low-cost or even zero-cost developer fees and charging a modest premium on integrated services like the PayPal Wallet API or compliance oracles.
In the rapidly evolving crypto world, banks, asset management companies, and fintech firms often have questions when exploring blockchain technology: how to understand this technology and its potential opportunities? Here are our core recommendations:
Start with customer segmentation and tailor solutions. Customer needs are diverse—institutional users require compliance-heavy, custodial setups, while retail users prioritize convenience and self-custody options for everyday use.
View security and compliance as non-negotiable bottom lines. Almost all counterparties, whether regulators or clients, have clear expectations regarding security and compliance.
Accelerate layout and innovation through collaboration. There is no need to do everything in-house; partnering with experts in specific fields can shorten time to market and leverage innovative solutions to create new revenue opportunities.
Blockchain can not only become the core infrastructure for traditional financial institutions but also help them explore new markets, attract new users, and uncover new revenue sources, paving the way for future development.
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