Crypto: from speculative asset to a new financial system

Something quite important is happening in cryptocurrency, and it is easy to miss if you spend too much time watching the price of bitcoin.

For most of crypto's relatively short history, the discussion has been dominated by price. Bitcoin goes up. Bitcoin crashes. Ethereum rallies. Ethereum collapses. Somebody launches another token. Somebody loses a fortune. Somebody else makes one. Regulators complain, exchanges fail, markets recover and the cycle begins again.

That world has not disappeared. Crypto remains volatile and, as the latest market turmoil demonstrates, bitcoin and Ethereum can still behave more like speculative risk assets than money. We have seen plenty of examples where a change in interest-rate expectations, equity markets or global risk appetite sends crypto sharply lower alongside everything else. Indeed, one of the interesting developments of recent years is that crypto has become sufficiently integrated into global markets that it increasingly reacts to the same macroeconomic forces as other financial assets.

But, underneath all of that noise, something much more interesting is happening.

Crypto is becoming finance or, perhaps more accurately, some of the technologies developed by crypto are gradually becoming part of the infrastructure of finance.

There is a big difference.

The original cryptocurrency proposition was essentially that we could create money outside the banking system.

Bitcoin offered a decentralised digital asset with no central bank, no commercial bank and no government controlling its issuance. That remains an extraordinary technological and economic experiment, but it is not necessarily the architecture that will underpin everyday digital finance.

Stablecoins increasingly look like a much stronger candidate.

The reason is obvious.

Most people do not want the money they use to buy lunch with to rise or fall ten per cent between breakfast and dinner. They want £10 to remain roughly £10 and $100 to remain roughly $100. Bitcoin may be digital gold, a speculative asset, a store of value or something else entirely depending upon your perspective, but stablecoins are trying to solve a very different problem. They are trying to make money programmable … and that is where things become interesting.

Regulation is no longer trying to stop crypto. It’s trying to institutionalise it.

One of the clearest signs of maturity is regulation.

For years, the cryptocurrency industry complained that governments would not provide regulatory clarity. Regulators responded that crypto firms were asking for legitimacy without accepting the responsibilities imposed upon banks, payment companies, investment firms and other regulated financial institutions.

That argument is increasingly yesterday's argument.

Europe has MiCA (Markets in Crypto-Assets). The United States has the GENIUS Act (the Guiding and Establishing National Innovation for U.S. Stablecoins Act) framework for stablecoins. Britain has completed important parts of its cryptoasset regulatory architecture, with its fuller regime scheduled to come into force in October 2027. The regulatory question is therefore shifting from should we regulate crypto? towards how do these regulated digital asset systems work together?

That is a profound change.

Crypto wanted to become part of finance and governments are effectively saying: fine, but if you want to become finance, you have to play by financial rules.

Europe is demonstrating what that means.

The end of MiCA's transitional arrangements has produced a brutal shake-out.

Compliance Week reports that fewer than ten per cent of crypto firms operating in the European Union before the July deadline had received authorisation to continue, with an estimated 3,000 firms expected to cease servicing EU clients from within the single market. (Compliance Week)

Another assessment puts the numbers somewhat differently, reporting that around 244 of more than 1,200 firms operating under previous national regimes had secured MiCA authorisation.

Either way, the direction is unmistakable.

Europe is moving from a crypto market where thousands of companies could operate under fragmented national arrangements towards one where fewer firms operate within a much clearer regulatory perimeter.

Some people in crypto will view that as regulatory overkill. Maybe it is. Nevertheless, it is also what happens when an industry grows up.

Banking licences are difficult to obtain. Payment licences are difficult to obtain. Securities businesses are heavily regulated. There are capital requirements, liquidity requirements, governance requirements, anti-money-laundering requirements, reporting requirements and consumer-protection rules.

If cryptocurrency becomes part of mainstream finance, why would we expect it to be different?

The next problem is interoperability

The really interesting question is therefore no longer whether America, Britain and Europe will regulate digital assets. They are doing it. The question is whether those regulatory systems can communicate with each other.

Imagine a regulated sterling stablecoin issued in Britain, held by somebody in France and used to pay a company in America. Technically, the transaction could move across a blockchain almost instantly. Legally and regulatorily, however, it potentially crosses several different regimes covering reserves, custody, redemption rights, reporting, insolvency and consumer protection. We have therefore recreated a familiar problem. The internet is global. Money is national.

I have been banging on about this for years because it is fundamental to understanding financial technology.

Information travels globally at almost zero marginal cost because the internet was designed as a global network. Money does not behave that way because money is surrounded by national laws, regulations, currencies, banking systems and political structures.

Stablecoins potentially create a bridge between those two worlds.

The technology allows value to behave more like information, but regulation determines whether that value can actually travel.

That is why cross-border regulatory coordination may become one of the defining financial issues of the next few years.

Encouragingly, Britain and America are already discussing interoperable approaches to stablecoins through the Transatlantic Taskforce for Markets of the Future, a joint U.S.–UK initiative created to align financial regulations, boost capital market competitiveness, and cooperate on digital assets.

We do not need identical regulation everywhere. That would probably be impossible. What we need is regulatory interoperability, where jurisdictions recognise that another country's regime provides sufficiently comparable protections to allow regulated digital money to move between them.

That begins to look like the foundations of a global digital financial system.

Stablecoins are moving into banking

Then look at what financial companies are actually doing.

Chime is exploring bringing stablecoins directly into its consumer banking app, potentially allowing customers to hold and transfer them without needing to open an account with a separate cryptocurrency exchange.

That is far more significant than another crypto exchange listing another token.

Think about the change in user behaviour.

Today, many people still think of cryptocurrency as somewhere you go. You open Coinbase, Kraken or another crypto platform because you want to do something involving crypto.

Tomorrow there may be nowhere to go.

The stablecoin wallet is simply inside your banking application.

You might not even particularly care that you are using a stablecoin. You just know that sending $500 to someone overseas happens immediately and cheaply.

That is exactly what happened with most important financial technologies. Consumers don't wake up excited about APIs, cloud computing, tokenisation or ISO 20022. They care that something works.

The technology disappears into the service.

Stablecoins are beginning to disappear into finance.

Then add AI

This becomes even more interesting when stablecoins collide with artificial intelligence.

A recent Forrester Consulting study of 521 financial-services technology and strategy decision-makers found that 70 per cent identified stablecoins as an important organisational focus.

Cross-border transactions were cited by 71 per cent as an objective, while 65 per cent believed stablecoin offerings would soon become table stakes for financial providers. More than half were already using stablecoins for treasury and cash-management purposes.

Now combine that with agentic AI.

AI agents do not particularly care whether a payment travels through a card network, bank account or blockchain. They care about whether they are authorised to transact, whether the recipient can be trusted, whether sufficient funds are available and whether the transaction can be completed.

Stablecoins are particularly interesting in that environment because they are programmable, digital, potentially instantaneous and available continuously.

We are already seeing the pieces coming together. Visa has been developing AI, token and stablecoin capabilities alongside infrastructure for agentic commerce. Santander and Mastercard completed a controlled end-to-end payment initiated by an AI agent earlier this year, while Mastercard's Agent Pay for Machines supports stablecoins alongside traditional bank accounts and card rails for automated machine-to-machine payments.

This takes us somewhere fundamentally different from the crypto conversation of a decade ago.

We are no longer talking about people buying bitcoin.

We are talking about machines using digital money.

Imagine an AI agent negotiating the purchase of computing capacity from another AI agent. Or an autonomous vehicle paying another machine for charging. Or a corporate treasury agent continuously moving liquidity between accounts, currencies and markets. Or an SME agent paying an overseas supplier the moment goods are verified as received.

Those transactions may involve thousands or millions of tiny economic decisions happening continuously.

The twentieth-century banking infrastructure was not designed for that.

Programmable digital money is.

Crypto is splitting into two worlds

This is why I increasingly think we need to stop discussing "crypto" as though it were one thing.

It isn't.

One part is the crypto asset market: bitcoin, Ethereum and thousands of other tokens whose prices rise and fall according to liquidity, sentiment, speculation, technology and macroeconomic conditions.

That world will continue. It may become enormous. Bitcoin may become digital gold, an institutional reserve asset or something completely different. Who knows?

Alongside it, however, another world is emerging.

It consists of stablecoins, tokenised deposits, tokenised securities, digital identity, smart contracts, programmable payments, blockchain settlement and eventually AI agents capable of initiating economic activity themselves.

That is less about cryptocurrency as an asset class and much more about crypto technology as financial infrastructure.

And that distinction matters enormously.

The latest bitcoin crash does not tell us whether stablecoins will transform cross-border payments any more than a fall in Apple's share price tells us whether smartphones are useful.

Price and infrastructure are different things.

In fact, the volatility of bitcoin arguably strengthens the case for stablecoins because it demonstrates why mainstream commerce requires digital money whose value does not jump around dramatically.

The new financial architecture

Put all these developments together and a picture begins to emerge.

We have regulated stablecoins representing money; blockchains providing programmable settlement infrastructure; tokenisation representing assets; digital identity and cryptography establishing who or what is authorised to transact; regulatory frameworks establishing trust; and, increasingly, we have AI agents making decisions about when, where and why money should move.

That begins to resemble a financial system.

It is not replacing banking tomorrow.

Banks have balance sheets, credit creation, deposit franchises, risk management, regulatory protection and centuries of institutional development behind them. Equally, Visa, Mastercard, SWIFT and the existing payment infrastructures are not suddenly disappearing.

What is happening is more subtle and, in the long term, potentially more important.

The financial system is absorbing the technologies created around cryptocurrency.

This is usually how technological revolutions mature. The revolutionary language disappears and the useful technology survives.

We stopped talking about "internet banking" because almost all banking became internet banking. We stopped talking about mobile banking as something separate because the mobile became the primary interface to the bank.

Eventually we may stop talking about crypto payments and stablecoin payments for exactly the same reason.

They will simply be payments.

This article is based on these latest headlines:

From MiCA to GENIUS: Why Crypto's Next Regulatory Test Is Cross-Border Coordination

Thousands of crypto firms miss EU license deadline

Bitcoin and Ethereum Nosedive as Market Panic Spreads: Have Bear Sentiments Finally Prevailed?

AI-Stablecoin Convergence Set to Transform Payments and Banking

Fintech Chime Explores Stablecoins as New Feature on Its App