Financial entities and major banks had a decade to experiment with crypto rails for cross-border and interbank settlements. They could have launched pilots, accumulated internal expertise, and prepared relevant models ready for real deployment once regulators gave their assent. They did not do so.
Synopsis
Banks possessed ten years to construct settlement pipelines based on blockchain, yet largely took no action, leaving the world stuck with sluggish and expensive legacy systems that generate unnecessary economic friction.
Blockchain reduces settlement durations, rewrites liquidity dynamics, and unlocks real-time capital mobility—advantages already proven in crypto markets and particularly significant for emerging economies.
Until financial institutions implement these rails at scale, businesses and consumers will keep paying the fare for avoidable delays, idle capital, and outdated infrastructure.
A few exceptions (such as JPMorgan’s Onyx project, now renamed Kinexys) demonstrated that institutional blockchain settlement can function. However, these efforts remain isolated instances, not industry norms. When regulators finally cleared the runway, the industry should have rolled out production-ready solutions. This inaction now costs the global economy billions due to needless friction. We all continue to bear the cost for banks relying on antique infrastructure that moves money in the Internet age.
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The Toll of Idleness
Traditional finance is full of inefficiencies. Security settlements queues, bank cut-off times, and even routine foreign exchange trades still move at multi-day speeds. Every one of these delays is effectively a capital charge, a hidden expense paid in non-earning funds held by intermediaries. This capital could be generating returns, funding new ventures, or accumulating in other venues.
In my native Brazil, for instance, retail cross-border payments often pass through offshore banking offices (frequently in the Caribbean) before reaching the USA, Europe, or even other Latin American nations. Every extra checkpoint adds expense, duration, and compliance complexity. For retail users, this lag directly results in higher fees. For institutions, it hinders liquidity and capital efficiency.
If settlement takes any longer, be assured someone, somewhere, is footing the bill for that delay. Just as risk in credit markets translates directly into interest rates, payment inefficiencies are priced into spreads and commissions.
Banks are aware of this. They should have seized the opportunity immediately to streamline the system, even simply to gain a competitive edge. Why did they refrain?
“Smart Contract Risk” Will Vanish
At the turn of the new millennium, analysts routinely factored “internet risk” into their models, citing the possibility that online infrastructure might fail and disrupt all operations. Two decades later, no valuation model contains a line item for “internet risk,” even though a single day offline can cost billions. The internet simply became assumed infrastructure.
The same evolution awaits blockchains. Pricing “smart contract risk” into a business model in 2030 will sound as antiquated today as pricing in “email risk.” As security audits, insurance standards, and backstop mechanisms mature, the default assumption will shift: blockchains will be viewed not as a risk, but as the infrastructure that mitigates it.
The Liquidity Premium, Rewritten by New Capital Velocity
Financial system inefficiencies impose an opportunity cost on investors.
In conventional private equity or venture capital, investors are locked up for 10–20 years before realizing liquidity. In the crypto sector, tokens are often acquired in a fraction of that time, and once held, they trade freely on global liquid venues (exchanges, OTC desks, DeFi platforms), collapsing what used to be the multi-stage process of venture, growth, and private equity followed by an IPO.
Even more intriguingly, non-invested tokens can sometimes be staked for yield or used as collateral in structured transactions, even while remaining non-transferable.
In other words, value that would remain inert in traditional finance keeps circulating in web3. The concept of a “liquidity premium,” meaning the extra return investors demand for holding illiquid assets, begins to dissolve when assets can be partially unlocked or re-collateralized in real-time.
The difference blockchain technology brings is felt across fixed-income and private credit markets as well. Traditional bonds pay semi-annual coupons, and private credit deals dispense monthly interest, whereas yield in the blockchain compounds every few seconds, block by block.
And in traditional finance, meeting a margin call can take days as collateral moves through custodians and clearinghouses. In decentralized finance, collateral moves instantly. When the crypto market endured its largest nominal liquidation event in October 2025, the on-chain ecosystem programmatically secured billions in capital within hours. The same efficiency manifested during other crypto “black swans,” like the Terra collapse.
Blockchains are a Game-Changer for Emerging Nations
The main burden of banking sector inefficiency is carried by developing economies. For example, Brazilians cannot hold foreign currency directly in local bank accounts. This implies any international payment automatically entails a currency conversion step.
Worse yet, Latin American currency pairs often must settle through the US dollar as an intermediary. If you want to exchange Brazilian Real (BRL) for Chilean Peso (CLP), you need two trades: BRL to USD, then USD to CLP. Every stage adds spread and delay. Blockchain technology, conversely, allows BRL and CLP stablecoins to settle directly on-chain.
Legacy systems also impose strict cut-off windows. In Brazil, same-day currency (T+0) transactions usually must close between noon and 1 PM local time. Miss this window, and it necessitates extra rollovers and time. Even for end-of-day T+1 deals, limits exist around 4 PM. For companies operating across time zones, this prevents genuine real-time settlement. Since blockchains operate around the clock, they entirely eliminate this constraint.
These are specific illustrations of predicaments banks could have resolved many years ago. And keep in mind, Brazil has not faced the same legislative pushback against cryptocurrency as the USA. There is no justification for these issues still troubling us.
The financial world has always valued waiting as risk, and justly so. Blockchain minimizes this hazard by shrinking the time between transaction and settlement. The ability to free up and reallocate capital instantaneously is a paradigm shift. But banks are denying their clients these benefits without a sound rationale.
Until banks, payment firms, and financial providers fully embrace blockchain-based settlement, the world economy will continue to subsidize their inertia. And in a world where time is of the essence, that bill mounts daily.
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