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The Intersection of Open Banking and Crypto: A New Financial Frontier

Writer: OpenFinityOpenFinity
2 days ago8 min read

Updated: 22 hours ago

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1. Introduction

The financial world is undergoing a transformative shift as open banking and cryptocurrency continue to take off, redefining how we access, manage, and utilize money.


While traditional banking has historically associated cryptocurrency with risky Ponzi schemes and basic fraud, there is no doubt that the technology has proved itself after two decades to be powerful, formidable and surprisingly durable. Where most banks once blocked customers from trading on platforms like Coinbase, they are now investigating the use of private financial blockchains to experiment with use-cases that accelerate or enhance common banking functions.


As we speak (March 2025), the U.S. Congress and Senate are advancing two significant legislative proposals aimed at shaping the financial landscape: the STABLE Act (Stablecoin Transparency and Accountability for a Better Ledger Economy) and the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins).


" The move to establish clear definitions, legal categorizations, and protections around the stablecoin ecosystem by Congress is a first step into what will eventually become a partnership between chartered banks, the Federal Reserve, The US Government, and financial service giants such as Blackrock, Vanguard and State Street. " - Nicholas Zeman, Senior Solution Architect, Zions Bancorporation

As these two domains continue to evolve, their intersection leverages blockchain technology, decentralized protocols, and open standards to create a more inclusive, transparent, and interoperable financial ecosystem. Let’s break down how they intersect, the value they create, and the challenges they represent.


2. The Promise of Open Banking

Open banking empowers consumers by allowing them to share their financial data securely with third-party applications via a shared, common and open APIs. In the U.S. The Financial Data Exchange (FDX) has been set as such API standard and already has over 96 million FDX API compliant accounts. This fosters innovation and competition, leading to the development of new financial products and services such as pay-by-bank.


3. The Role of Cryptocurrencies in Banking

Cryptocurrencies, particularly stablecoins, play a crucial role by providing real-time transactions and programmable money. Stablecoins are digital assets pegged to traditional currencies (like the US dollar) and are integral to decentralized finance (DeFi). Their stable value, combined with the efficiency of blockchain technology, makes them ideal for seamless payment transactions.


"Stablecoins enable faster, cheaper, and competitive transactions in our digital world and facilitate seamless cross-border payments." - Senator Tim Scott (R-S.C.), Chairman of the Senate Banking Committee and co-sponsor of the GENIUS Act, March 16, 2025

Stablecoins represent an opportunity to use cryptocurrency technology for the benefit and enhancement of modern banking, without the enormous speculative risk of variable-value tokens like Bitcoin, Ethereum and Solana. Stablecoin can provide the ability to execute tokenized security trades with instant, “atomic” settlement in unlimited amounts, move assets between foreign denominations with ease, and create automated monetary operations powered by smart contracts without human interaction or approval.


Not only does it provide better speed and security for money movement, but it incorporates an inherent data traceability to every transaction on the ledger, which can be audited and analyzed simply by the nature of the technology. Most legacy banking ledger systems do not have this kind of functionality as an inherent feature of the architecture, and require complex or costly integrations in order to perform these functions.


4. Key Use Cases of Stablecoins

Stablecoins have become a cornerstone of the cryptocurrency ecosystem due to their ability to maintain a stable value, typically pegged to a fiat currency like the U.S. dollar. Their significance and most influential use cases include:


  1. Cross-border payments and Remittances

    • Significance: Stablecoins offer fast, low-cost, and borderless transactions compared to traditional financial systems. They eliminate the volatility associated with other cryptocurrencies like Bitcoin or Ethereum. By eliminating currency conversion fees and long processing times, stablecoins simplify global payments and remittances.

    • Use Case: Cross-border remittances are simplified, with users able to send stablecoins internationally within minutes, often with lower fees than traditional remittance services.


  2. DeFi Integration

    • Significance: Stablecoins are the backbone of DeFi ecosystems, providing a stable medium of exchange, collateral, and liquidity.

    • Use Case: Users can lend, borrow, and earn interest without the risk of value fluctuations typical of native cryptocurrencies. Cryptocurrencies allow users to lend, borrow, and earn interest without intermediaries, directly leveraging blockchain technology.


  3. Decentralized Savings and Yield Generation

    • Significance: Stablecoins offer an alternative to traditional savings accounts by providing yield through DeFi protocols.

    • Use Case: Users can deposit stablecoins into liquidity pools or staking platforms to earn interest, often significantly higher than traditional banking rates.


  4. Programmable Money and Smart Contracts

    • Significance: Stablecoins can be embedded in smart contracts to facilitate automated payments and financial operations without the risk of price volatility.

    • Use Case: Automated payouts, escrow services, and subscription payments leverage stablecoin stability.


5. How Open Banking Helps

  • Open banking APIs enable seamless access to bank account information, allowing stablecoin wallets and applications to integrate directly with users' financial accounts, and instant bank account id verification.

  • Facilitates access to user financial data, enabling lenders to make informed decisions based on creditworthiness. Example: a fintech lender uses open banking data to evaluate credit risk and disburse a stablecoin loan directly to the borrower’s wallet.

  • Enables merchants and businesses to directly link their corporate bank accounts to stablecoin payment gateways, streamlining the settlement process. Example: a small business exporting goods to Europe receives payments in USDC[1] via a stablecoin payment processor, with automatic conversion to local currency through open banking APIs.


6. Navigating Regulatory Hurdles

The convergence of open banking and crypto brings forth regulatory challenges that need to be addressed. Two significant legislative proposals are shaping the financial landscape:


"A properly regulated stablecoin market can strengthen the U.S. dollar’s dominance, modernize our payments infrastructure, and promote financial access without government overreach."  -The House Financial Services Committee, led by Chairman French Hill, March 11, 2025

1. Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act

  • Objective: Establish a comprehensive framework for the issuance and operation of dollar-denominated payment stablecoins in the United States.​


  • Key Provisions:

    • Regulatory Oversight: Mandates that all stablecoin issuers obtain federal approval, ensuring adherence to standardized operational and financial protocols.​

    • Reserve Requirements: Requires issuers to maintain reserves equivalent to the value of the stablecoins in circulation, safeguarding consumer interests and ensuring redemption capability.​

    • Consumer Protection: Implements measures to enhance transparency, including regular disclosures about reserve holdings and operational practices.​

    • AML/KYC Compliance: Enforces strict anti-money laundering (AML) and know-your-customer (KYC) protocols to prevent illicit activities.​


  • Current Status: The STABLE Act is under deliberation in the House Financial Services Committee, with discussions focusing on balancing innovation with financial stability and security.


2. Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act

  • Objective: Create a clear federal regulatory framework for payment stablecoins, fostering innovation while ensuring financial system integrity.​


  • Key Provisions:

    • Definition of Payment Stablecoin: Classifies a payment stablecoin as a digital asset used for payment or settlement, pegged to a fixed monetary value.

    • Licensing Procedures: Establishes procedures for institutions seeking licenses to issue stablecoins, applicable to subsidiaries of insured depository institutions, federal qualified nonbank payment stablecoin issuers, and state-qualified payment stablecoin issuers. ​

    • Reserve Requirements: Mandates that issuers maintain 1:1 reserves, ensuring that each stablecoin is fully backed by tangible assets.​

    • Bankruptcy Provisions: Amends the Bankruptcy Code to allow non-depository institution stablecoin issuers to be debtors, granting priority to stablecoin holders over other creditors in insolvency scenarios. ​


  • Current Status: The GENIUS Act has been approved by the Senate Banking Committee and is awaiting further deliberation in the full Senate. ​


Key Takeaways:

  • Both acts aim to provide regulatory clarity for stablecoin issuance and operation in the U.S., addressing concerns related to financial stability, consumer protection, and illicit activity prevention.​

  • The STABLE Act emphasizes comprehensive federal oversight and stringent compliance measures for stablecoin issuers.

  • The GENIUS Act focuses on fostering innovation by establishing clear definitions, licensing procedures, and addressing insolvency scenarios for stablecoin issuers.​


These legislative efforts reflect a bipartisan commitment to integrating digital assets into the mainstream financial system while safeguarding economic integrity and consumer interests.


7. Challenges of Stablecoin Adoption in Open Banking and Crypto

The adoption of stablecoins within open banking presents unique challenges despite their promising use cases. These challenges span regulatory, technological, and economic dimensions, and addressing them is crucial for achieving mainstream adoption and financial stability.


1. Regulatory Uncertainty

Stablecoins operate at the intersection of traditional finance and digital assets, making them susceptible to conflicting regulations. Regulatory bodies around the world differ in their approach to stablecoins, creating a fragmented legal environment. The lack of uniform standards complicates adoption, especially for cross-border use cases like digital payments and remittances.


2. Lack of Transparency in Reserve Backing

One of the primary critiques of stablecoins like Tether (USDT[2]) is the opacity regarding reserve assets. If stablecoin issuers fail to maintain adequate reserves, users risk losing their assets in case of a crisis or run on the stablecoin.


The STABLE Act mandates transparent reserve disclosures to enhance consumer protection. However, some stablecoins still lack independent audits, leading to skepticism about their stability.


3. Market Volatility and De-Pegging Risk

Stablecoins are designed to maintain a fixed value, but market pressures or liquidity crises can lead to de-pegging. This risk was starkly demonstrated in the collapse of algorithmic stablecoins, where reliance on arbitrage mechanisms failed to sustain the peg.


The dramatic fall of TerraUSD showcased how algorithmic mechanisms might not withstand severe market conditions. In contrast, fiat-backed stablecoins like USDC tend to fare better, but they still require robust regulatory oversight to ensure stability.


4. Integration with Traditional Finance

Banks and financial institutions remain cautious about integrating stablecoins due to perceived risks and regulatory uncertainties. Without seamless interoperability between crypto and traditional finance, adoption will be slow and limited.

Example: On-Chain Settlements and Real-Time Payments. Stablecoins promise faster settlement times, but integrating them into traditional payment systems remains a complex challenge, requiring upgrades to legacy infrastructure and clear compliance protocols.

8. The Future of Open Banking and Crypto

Despite the fact that the President of the United States has signed Executive Order 14178[3] on January 23, 2025, preventing the establishment of a “Central Bank Digital Currency”, there is a clear and rapid direction towards some form of digital token or tokens that can be federally certified as representative of the US dollar; which is effectively a centralized digital currency that serves the same purpose as a CBDC. Congress is wise to get ahead of the establishment of the definition and oversight of such digital dollar tokens, so that the massive popularity of their use will not outpace the speed or ability of any necessary regulation to mitigate abuse and fraud.


As legislative frameworks like the STABLE Act and the GENIUS Act shape the regulatory landscape, the integration of crypto into open banking and open finance will continue to evolve. The challenge lies in balancing innovation with safety, ensuring that both consumers and financial institutions benefit from these advancements.


The intersection of open banking, open finance and cryptocurrency holds immense potential. From enabling faster payments to fostering financial inclusion and innovation, this fusion will redefine how money moves in the digital age. As regulations become clearer, the adoption of crypto within open banking systems will likely accelerate, paving the way for a more dynamic and resilient financial future.



[1]: USDC (USD Coin) is a fiat-collateralized stablecoin that is pegged 1:1 to the U.S. dollar, meaning that each USDC token is backed by one U.S. dollar held in reserve.

[2]: USDT (Tether) is a fiat-collateralized stablecoin issued by Tether Limited, which is a subsidiary of the Hong Kong-based company iFinex Inc. (the same company that owns the crypto exchange Bitfinex). Like USDC, USDT is pegged 1:1 to the U.S. dollar, meaning that each USDT token should theoretically be backed by one U.S. dollar held in reserves.


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