Beyond Stablecoins: The Next Phase of Digital Finance

This article is written by Adi Ben-Ari, Founder & CEO of Applied Blockchain, the company behind Silent Data, a privacy-preserving Layer 2 platform enabling programmable finance.

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Beyond Stablecoins: The Next Phase of Digital Finance

This summer marked a pivotal moment for stablecoins. What was once a niche experiment has become the centerpiece of discussions across finance, technology, and policy. The surge in attention can be traced to several converging developments:

• A shift in U.S. administration and regulatory priorities.
• The Securities and Exchange Commission (SEC) adopting a more defined stance on digital assets.
• The passage of the U.S. Genius Act, establishing a framework for U.S. Treasury–backed stablecoins.
• Circle, the issuer of USDC, completing a successful IPO and launching its own Layer 1 network, Arc.
• Stripe making bold strategic moves: acquiring Pivvy and Bridge, and unveiling its own Layer 1, Tempo.
• The Sibos conference (Swift’s annual banking industry event) dominated by stablecoin discussions, capped by Swift’s announcement of its own ledger.
• Major financial institutions entering the space with Citi investing in BVNK and Mastercard engaged in acquisition battles.

These are not isolated events. They represent a coordinated pivot toward a new financial infrastructure built on blockchain-based settlement rails.

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Why Now?

At the core of this shift is a simple proposition: stablecoins make payments faster and cheaper.

They enable instant, low-cost cross-border transfers, a clear improvement over the inefficiencies of correspondent banking and legacy remittance networks. For banks, deposit tokens represent a familiar and regulated way to modernize their systems while maintaining the advantages of traditional banking architecture.

In short, stablecoins and deposit tokens are not just technological innovations. They are strategic tools in the modernization of global finance.

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What Comes Next?

The current wave of investment, acquisitions, and innovation has focused squarely on payments. But payments are just the beginning.

Once the foundations for tokenized money are established, the next evolution will be in applications: software that leverages digital money’s programmability and composability.

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Emerging Applications

• Smart contract escrow services, such as Applied Blockchain’s own Portafino.
• Delivery-versus-payment (DvP) mechanisms for asset settlement.
• Decentralized swaps for asset exchange, as pioneered by Uniswap.
• Decentralized lending and liquidity protocols (DeFi).

These applications build on the same principles that make stablecoins efficient but amplify them dramatically. By automating processes through smart contracts, they reduce friction, intermediaries, and operational risk.

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The Architectural Challenge

However, not all blockchains are created equal. Networks optimized for payments may not be suitable for more complex financial applications.

Likewise, private blockchain architectures (like Besu, Corda, and Canton) excel at maintaining privacy for limited groups, but they lack a shared global ledger necessary for asset interoperability.

Consider this:

• Governments are unlikely to issue bonds on a payments-only chain.
• Corporations will hesitate to tokenize debt instruments on networks designed solely for transfers.
• Asset managers won’t deploy money market funds where settlement flexibility and composability are limited.

If digital assets and stablecoins live on separate chains, we lose delivery-versus-payment (DvP), one of the key benefits of blockchain-based finance. Cross-chain bridges can technically solve this, but they reintroduce complexity and reduce efficiency, undermining the very gains of a shared ledger.

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The Privacy-Programmability Trade-Off

Emerging payment chains are adding privacy through zero-knowledge proofs (ZKP), fully homomorphic encryption (FHE), and multi-party computation (MPC). While these are vital for transaction confidentiality, they often limit programmability, making it difficult to build or execute complex smart contracts securely.

This tension between privacy and programmability must be resolved before digital finance can scale beyond payments into broader applications.

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Looking Beyond Stablecoins

The rise of stablecoins represents an important milestone, but not the final destination.

To fully unlock the promise of digital finance, we must look beyond payments and design for the next phase: a world of interoperable, programmable, and privacy-preserving financial applications.

Now is the time to think holistically, to build not just for stablecoins, but for the entire ecosystem that will follow.