Will Every Correspondent Bank Support Stablecoins?

The Short Answer

Not yet, but the direction is set. Correspondent banks hold idle balances in nostro/vostro accounts across every geography they clear in, and stablecoins let them rebalance those balances programmatically in real time instead of pre-funding them. Augustus CEO Ferdinand Dabitz expects every major correspondent or clearing bank to support stablecoin rails within five to ten years, though today only a small group of stablecoin-native, fully chartered banks does it.

That prediction came on Episode 97 of Tokenized, in a conversation about why correspondent banking, one of the oldest and most profitable parts of a bank, has never had a real challenger until now.

Correspondent Banking Never Got Its Challenger

Retail banking got Revolut. Brokerage got Robinhood. Commercial banking got Mercury. Correspondent banking and dollar clearing, according to Dabitz, sat untouched for two decades even as every other layer of the bank stack was challenged.

“it's part of this like massive institution that just like intuitively cannot move fast, and then the same time it's printing cash, right?”

— Ferdinand Dabitz, Co-Founder & CEO at Augustus

Part of the reason is the sheer scale of the incumbents. Citi's Treasury and Trade Solutions business is one of the most iconic dollar clearers in the world, built on decades-old technology and still enormously profitable.

The Trapped Liquidity Problem

Dabitz described Augustus as a modern correspondent bank: it still runs on a bank charter and a Fed master account, rather than trying to reinvent global money movement from first principles. But the core inefficiency of the correspondent banking model, he argued, is the same one every clearing bank carries.

“one of the most expensive things a corresponding bank is, and has always been, trapped liquidity, right, in these nostro vostro accounts, because you have to hold these balances in different geographies to facilitate the corresponding flows, and once again, I think that's a very real, non-fake news way that efficiency can be improved by programmatically rebalancing that in real time through stablecoins.”

— Ferdinand Dabitz, Co-Founder & CEO at Augustus

That inefficiency is trapped liquidity: balances a bank must hold in nostro and vostro accounts in every jurisdiction it clears in, whether or not that capital is being used.

Not Every Bank Feels the Pain the Same Way

The trapped liquidity problem doesn't hit every issuer equally, and that shapes who actually needs stablecoin settlement first. Visa's Cuy Sheffield made the point directly: a large, investment-grade U.S. bank has little incentive to change how it settles card programs today.

“I think that the opportunity for stablecoin settlement is lowering the barrier to entry to launch and scale card programs, and it's smaller bin sponsors, fintechs, enablers”

— Cuy Sheffield, Head of Crypto at Visa

The real demand, he said, comes from smaller and newer entrants who don't have the balance sheet of a Bank of America and can't absorb multi-day settlement delays the same way.

Is the Bottleneck Technology or Organization?

One of the more counterintuitive points Dabitz made is that the existing rails are often more capable than people give them credit for. Fedwire, the Fed's real-time gross settlement system, already clears 22 hours a day. The 3 p.m. cutoffs and next-day waits that frustrate banks aren't usually the rail itself.

“what is actually like a technology limitation, infrastructure limitation that can be solved by a blockchain, right, or any like frontier technology effort, and what is actually like like a social organizational limitation.”

— Ferdinand Dabitz, Co-Founder & CEO at Augustus

The distinction matters for where stablecoins actually help. If the constraint is organizational rather than infrastructural, a new settlement rail alone won't fix it.

Why It Matters Beyond Banking

The underlying cost of trapped liquidity isn't unique to correspondent banks. Anna Wroblewska, Chief Business Officer at Dinari, framed it as a universal problem for anyone moving money across borders: capital sitting in transit is capital that isn't earning anything.

“when money is in flight, it's not being productive, right? You're not earning yield on it, it's not being used for anything.”

— Anna Wroblewska, Chief Business Officer at Dinari

That framing is why Dabitz expects convergence rather than disruption. Stablecoins don't replace the correspondent banking model; they make the back office of that model more efficient, which is why he expects the largest clearing banks to eventually adopt the same rebalancing stablecoins already give smaller, stablecoin-native banks.

• Citi's dollar-clearing business alone is worth billions. Dabitz pointed to Citi's Treasury and Trade Solutions unit as one of the most profitable parts of the bank, despite running on decades-old technology (Episode 97, Aug. 2026).
• Fedwire already clears 22 hours a day. The bottleneck most banks feel isn't the settlement rail itself but the correspondent-banking stack wrapped around it, and the weekend gap that remains (Episode 97).
• Large U.S. banks aren't the early adopters. Cuy Sheffield's read: stablecoin settlement mainly lowers the barrier to entry for smaller bin sponsors, fintechs and higher-risk issuers, not investment-grade incumbents (Episode 97).
• Convergence, not disruption, within five to ten years. Ferdinand Dabitz expects every major correspondent or clearing bank to support stablecoin rails within five to ten years, up from a small group of stablecoin-native banks today (Episode 97, Aug. 2026).