Stablecoins are no longer just a bridge between crypto markets and fiat money. According to a new 2026 outlook from Moody’s, they are rapidly evolving into a form of institutional digital cash, increasingly used by banks, asset managers and market infrastructure providers for settlement, collateral and liquidity management.
In its report, Moody’s argues that the financial system is entering a phase where tokenised assets and on-chain settlement are moving beyond pilots and into early production use. Stablecoins, particularly those backed by fiat currency or short-term government securities, are emerging as the preferred settlement asset within these new digital market structures.
The scale of activity is already significant. Moody’s points to trillions of dollars in on-chain settlement volume processed by stablecoins, far exceeding their original role in crypto trading. For institutions, the appeal lies in speed, programmability and round-the-clock settlement, features that traditional payment rails still struggle to match across borders.
Importantly, the agency does not frame this shift as a rejection of banks or central bank money. Instead, it describes a convergence. Tokenised deposits, bank-issued stablecoins and regulated third-party stablecoins are increasingly seen as complementary forms of digital cash, used alongside traditional accounts. In this model, stablecoins function as high-speed settlement instruments within tokenised financial markets, rather than as retail payment tools for everyday consumers.
Moody’s highlights use cases such as securities settlement, collateral transfers and cross-border transactions between financial institutions. These are areas where delays, cut-off times and intermediaries currently add cost and risk. On-chain settlement using stablecoins can compress these processes into minutes or seconds, while improving transparency and auditability.
Regulation remains a decisive factor. Moody’s notes that clearer frameworks, including Europe’s Markets in Crypto-Assets regulation, are helping to differentiate regulated stablecoins from higher-risk crypto assets. At the same time, the report flags ongoing risks linked to smart contract vulnerabilities, custody, governance and fragmentation across blockchain networks. These factors will shape which stablecoin models gain institutional trust.
For Europe, the analysis carries strategic implications. As policymakers debate the role of a digital euro and the future of tokenised finance, Moody’s outlook reinforces a central message: private digital money is already becoming embedded in financial market infrastructure. The challenge for regulators and central banks is not whether this transition happens, but how to ensure it unfolds safely, interoperably and under effective public oversight.
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