The TradFi-DeFi Convergence: Stablecoins Signal a New Era for Banks

The future of the financial sector is unfolding as cryptocurrency enters the mainstream. Up to this point, the world of highly centralized traditional finance (TradFi) has been quite distinct from the chaotic but innovative early days of decentralized finance (DeFi), which relies on blockchains and cryptocurrency. When most people think of TradFi, they associate it with large banks and institutions governed by regulation and consumer protections. TradFi is seen as fundamentally reliable and low risk.

DeFi, on the other hand, feels more volatile, complex and confusing, and it seems much riskier since it’s largely unregulated and unpredictable. That said, advocates argue that decentralized finance using blockchain technology gives users greater control of their assets, is accessible to more people, and enables faster, cheaper transactions.

While there are strengths and weaknesses to each model, we’re swiftly moving toward a future in which TradFi and DeFi will be more integrated. Thanks to new regulation on a type of cryptocurrency called stablecoins, traditional financial institutions are beginning to explore this decentralized, blockchain-powered technology. Earlier this year, the United States passed the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, the first federal framework for stablecoin regulation. By regulating and legitimizing a type of cryptocurrency for banks, the act is building a bridge between the TradFi and DeFi worlds.

Thanks to the regulatory protections in the GENIUS Act, stablecoins are opening new doors for banks and their customers. Major financial institutions believe a regulated stablecoin will bring enough legitimacy and integrity to allow them to integrate it into their offerings. It’s an exciting time, with U.S. banks exploring opportunities to leverage the benefits of blockchain and stablecoins domestically and internationally.

What are stablecoins, and why are they important?

Stablecoins are a unique type of crypto asset because of their low price volatility. They’re designed to maintain stability by being linked 1:1 to a real-world asset like the U.S. dollar or the price of gold.

Stablecoins have been quietly rising in the world of DeFi. Tether is the largest stablecoin issuer today with its USDT, a USD-pegged stablecoin used across many blockchains. Many people have also heard of Ethereum and Solana, stablecoins that have become well established over the last decade.

Stablecoins can be used 24/7 for instant, low-fee money transfers across multiple payment rails anywhere in the world, benefitting both businesses and consumers. A traditional bank moving money across national borders could take days to settle the transaction, but stablecoin settlement is recorded and finalized directly on a blockchain ledger, which means it’s direct, transparent, fully auditable and nearly instantaneous. Stablecoins are thus being seen by traditional financial services companies as a better way to efficiently move money with instant settlement nationally and across borders.

Several notable mainstream banks and payment platforms have entered the stablecoin space, including JPMorgan Chase,[1] Bank of America, Deutsche Bank, Goldman Sachs, Citi, Barclays, and BNP Paribas.[2]

Why the GENIUS Act is a game-changer in the finance world

The GENIUS Act represents a turning point, enabling federally regulated banks and non-bank entities to hold stablecoins on their balance sheet for the first time. The act provides the necessary legal certainty and consumer protection that TradFi has historically demanded. With increased regulatory clarity, banks have a secure, trusted entry point into cryptocurrency adoption, and stablecoins could become a major source of institutional-grade liquidity for the finance ecosystem.

As the first legislation of its kind, the GENIUS Act is getting attention around the world. We’ve seen regulators in the European Union, the UK, Singapore and Hong Kong all respond with statements clarifying their view on stablecoins. The act thus extends U.S. regulatory influence internationally and strengthens the U.S. dollar’s position in the world of digital finance, which is dominated by borderless transactions.

The infrastructure enabling stablecoins for TradFi companies

TradFi companies have historically used a centralized model for transactions, whereby one organization stores and controls data, even if transactions happen in multiple locations. In contrast, the blockchain databases used in DeFi are decentralized, and data is replicated across many nodes (copies of the blockchain) in a peer-to-peer network. In DeFi, trust and control are based on consensus mechanisms, with multiple “validators” approving transactions across a network. This enables fast, frictionless transactions, but the computational overhead is also higher.

Comparison of centralized and blockchain database structures

For traditional finance companies to begin issuing stablecoins, they must be able to support blockchain at scale, which requires operationally resilient, distributed digital infrastructure. They’ll also need to deploy new applications running in parallel to the blockchain to deliver stablecoin-enabled services. Traditional banks will need to invest in the right infrastructure to meet the demands of enterprise-grade blockchain deployments and applications.

Primary infrastructure for blockchain

Let’s dive a bit deeper into the core infrastructure considerations for TradFi companies as they enter the world of stablecoins:

• Compute: Each blockchain validator node controls access to the blockchain. To operate nodes for tasks like transaction validation and synchronization, banks need powerful, multi-core CPUs with high clock speeds. The validator nodes that verify transactions require even higher-performance compute, with dedicated, high-speed connectivity.
• Storage: Each blockchain node also requires high-speed, high-capacity storage to handle exponential data growth. Banks will likely use a hybrid approach with performance-optimized solid-state drives using the NVMe protocol for “hot,” frequently accessed data and more cost-effective storage options for “cold” data.
• Network: Because stablecoins involve near-instant settlement, banks need low-latency, high-bandwidth network connectivity between nodes, partners and service providers in their ecosystem.

The role of colocation data centers

DeFi is a relatively young space, and the organizations that make up this ecosystem have typically used public cloud providers to host the infrastructure they need and the public internet for the connectivity.  However, colocation data centers will play a key role in the blockchain and digital asset ecosystem as traditional banks adopt blockchain at scale. Colocation facilities already hold the critical infrastructure for a vast number of TradFi organizations. So, they’re a natural place for TradFi companies to deploy DeFi solutions.

Financial institutions needing to deploy new infrastructure for decentralized banking services will benefit from using a colocation facility instead of their own data centers or the public cloud. Colocation facilities provide the power redundancy, physical security, scalability, regulatory compliance support and private high-speed network connectivity needed to support blockchain.

Preparing for an integrated digital future

The GENIUS Act is reshaping the future of finance by laying the regulatory foundation for the convergence of TradFi and DeFi. The rest of the world has taken notice and will likely soon follow suit. Before long, the lines between these worlds will blur. This new era will be underpinned by powerful infrastructure in state-of-the-art data centers that bring together institutional trust with the automation and efficiency of decentralized protocols.

The financial companies that most effectively build and leverage this digital backbone will emerge as leaders in the integrated financial services ecosystem enabled by the fusion of TradFi and DeFi.

Equinix is uniquely equipped to facilitate this transition for traditional banks, and we’re already helping leading financial institutions transform their infrastructure for the future. Our high-performance data centers deliver the high-speed connectivity DeFi applications require, and they enable connection to rich financial ecosystems.

Learn how our high-performance data centers can help by downloading our infopaper, Four key considerations when migrating to a High-Performance Data Center.

[1] Hugh Son, Jamie Dimon says JPMorgan Chase will get involved in stablecoins as fintech threat looms, CNBC, July 15, 2025.

[2] Elizabeth Howcroft and Tommy Reggiori Wilkes, Major banks explore issuing stablecoin pegged to G7 currencies, Reuters, October 10, 2025.

[3] Visa Expands Stablecoin Settlement Support, July 31, 2025.