🎙️ Ep. 65. Banks Are Waking Up to the Stablecoin Threat

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On Episode 65 of Tokenized, hosts Simon Taylor (Head of GTM, Tempo) and Cuy Sheffield (Head of Crypto, Visa) are joined by Sandy Kaul, Executive Vice President and Head of Innovation at Franklin Templeton. Kaul brings nearly two decades of institutional perspective to the conversation, having helped steer one of the world's largest asset managers (with ~$1.7 trillion AUM) through its early tokenization journey - Franklin Templeton launched its first tokenized fund in April 2021.

The discussion spans recent market developments from OnePay's crypto integration to Barclays' investment in stablecoin infrastructure, offering a window into how traditional finance is positioning for a wallet-based future.

🎙️Listen to the full episode here on your favorite podcast app or 📷 watch on YouTube. 

Key Takeaways

Banks Are Recognizing the Stablecoin Threat. But Responses Vary

The central tension emerging across financial services is the strategic choice banks face between defending deposit franchises and embracing stablecoin interoperability. As Sandy Kaul from Franklin Templeton framed it: "The whole conversation with banks and stablecoins is pretty fraught. If stablecoins are really doing what stablecoins are meant to be doing, then the banks are gonna be losing those deposits."

This dynamic is driving divergent strategies. Many institutions are opting for tokenized deposits as a defensive posture - instruments that must return to the issuing bank, unlike stablecoins that can "recirculate wherever I would like."

Yet Kaul sees this as only a near-term holding pattern: "Banks are going to inevitably have to be able to interoperate across this whole space, or they risk really losing those deposits permanently."

Cuy Sheffield noted that Barclays' investment in Ubyx - a stablecoin settlement firm founded by former Citi clearing head Tony McLaughlin - signals that even conservative banks "are recognizing the value of stablecoins and are taking meaningful steps."

The practical advice: banks should start by assuming some customers already hold stablecoins. "Shouldn't you want them to bring those stablecoins to you and just deposit those into the bank to grow your deposits?"

Enterprise-Grade Infrastructure Requires Getting Closer to the Metal

Franklin Templeton's approach to blockchain infrastructure offers a blueprint for institutions serious about scaling tokenized operations. The firm runs its own node operations across 10 public blockchains plus Canton, maintaining "three real-time copies of our records at all times, second to second, 24 hours a day, seven days a week."

Sheffield emphasized this mindset shift: "Where we're heading in 2026 is the real value... who are the financial institutions who can actually get closer to the metal and say, how do we build and design a stack that is not just going to get us to an innovation POC, but is going to get us to trillions of dollars of assets onchain."

The Fireblocks acquisition of TRES Finance for $130 million reflects this maturation. As Sheffield observed, when CFOs become the customer rather than product managers, infrastructure providers need audit-ready data and ERP integrations, not just key management.

The Wallet-Based Ecosystem Is Rebundling Financial Services

Kaul articulated a clear vision of where distribution is heading: "I am going to aggregate more and more of my financial life in my wallet. The app that allows me to access and optimally use those assets in the wallet is going to become where I want to live my life."

This extends well beyond crypto holdings. Franklin Templeton envisions its entire $1.7 trillion product suite eventually available via wallet infrastructure, alongside tokenized alternatives like intellectual property rights, art, and farmland.

"My portfolio today is typically just equities and bonds. I think my modern portfolio has dozens of different kinds of assets in it."

The Wyoming stablecoin, where Franklin Templeton provides reserve management - illustrates this proliferation: "If I am a resident in the state of Wyoming and I'm getting paid food benefits, I'm getting paid a tax refund... I'm going to receive these Wyoming stablecoins."

Legacy Systems Will Create Unacceptable Drag

The batch-processing infrastructure underlying traditional banking is on a collision course with 24/7 onchain settlement. "Banks are going to struggle here because their systems have not been built to operate in real time 24/7 like this," Kaul noted. "I think that this is going to start to be seen increasingly as an unacceptable drag... and that is going to push people to transform a lot faster than many anticipate."

Cuy raised a provocative question about working capital optimization: if all assets become instantly liquid and usable as collateral, why maintain deposits at all? Kaul's response pointed toward the convergence of agentic AI and blockchain - "a logic layer that sits over my smart contracts that can actually start to algorithmically assess all the assets I have in my wallet, figure out my optimal form of payment or figure out my optimal collateral."

Looking Ahead: The panelists converged on 2026 as the year of institutional positioning. Fintech banks like Cross River and Lead Bank are already building stablecoin settlement capabilities, while larger banks begin "dipping their toes in."

The first major bank to publicly declare "we're open for business - send us a stablecoin" may capture significant first-mover advantage. Meanwhile, every financial firm will need to operate across both traditional account-based systems and wallet-based infrastructure "for the next decade at least."

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