The Hidden Problem Slowing Community Banks’ Crypto Adoption

For all the momentum behind digital assets, the banking industry’s biggest hurdle isn’t conceptual. It’s operational.

The tools to support cryptocurrencies, stablecoins and tokenized deposits already exist, but what’s missing is the connective infrastructure that allows traditional financial institutions to use them seamlessly.

“For everyone outside those top 10, 15 banks, it’s a really big task to take on,” Alex Treece, co-founder and CEO at Stablecore, said in conversation with PYMNTS CEO Karen Webster, noting that even something as foundational as connecting to a digital asset custodian can stretch internal capabilities.

Or, as Webster put it, “Plug and play is never actually that easy.”

And one of the most persistent misconceptions held by traditional institutions looking to integrate crypto is that digital asset adoption can be achieved through simple vendor integration. Selecting a custodian or wallet provider is only a small piece of the puzzle.

“A great custodian provider, that’s maybe 10 to 15% of the work,” Treece said. “But you’ve got another 80, 85% to get that integrated with your internal systems … as it relates to regulated financial institutions, there’s a lot of other pieces that have to come together.”

Giving Regional and Community Banks a Crypto Bridge

For regional and community institutions, crypto’s integration burden can often be prohibitive as these smaller lenders frequently lack the sizable engineering and compliance teams their larger peers boast. But that integration gap, or the “last mile” of crypto adoption, is where Stablecore has staked its own claim in the market.

“We focus on connecting pieces together because we found that that’s where 80% of the work is,” Treece said.

Rather than building custody or core banking systems, the company focuses on connecting the disparate components banks need to offer digital asset services, from wallets and custodians to compliance tools and customer interfaces. The company’s investor base of nearly 300 banks and credit unions is itself a signal of demand for that capability.

For banks, the implications are both defensive and strategic. Webster framed it succinctly: “It’s more because they want to retain the deposits, and attract and retain a younger client base.”

In Treece’s view, the competitive landscape is converging toward a single objective: “Everyone wants to be the primary financial account.”

“This market’s being driven by non-bank participants,” he added, noting that over the past decade, FinTechs and crypto-native firms have scaled independently, building products and capturing users while banks remained on the digital asset sidelines due to regulatory uncertainty.

Stablecoins, Tokenized Deposits and the Infrastructure Bet

Unlike real-time payments infrastructure, which has been constrained by bank’s own adoption cycles, digital assets have grown rapidly outside the traditional system.

And for years, regulatory uncertainty was the primary barrier to bank participation in digital assets. That constraint has eased significantly and made it more permissible for banks to engage directly in the blockchain finance space.

“The real blocker has been on the technology side,” Treece said.

Integrating digital asset infrastructure into existing banking stacks—while maintaining compliance and passing regulatory exams—remains a complex undertaking, one that must be executed with surgical precision.

As a result, within banks, the conversation often begins with use cases—whether to prioritize stablecoins, tokenized deposits or broader digital asset offerings. Stablecoins alone have grown from roughly $10 billion in supply five years ago to around $300 billion today, with projections reaching trillions by 2030. Meanwhile, tokenized deposits have gained traction in industry discourse, fueled by consortium efforts and experimentation.

But Treece argued that the more important consideration for banks is an architectural one.

“Whether you start with stablecoins, ditcoin, or tokenized deposits, these all use the same infrastructure,” he said, underscoring how that shared foundation allows banks to enter the market through a single use case while preserving flexibility to expand over time.

Even after the technical hurdles are cleared, operational challenges persist. Banks must design products, train staff and align internal processes with new capabilities, all while maintaining the reliability expected of regulated institutions. Fortunately, early adopters, typically the most innovative institutions within each tier, are setting precedents that others can follow with greater confidence.

“This year is really about that first five-to-20% coming in the market,” Treece said. “Next year I think you’re going to see accelerated adoption.”

PYMNTS CEO Karen Webster is one of the world’s leading experts in payments innovation and the digital economy, advising multinational companies and sitting on boards of emerging AI, healthtech and real-time payments firms, including a non-executive director on the Sezzle board, a publicly traded BNPL provider. She founded PYMNTS.com in 2009, a top media platform covering innovation in payments, commerce and the digital economy. Webster is also the author of the NEXT newsletter and a co-founder of Market Platform Dynamics, specializing in driving and monetizing innovation across industries.