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The passage of the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act in July 2025 marked a pivotal moment for financial institutions. While many banks and credit unions had previously explored digital assets, regulatory uncertainties often led to hesitation. With the new legislation now setting the stage for implementation, the primary hurdle for banks has shifted from navigating compliance to fortifying their technological infrastructure to support this evolving landscape.
The Unprecedented Infrastructure Shift for Banking
Digital assets, including stablecoins, tokenization, and blockchain-based transactions, represent the most significant infrastructure paradigm shift for the banking sector since the internet’s inception. This transformation is poised to accelerate the adoption of cloud-native “side core” processing systems, which are becoming indispensable for modern financial operations.
The Challenge: Traditional Cores vs. 24/7 Digital Assets
The fundamental incompatibility between legacy banking systems and the demands of digital assets presents a critical challenge:
- Legacy Core Limitations: Traditional core banking systems were architected for predictable, contained environments. They process transactions through established networks with defined reconciliation schedules, and their controls, reporting, and oversight mechanisms are tailored to this business-day model.
- 24/7 Digital Asset Operations: Stablecoins and other digital assets operate ceaselessly. A single transfer demands instant interaction with external blockchains, real-time settlement confirmation, immediate internal ledger updates, and continuous compliance and reporting – around the clock.
- Operational Friction: This inherent disconnect between a 24/7 external network and internal systems designed for fixed business hours generates significant friction across critical functions like finance, risk management, operations, and information technology.
The Dawn of the Side Core Era
For the vast majority of banks and credit unions, a complete overhaul of their existing legacy core system is neither feasible nor required. The pragmatic and increasingly adopted solution involves implementing one or more “side cores.” This approach is already favored by innovative core challengers and is being integrated by traditional core providers for their next-generation offerings.
The imperative to engage with digital assets and stablecoins will dramatically accelerate this trend. While discussions often center on the need for a “stablecoin strategy,” a more comprehensive perspective suggests that every financial institution requires a robust side core strategy, encompassing stablecoins and a broader spectrum of digital assets.
Why Side Cores Are Essential for Digital Assets
A digital asset side core functions as a crucial interoperability layer, bridging a bank’s established systems with the new functionalities necessary for interacting with stablecoins, tokens, and blockchain networks. It acts as a “translation layer” for digital asset types, adapting the familiar processes of ledgering, orchestration, controls, compliance, reporting, and reconciliation from the traditional banking environment.
This strategic side core implementation enables institutions to modernize their infrastructure incrementally, without the disruption of a full internal rebuild. This not only facilitates immediate stablecoin transfer capabilities but also builds the foundation for future digital asset use cases, such as tokenized deposits, digital asset-backed lending, and innovative reward programs.
Initiating Your Side Core Journey
Many financial institutions commence their digital asset exploration by engaging directly with infrastructure providers like custodians or stablecoin issuers. However, they soon realize the overwhelming scope of required integrations, underscoring the necessity of a comprehensive side core solution (sometimes referred to as “sidecare cores”) to aggregate these diverse services.
The extensive functionalities needed for digital assets include, but are not limited to, custody services, managing “gas” costs (transaction fees on a blockchain), seamless core integration, specialized accounting, stablecoin issuer integration, robust digital asset ledgering, continuous compliance, exchange integration, resilient blockchain network infrastructure, dynamic liquidity management, and sophisticated orchestration and permissioning.
The Key Challenge: Internal Capabilities
A crucial reality highlighted by the side core approach is that most financial institutions are not equipped to develop these complex capabilities in-house. Only a select group of highly technical banks possess the specialized engineering teams and modern core systems required for direct integration with blockchains and various service providers, including custodians, exchanges, and issuers.
For the vast majority, attempting to graft stablecoin functionalities onto legacy systems creates unacceptable operational risks and introduces complexities that these older infrastructures were never designed to handle.
Addressing the “Customer Demand” Misconception
A frequent concern voiced by bank executives is the perceived lack of customer demand for stablecoin services. However, a deeper look into actual customer behavior often reveals a different narrative, suggesting a silent but significant engagement with digital assets outside traditional banking channels.
For instance, a recent KlariVis study among community banks highlighted that 90% of them have customers actively transacting with platforms like Coinbase. Notably, these transactions showed a concerning $2.77-to-$1 ratio of outflows to inflows, indicating that for every dollar returning from such platforms, nearly three dollars were leaving the banking system permanently. This pattern strongly suggests that many customers are already interacting with digital assets, albeit externally.
Seizing the Opportunity: Reversing the Trend
This trend presents a substantial opportunity for banks to reclaim and expand their customer relationships. A separate survey revealed that a remarkable 77% of crypto-active individuals would prefer to open a stablecoin wallet within their existing bank or fintech application, provided such an option were available. This clearly demonstrates a strong preference for accessing stablecoins through trusted financial institutions rather than relying solely on standalone crypto platforms.
The broader financial landscape further underscores this urgency. Industry giants like Stripe, Shopify, Uber, JPMorgan Chase, PayPal, SoFi, State Street, Visa, and Mastercard have already launched significant stablecoin and digital asset initiatives, positioning themselves at the vanguard of this monumental industry shift.
In 2025 alone, stablecoins facilitated an astounding $33 trillion in annual transaction volume, marking a 72% increase from the previous year. While much of this volume currently pertains to settlements rather than “real-world” consumer payments, the trajectory points to exponential growth as adoption widens. For banks and credit unions, the message is unequivocal: preparedness is paramount. As consumer payments and financial markets progressively transition towards 24/7 settlement on stablecoin rails, institutions that proactively establish the necessary infrastructure will be well-positioned to thrive. Those that hesitate risk significant deposit outflows to more agile competitors.
Actionable Steps for Your Institution
As we progress into 2026, prioritizing infrastructure readiness for digital assets is crucial for bank and credit union leadership. The consensus is clear: every financial institution needs a comprehensive side core strategy that seamlessly integrates digital assets.
Implementing Your Digital Asset Strategy
A proven first step towards successful implementation is establishing a cross-functional Digital Asset Working Group (DAWG). This team, comprising representatives from finance, risk, compliance, IT, and operations, can holistically evaluate the requirements for safely and reliably supporting 24/7 digital asset operations. This initiative demands robust executive sponsorship and transparent board visibility, given that decisions around digital asset infrastructure profoundly impact risk posture, liquidity management, and long-term competitive standing.
Following this, institutions should pinpoint a strategic initial use case. A pragmatic starting point could be developing stablecoin send-and-receive capabilities for corporate treasury functions. For the majority of institutions, this will necessitate implementing a dedicated side core solution via a specialized digital asset infrastructure firm, working in close collaboration with existing core banking vendors and digital banking frontend providers.
Ultimately, the immediate priority is to establish the correct infrastructure foundation to support forthcoming digital asset services. Financial institutions that transition from strategic discussions to controlled, proactive implementation in 2026 will be exceptionally well-prepared for the next wave of financial innovation.
Source: thefinancialbrand.com