Blockchain in central banking: Where private stablecoin rails fit

Central banks around the globe are moving blockchain use from theory into practice. Major institutions like the European Central Bank (ECB) and the Bank for International Settlements (BIS) are running pilot programs, testing distributed-ledger technology (DLT) in controlled settings. Live production deployments of wholesale central bank digital currencies (CBDCs) remain very rare, though. Institutions are using these programs to find cheaper ways for institutions to settle cross-border transactions and move tokenized assets.

However, blockchain in central banking isn't just about a central bank's infrastructure. The private side of the market also plays a role in the evolution of wholesale settlement. Commercial banks are tokenizing customer deposits, and private companies are offering stablecoin payment rails.

While a central bank's infrastructure provides the anchor for trust and final settlement, the future financial system will be multilayered. Central banks will handle final, low-risk settlement, and commercial banks will process regulated daily payments. Meanwhile, private stablecoins will offer 24/7 payment rails for automated cross-border transfers on public networks. Read on to see how private stablecoins can complement central banking infrastructure.

What are central banks actually building with blockchain?

Central banks want a blockchain infrastructure primarily for wholesale settlement between institutions, not for consumer retail payments. They're building a programmable settlement layer where banks and other eligible institutions can move funds instantly in a digital space.

CBDCs are just one piece of this larger puzzle:

• Wholesale CBDCs and tokenized reserves. These are digital central bank reserves used only by institutions. They don't replace physical cash for the public. Instead, they make existing central bank money programmable so it can move on DLT platforms.
• Two-tier settlement architecture. Central banks maintain the foundation layer, holding the sole authority to issue central bank money to regulated institutions. Commercial banks stay on the layer above, continuing to serve businesses and consumers. Blockchain changes how money flows, but it keeps the traditional roles of banks intact.

Tokenized deposits and private stablecoins are separate from central bank money. Tokenized deposits represent a claim on a commercial bank. Private companies issue stablecoins and back them with their own reserve assets.

Real-world examples

The BIS runs Project Agorá to demonstrate how this fusion of central bank infrastructure and tokenized assets works in practice. Made up of eight central banks and more than 40 financial institutions, this prototype tests whether central bank money and commercial bank deposits can settle together on one shared platform. In July 2026, Project Agorá's real-value testing covered 17 cross-border transaction scenarios worth about 800,000 Swiss francs in total.

On a national scale, South Korea is running Project Hangang. The Bank of Korea uses this pilot program to run wholesale CBDCs and tokenized deposits together on a single ledger.

What are the 3 main layers of the digital payment ecosystem?

There's no limit to the layers in the digital payment ecosystem, but focusing on these three main layers helps explain how CBDCs could work in novel blockchain-based systems. It can seem like each of these payment layers is in competition over transaction data. In reality, the goal is to create separate yet complementary layers, with programmability serving as the common thread. Tokenization makes payments digital, and it also makes them predictable through conditionality and automated smart contract commands.

1. Central bank money

Central bank money sits at the base of the system. It offers zero credit risk and acts as the legal anchor for settling all private money.

2. Tokenized deposits

Tokenized deposits are blockchain-based versions of standard commercial bank deposits. They let banks settle transactions automatically while keeping customer accounts on the commercial bank's balance sheet. For example, The Clearing House launched its On-Chain Money Initiative to connect with existing systems like real-time payments (RTP) and Clearing House Interbank Payments System (CHIPS).

3. Private stablecoins

Private stablecoins sit outside traditional bank balance sheets. However, they link official bank networks to public blockchains. Since these stablecoins represent claims over an issuer's legal and reserve arrangements, they open new possibilities and greater flexibility for cross-chain and cross-border transactions.

How do private stablecoin rails fit into institutional payments?

In an institutional context, private stablecoins stand out because they run 24 hours a day, seven days a week. Adding a stablecoin layer to bank settlement networks extends operating hours and expands global reach.

Stablecoins also free up working capital. In traditional cross-border banking, institutions must prefund foreign accounts with idle cash. With stablecoins, money moves across borders on demand and converts into local currency right when needed. This lowers liquidity costs and speeds up treasury operations.

What infrastructure do businesses need to move stablecoins in practice?

Stablecoins as a payment asset reduce cross-border prefunding requirements and provide 24/7 liquidity. However, traditional public blockchains introduce operational friction: disrupted banking workflows, accounting mismatches, and lack of data privacy. To deploy stablecoin settlement, enterprise treasury and engineering teams need purpose-built infrastructure designed specifically around institutional workflows.

Tempo: Purpose-built payment capabilities for enterprise settlement

Tempo's payments-first stablecoin rail is purpose-built to complement blockchain in banking. Institutions maintain their existing compliance frameworks, banking relationships, and corporate accounts. Tempo provides a dedicated, payment-optimized Layer 1 network designed to handle institutional cross-border settlement, with validator nodes run by Stripe, Visa, and Zodia Custody by Standard Chartered.

Here's how Tempo's architecture addresses the key infrastructure needs of institutions.

Interoperability with existing bank messaging

Banks can't replace their legacy messaging systems like SWIFT or rebuild their compliance infrastructure just to use stablecoins. Stablecoin rails must handle movement of funds while keeping existing messaging, tracking, and compliance workflows intact.

Tempo separates payment messaging from value settlement. Existing banking software handles identity checks (KYC/AML), sanctions screening, and status confirmations. Tempo's Layer 1 chain handles the underlying transfer of funds.

A clear example of this architecture is Coastal Financial Corporation. Coastal and Tempo are building a cross-border payment corridor that keeps Coastal's existing KYC/AML workflows and institutional messaging in place while the correspondent-banking settlement leg moves onchain to Tempo, where network fees are typically sub-cent and payable in stablecoins. Pairing existing compliance workflows with low-cost settlement is designed to give Coastal more predictable payment economics as transaction sizes scale.

Structured metadata for treasury reconciliation

Standard public blockchain transactions only log raw wallet addresses and transaction hashes, forcing finance teams to manually reconcile payments in spreadsheets. Onchain payment legs must carry structured, enterprise-grade accounting metadata that syncs automatically with accounting and ERP software.

Tempo payment memos carry structured transaction references that support mapping into existing finance and accounting systems, as well as ISO 20022 records. A 32-byte memo, such as an invoice or customer reference, travels natively with each transfer. This allows stablecoin transactions to flow directly into standard accounting systems.

Fee handling and automation

Enterprise finance teams can't ask end-users, vendors, or treasury managers to purchase and manage separate volatile network tokens like ETH or SOL just to execute a payment. Tempo offers native payment-first controls. Network fees can be paid directly in stablecoins or sponsored entirely by the originating enterprise. Payees receive exact settlement amounts without needing to manage or hold underlying execution tokens.

Treasury departments can automate recurring payouts, vendor distributions, and liquidity rebalancing. Native scheduled transactions allow operations teams to queue and execute high-volume batch transfers automatically according to set schedules. It does this without requiring continuous manual transaction signing or custom contract overhead.

Institutional privacy via Tempo Zones

Public ledgers publish every payment amount, balance, and counterparty address to the entire world. This can expose trade secrets and customer lists to competitors. Institutions need confidential settlement channels that preserve compliance visibility for auditors and regulators.

Tempo Zones, now in limited access, keep balances and activity inside a Zone private from the public, while the Zone operator has full visibility for audit and compliance. Deposits and withdrawals at the Zone boundary stay partly visible on Tempo Mainnet.

Talk to our team about how Tempo connects stablecoin settlement to your banking infrastructure for institutional-grade cross-border settlement.

FAQ

What kinds of regulatory tools are central banks exploring with DLT?

Beyond settlement, some central banks are exploring DLT for supervisory or compliance-related issues, such as monitoring and sharing financial data.

What role do private stablecoin rails usually play in the payment system?

As the ecosystem grows, private stablecoins will most likely serve as a complementary layer to existing systems. Stablecoins can support continuous, cross-border transactions alongside commercial bank deposits and central bank infrastructure.

What are central banks mostly not building?

Central banks aren't as interested in building retail CBDCs or replacing commercial banks with blockchain-based payment networks. It's more common for these projects to use blockchain in wholesale settlement solutions.