Digital Dollars, Real Risk: What Stablecoins Mean for Model Risk

I’ve always been intrigued by crypto and the blockchain. But mostly from a distance as I'm pretty risk averse on the personal investing side and it hasn't really crept into, or impacted, my day job working with community banks and credit unions on model risk.

Until now.

🪙 Stablecoins are starting to go mainstream and they’ve officially got my attention.

If you’re not familiar, stablecoins are a type of digital currency designed to stay pegged to a stable asset - usually the U.S. dollar. So unlike Bitcoin, the goal here is predictability rather than the typical volatility we've seen with Bitcoin.

They run on the blockchain, which means they can move instantly, settle 24/7, and skip a lot of the traditional intermediaries that slow down and add cost to payments.

❗ And now it’s not just crypto startups using them as banks are entering the arena.

This week (June 2025), Fiserv announced a partnership with Circle (issuer of the USDC stablecoin) to launch its own stablecoin, FIUSD, and roll out a platform that lets banks and merchants access stablecoin infrastructure without the need for major tech investment.

With Fiserv working with 10,000+ banks and 6 million merchants, this is very significant!

🏦 Why should banks care?

Because stablecoins can:

 ✔ Cut payment costs

 ✔ Enable real-time settlement (who likes waiting 2-3 business day?!!)

 ✔ Automate treasury and cash management

 ✔ Help smaller banks offer competitive digital payment tools

 ✔ Create new options for B2B, cross-border, and peer-to-peer business

And with the GENIUS Act recently passing in the Senate, there’s now real momentum on the regulatory front, giving traditional banks more confidence to explore this space and make sure they remain relevant in a digital world.

💡 So how does this impact the world of modeling and model risk, you ask?

If your institution is thinking about dipping a toe into stablecoins, modeling and MRM teams need to be looped in early.

A few areas to watch:

 🔹 Liquidity risk – When funds can move 24/7, old assumptions about deposit behavior need to be revisited.

 🔹 Operational risk – New tech = new dependencies. APIs and blockchain platforms all bring unique risks.

 🔹 Credit and market risk – Stablecoins can de-peg. Issuer quality matters. Redemption risk is real.

 🔹 Model risk – New processes often mean new models, or big changes to existing ones. SR 11-7 still applies, even if the money is digital.

🫷 Bottom line:

This isn’t about buying crypto. It’s about understanding how digital dollars may soon flow through community banks, and what that means for risk management, modeling, and governance.

I’m watching this space closely. Because for the first time, crypto/blockchain might actually impact my day job.