A treasury team holding a stablecoin balance in one currency and a payable due in another cannot swap them the way a bank's FX desk swaps deposits. It has to find a venue, work out what the trade is priced against, and know what happens if only one side of the exchange settles. All three answers change once the pair stops being dollar to dollar. This is not advice.
What "onchain FX" is, mechanically
Most onchain currency conversion today is not foreign exchange at all: it is one stablecoin swapped for another in the same currency, or a local-currency token converted to and from a US dollar token. A genuine cross-currency trade, a euro stablecoin for a Korean won token, say, happens in one of two places. One is an automated market maker such as Curve's FXSwap pools, where a smart contract prices the pair against its own reserves and arbitrage traffic. The other is an over-the-counter desk that quotes a price and settles by moving tokens between wallets. Neither is connected to a correspondent banking network, and neither is a central bank payment system. Our look at OTC block trading in digital assets covers how desks quote and settle; this piece is about the currency pair itself.
Why non-dollar liquidity is thin
The starting fact is not in dispute. In an interview with Finadium published on 6 January 2026, Dirk Bullmann, managing director for public policy, strategy and innovation in the CEO office at CLS, said stablecoins "could only play a niche role today" in wholesale foreign exchange, noting that 99% of stablecoins are pegged to the US dollar. Our post on euro, sterling and Swiss franc stablecoins sets out the non-dollar issuers in detail and is not repeated here.
What matters for FX specifically is that non-dollar stablecoins lean on dollar tokens for depth. Vendor material hosted by CoinGecko, updated 14 July 2026, put EURC's market capitalisation at about $430 million against a total stablecoin market of about $297 billion, and said that "non-USD stablecoins still need USDC or frxUSD for secondary market depth." Curve, quoted in the same piece, pitches FXSwap as making it easier "to build efficient onchain markets for real world currency pairs", which is a product aimed at a gap rather than evidence the gap has closed. Where no direct pool of depth exists, converting one non-dollar stablecoin into another can mean two trades through a dollar token rather than one.
Pricing against the interbank benchmark
An onchain quote for a currency pair is not the same number as the spot rate, and the gap between them is not fixed. BIS Working Paper 1340, published on 27 March 2026 and drawing on four dollar-pegged stablecoins, 27 fiat currencies and 64 exchanges between 2021 and 2025, measured the gap between the cost of buying dollars via stablecoins and via the spot FX market. It found that a 1% exogenous increase in net stablecoin inflows raised that parity deviation by 40 basis points, depreciated the local currency and widened covered interest parity deviations. The authors trace the effect to the limited balance-sheet capacity of the intermediaries who connect stablecoin and traditional markets, find emerging-market currencies most exposed because their deviations are largest and arbitrage weakest, and find spillovers growing disproportionately when those intermediaries take losses. The paper studies dollar stablecoins against local currencies, but the mechanism is the one that matters for a treasurer: the thinner the arbitrage behind a pair, the further its onchain price can sit from the benchmark used to mark the trade, and the more that gap can widen under stress.
Settlement risk, and what CLS actually removes
Payment-versus-payment (PvP) settlement exists because of Herstatt risk: the chance that a bank pays away the currency it sold before it receives the currency it bought, and its counterparty fails in between. In the same January 2026 Finadium interview, CLS's chief executive Marc Bayle de Jessé said CLS had mitigated around 90% of the risk exposure on FX trades across its 18 eligible currencies, and its chief growth officer Lisa Danino-Lewis put average daily settlement values in 2025 at over $8 trillion.
A BIS Quarterly Review article published on 15 June 2026, using the 2025 Triennial Survey, measured what sits outside that protection. Of more than $14 trillion in gross FX settlement obligations on an average day in April 2025, 36% settled via PvP systems and 10%, about $1.4 trillion a day, settled gross and bilaterally with full exposure to settlement risk; the rest went through pre-settlement netting, intragroup settlement or bank account controls. For currency pairs eligible for CLS, 40% of trades settled via PvP; for pairs outside it, only 12% did.
An automated market maker swap of one stablecoin for another is atomic in a narrower sense: the smart contract either exchanges both tokens or reverts, so neither party can pay without receiving. That removes counterparty settlement risk within the trade itself. It does not remove what CLS was built for, because neither leg is central bank money; each is a claim on the issuer that minted the token, redeemable on that issuer's terms, and the fiat legs into and out of the tokens settle outside the smart contract. A stablecoin swap that completes cleanly onchain has avoided one risk, not the full set a bank's FX desk manages.
At Proof of Talk's Paris edition at the Louvre Palace in June 2026, "The Current State of Global Stablecoin Rails: Payments, Settlement and Compliance", moderated by Eddie Chong, brought Christian Niedermüller, Josiah Senu and Suzanne Morsfield together on that settlement and compliance ground.
What regulated venues and banks are testing, and how far each has got
The most advanced official work is a pilot, not a product. On 27 May 2026 the BIS said the Project Agorá prototype, involving seven central banks and more than 40 private sector financial institutions, had shown that atomic "all-or-nothing" settlement of cross-border wholesale transaction chains is achievable across currencies and jurisdictions, and that the work would advance to real-value testing. That testing ran in July 2026: according to the BIS, 28 private sector institutions and central banks completed 30 transactions across 17 scenarios, totalling about CHF 800,000 (roughly $1 million, as CoinDesk reported on 30 July), in Swiss francs, euro, sterling, yen, won and US dollars, including payment-versus-payment transactions, with an average of about 80 seconds from initiation to settlement. The BIS noted that the prototype was not integrated with existing real-time gross settlement or core banking systems, and said the project intends to advance testing. Agorá follows Project Mariana, whose final report of 28 September 2023, with the Bank of France, the Monetary Authority of Singapore and the Swiss National Bank, tested automated market makers for hypothetical wholesale euro, Swiss franc and Singapore dollar central bank digital currencies and described itself as purely experimental.
Hong Kong is on a licensing-led track. Its Stablecoins Ordinance has been in force since 1 August 2025, and on 10 April 2026 the Hong Kong Monetary Authority granted the first two stablecoin issuer licences, to Anchorpoint Financial, a joint venture of Standard Chartered Bank (Hong Kong), HKT and Animoca Brands, and to HSBC. The 2026 Policy Address, delivered in September 2026, set out plans to introduce round-the-clock settlement in tokenised central bank money for tokenised deposits under EnsembleTX by the end of 2026, and for the HKMA to test tokenising Exchange Fund Bills, of which more than HK$1.3 trillion are outstanding, before the year ends. These are stated plans; none of it is live cross-currency stablecoin trading.
On the private side, 21 banks including Citi, Goldman Sachs, Bank of America and UBS announced on 2 September 2026 that they will establish a company in the second half of 2026 to issue a stablecoin, with a US dollar token targeted for the first half of 2027 and an ambition to add other G7 currencies later, starting with the euro. That is a commitment with a timeline, not a running service. And on 22 September 2026 CoinDesk reported that Reap, a Visa Principal Issuer Member with licences in Hong Kong and Mexico, is preparing to add a Mexican peso stablecoin and exploring stablecoins pegged to the Hong Kong dollar, euro, won and yen, with no issuer or rollout timetable named. Each sits at a different point on the same line, from a completed real-value pilot, through licences and stated plans, to an announced consortium and an exploratory statement.
What this means for now
Dollar stablecoin conversion is deep. Non-dollar conversion leans on dollar tokens for depth. The onchain price can drift from the interbank benchmark, most in currencies with thin arbitrage and most under stress. And an onchain trade settling cleanly is not evidence that the settlement risk CLS addresses has been solved. Our note on stablecoin payments for corporate treasury covers what changes once a business holds these balances, and the work on wholesale central bank money and tokenised settlement is where to watch for whether that gap closes.