Why Ethereum Could Become Financial Infrastructure

I believe Ethereum has a reasonable chance to emerge as significant financial infrastructure. This hypothesis rests on several converging trends that are starting to reinforce each other.

Stablecoins have proven that public blockchain rails can handle trillions in transaction volume
U.S. regulators are shifting from skepticism to strategic engagement with this technology
Major financial institutions are tokenizing real-world assets, with projections reaching $16 trillion by 2030
Institutional capital is flowing in through ETFs and corporate treasury allocations
Ethereum’s economic model directly links network usage to the value of ETH through staking yields and fee burns
Open, permissionless networks have structural advantages over closed systems for global financial infrastructure

The current financial system runs on technology designed in the 1970s. These rails are slow, expensive, and poorly suited for a digital, 24/7 global economy. Public blockchains offer a potential upgrade path - though this transition faces real challenges and isn’t guaranteed.

Stablecoins: The Proof of Concept

Stablecoins have become the first genuine product-market fit for public blockchains at scale. The market has grown to approximately $280 billion¹, processing trillions in annual transaction volume. USDT leads with $167 billion in circulation, while USDC holds $67 billion².

In recent months, USDC alone processed $2.3 trillion in on-chain transfers while USDT handled $1.2 trillion³. These volumes rival traditional payment networks - not because of speculation, but because stablecoins solve real problems. They enable instant cross-border payments, provide dollar access in countries with unstable currencies, and serve as the foundation for DeFi protocols.

Major lending protocols like Aave, which currently manages over $30 billion in deposits⁴, were built on stablecoin infrastructure. This isn’t just crypto trading anymore - it’s functional financial infrastructure that works 24/7 globally.

The success of stablecoins forced regulators to pay attention. What started as a tool for crypto traders has evolved into a global payment rail that policymakers can no longer ignore.

The Regulatory Landscape

A significant shift is underway in how U.S. regulators view blockchain technology. Federal Reserve Governor Christopher Waller captured this change in his August 2025 speech at the Wyoming Blockchain Symposium: “There is nothing scary about this just because it occurs in the decentralized finance or DeFi world - this is simply new technology to transfer objects and record transactions.”⁵

The passage of the GENIUS Act in July 2025 marked the first major U.S. cryptocurrency legislation⁶. This law creates a federal framework for stablecoin issuers, requiring full reserve backing and regular audits. It gives traditional banks, fintech companies, and other institutions a clear path to issue regulated digital dollars.

This isn’t just financial policy - it’s geopolitical strategy. U.S. policymakers increasingly view dollar-denominated stablecoins as a way to maintain and extend the dollar’s global reserve status. As Governor Waller noted, stablecoins have “the potential to maintain and extend the role of the dollar internationally.”⁵

The regulatory clarity provided by the GENIUS Act removes the primary barrier that kept institutions on the sidelines. Combined with the Fed’s more supportive stance, this creates conditions for broader adoption.

Real-World Asset Tokenization

If stablecoins proved the concept, tokenized real-world assets (RWAs) represent the next wave. Financial institutions are actively moving traditional assets onto public blockchains, with Ethereum emerging as the primary platform.

BlackRock’s BUIDL fund, a tokenized money market fund on Ethereum, has grown to over $500 million since launching in March 2024⁷. Franklin Templeton’s FOBXX fund manages approximately $400-780 million across multiple blockchains⁸. Other examples include:

Ondo Finance’s tokenized Treasury products (OUSG, USDY) with over $248 million on Solana alone⁹
J.P. Morgan’s tokenized asset-backed securities
Multiple corporate debt and private credit tokenization initiatives

The total market for tokenized RWAs (excluding stablecoins) has reached approximately $26-27 billion¹⁰. Boston Consulting Group projects this could grow to $16.1 trillion by 2030 - roughly 10% of global GDP¹¹. Even their conservative estimate represents a 50x increase from today’s levels.

The economics driving this shift are straightforward. Tokenization enables 24/7 settlement instead of T+2, reduces operational costs, allows fractional ownership of previously illiquid assets, and creates a transparent, immutable record of ownership. For a large bank, these efficiencies could save hundreds of millions annually.

By choosing Ethereum for products like BUIDL, institutions are making a bet on which infrastructure will matter. Each deployment strengthens Ethereum’s network effects and makes it more likely to become the default settlement layer.

Valuing a Global Settlement Layer

If Ethereum becomes critical financial infrastructure, traditional valuation models become inadequate. The question becomes: what is a global, programmable settlement layer worth?

For context, the combined market capitalization of NYSE and Nasdaq exceeds $53 trillion. SWIFT facilitates over $5 trillion in daily transaction value¹². Ethereum, which combines functions of an asset ledger, settlement network, and messaging layer, currently has a market cap of approximately $450 billion.

The more relevant metric might be Total Value Secured (TVS) - the sum of all assets trusting the chain’s security. Ethereum’s DeFi ecosystem alone holds approximately $90-95 billion in total value locked, representing about 60% of all DeFi activity¹³. As tokenized RWAs grow into the trillions, the network securing them must be valuable enough to deter attacks.

Ethereum’s economic design creates direct links between usage and value. The Proof-of-Stake mechanism allows ETH holders to earn yields (currently around 3%) by staking. EIP-1559 burns a portion of every transaction fee, creating deflationary pressure as usage increases. These mechanisms mean increased network activity translates directly into value accrual for ETH holders.

Why Open Networks Have Structural Advantages

For global financial infrastructure, neutrality matters more than control. Private blockchains face an inherent trust problem - would Goldman Sachs build critical infrastructure on a J.P. Morgan-controlled network? Would any country trust another’s centralized system?

Public blockchains solve this through credible neutrality. The rules are transparent, enforced by code, and can’t be arbitrarily changed. This creates a level playing field that encourages long-term investment and development.

The real advantage is composability. Assets on Ethereum can be combined and recombined permissionlessly, like open-source code. This enables exponential innovation that closed systems can’t match. While private networks innovate linearly and top-down, Ethereum evolves exponentially and bottom-up.

Institutional Capital Flows

The theoretical case is being validated by capital flows. Prominent investors including Peter Thiel’s Founders Fund are making what the WSJ describes as a “broad play on Ethereum,” taking stakes in companies that accumulate ETH on their balance sheets¹⁴.

Corporate treasuries have purchased 1.26 million ETH in recent months - 1% of circulating supply - with Standard Chartered projecting they could eventually hold 10%¹⁵. These firms are following the MicroStrategy playbook, using equity markets to accumulate crypto assets as primary reserves.

U.S. spot Ethereum ETFs have attracted over $9 billion since launching¹⁶. Unlike previous crypto cycles, this represents long-term strategic allocation rather than speculation.

These flows are creating supply dynamics worth watching. Between ETF purchases, corporate accumulation, and staking (which locks up ETH), an increasing percentage of supply is becoming illiquid. When this meets growing demand from RWA settlement, basic economics suggests significant price appreciation.

Risks and Challenges

This thesis faces real risks that could derail or delay it:

Competition: Other blockchains like Solana are growing rapidly. While Ethereum dominates with 60% of DeFi activity, this could change. Network effects are powerful but not insurmountable.

Technical limitations: Ethereum still faces scalability challenges. While Layer 2 solutions help, the base layer processes only 15-30 transactions per second. Major institutional adoption will require continued technical improvements.

Regulatory reversal: While current momentum is positive, political changes could shift regulatory stance. The framework remains incomplete, particularly around DeFi protocols and cross-border transactions.

Security concerns: Smart contract bugs and hacks remain common. A major security failure could damage institutional confidence. The technology is still maturing.

Macro factors: Rising interest rates or a broader market downturn could reduce appetite for digital assets. Correlation with traditional markets has increased.

Adoption friction: Despite improvements, blockchain technology remains complex for average users. Institutional adoption doesn’t guarantee retail follow-through.

Conclusion

The convergence of proven stablecoin utility, regulatory clarity, institutional adoption, and technical maturation suggests Ethereum could become foundational financial infrastructure. This isn’t certain - technology transitions are messy and incumbents don’t give up easily.

But the direction seems clear. Major financial institutions are building on Ethereum. Regulators are creating frameworks rather than barriers. The technology, while imperfect, works well enough for trillion-dollar transaction volumes.

If this thesis plays out, we’re watching the early stages of a fundamental rewiring of global finance. The pipes are being laid now, even if the full transition takes decades. Ethereum’s position as the primary settlement layer for this new system would make it extraordinarily valuable - though predicting exact valuations or timelines would be speculation.

The question isn’t whether blockchain technology will impact finance - that’s already happening. The question is which infrastructure wins and how completely the transition occurs. Ethereum has the lead, but the race is far from over.