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Foreign exchange (often referred to as forex or FX) is the backbone of global commerce. Every cross-border payment, import invoice and currency hedge passes through a market that, by sheer transaction volume, dwarfs every other financial market on earth. The Bank for International Settlements' (BIS) most recent triennial survey, conducted in April 2025, put OTC FX trading at $9.6 trillion per day, a 28% increase from the $7.5 trillion recorded in 2022. A market operating at that scale cannot sit on the sidelines when financial infrastructure begins to shift.
As on-chain asset tokenization expands across stocks, bonds, commodities and stablecoins, FX is now entering the conversation. The goal is not to replace the entire FX market overnight, but rather to make parts of currency trading and settlement faster, as well as more transparent and programmable. Blockchain-based infrastructure is beginning to offer alternatives to correspondent banking rails for specific use cases, particularly cross-border settlement and treasury flows for which traditional processes carry the most friction.
Key Takeaways:
Forex tokenization covers stablecoins, tokenized deposits and wholesale CBDCs, each serving different parts of currency settlement.
On-chain FX could reduce settlement friction and support 24/7 programmable currency flows, but most use cases are still early.
Bybit TradFi lets users trade 300+ pairs across forex, commodities, indices and stocks using USDT collateral, bridging crypto capital with traditional markets.
The term “forex tokenization” refers to using blockchain infrastructure to represent, transfer or settle fiat currency value. Rather than moving fiat currency through correspondent banking networks, tokenized FX uses on-chain instruments that stand in for currency exposure at different points in the settlement chain.
The main forms of forex tokenization cover stablecoins, tokenized deposits, wholesale central bank digital currencies (CBDCs) and on-chain FX settlement.
Stablecoins, such as USDC (USDC) or STASIS euro (EURS), are fiat-pegged tokens issued by private entities, already integrated into crypto trading and on-chain liquidity pools.
Tokenized deposits are commercial bank liabilities that are recorded on blockchain-based ledgers, rather than conventional core banking systems.
Wholesale CBDCs are digital currencies issued directly by central banks for interbank and cross-border settlement.
On-chain FX settlement, the most direct application of forex tokenization, involves exchanging one tokenized currency representation for another on blockchain networks or crypto exchanges, bypassing the traditional finance correspondent network.
Each of these four instruments sits at a different point in the financial stack, which determines both its practical utility and its regulatory exposure.
Traditional FX markets are deep and liquid at the interbank level, but the infrastructure beneath that liquidity carries structural inefficiencies that become more visible as digital alternatives develop.
For instance, Spot FX between major currency pairs typically settles on T+2, meaning that two full business days pass between trade execution and final fund delivery. Cross-border corporate payments can take considerably longer, particularly when they route through multiple correspondent banks operating across different time zones and incompatible cutoff schedules. Each intermediary in that chain adds cost, introduces reconciliation work and creates a window of counterparty exposure between deal execution and confirmed settlement.
Operational risk compounds with each handoff. Corporate treasurers managing multicurrency operations often hold excess balances to buffer against timing mismatches, which represent capital sitting idle (rather than being actively deployed). Additionally, counterparty risk between execution and settlement remains a persistent concern in corridors with limited infrastructure.
Tokenized FX infrastructure can address these points by compressing settlement timelines, removing banking-hour constraints on currency movements, and automating confirmation and reconciliation workflows via smart contracts. The greatest appeal of the technology, however, is in cross-border payment corridors and treasury operations, since correspondent banking infrastructure is costly or inefficient.
The mechanics of on-chain FX settlement differ from the correspondent banking model at almost every step.
Currency representation is the starting point: a fiat currency is brought on-chain through a stablecoin, a tokenized deposit or a CBDC. Once it’s represented on a distributed ledger, it can move without requiring correspondent banks to debit and credit accounts on either side of the transaction. The exchange step works similarly to a token swap: a holder of tokenized euros transfers their on-chain representation to a counterparty in exchange for tokenized dollars, with settlement occurring on-chain (rather than across two separate banking systems).
Atomic settlement provides the structural advantage: both legs of the transaction complete simultaneously, or neither one settles. This eliminates the principal risk that arises in conventional FX when one counterparty delivers currency before confirming receipt of the other leg. Smart contracts can then automatically trigger processes such as confirmation, regulatory reporting or treasury account updates upon settlement, without any manual intervention.
Some central banks and institutions have tested blockchain-based FX settlement through pilot projects. However, most of these remain experimental (rather than live) market infrastructure. The gap between proof-of-concept and production-scale adoption remains significant, particularly in cases where legal finality and cross-border regulatory recognition are still uncertain.
These three instruments are frequently grouped together in tokenization discussions, but they serve different functions and carry different risk profiles.
Instrument | Issuer | Main use |
Stablecoins | Private issuers | Crypto trading, payments, on-chain liquidity |
Tokenized deposits | Commercial banks | Institutional settlement and treasury |
Wholesale CBDCs | Central banks | Interbank and cross-border settlement |
Stablecoins are already deeply embedded in crypto markets, and represent the most accessible and liquid form of on-chain currency representation available today. In contrast, tokenized deposits and wholesale CBDCs are designed primarily for regulated institutional finance, as legal certainty, counterparty standing and central bank backing carry more weight than open accessibility. These instruments are unlikely to converge into a single standard, however, as interoperability between them will require deliberate technical and legal frameworks, rather than just enthusiastic market adoption.
As a major industry player, Bybit is already at the forefront of the trend toward integrating forex and crypto. As of mid-2026, its exchange offers products in this niche targeting different usage profiles, though it doesn’t operate a unified on-chain FX settlement system.
On the crypto side, stablecoins such as USDT and USDC function as tokenized fiat-like assets across Bybit's trading and investment products, serving as collateral, settlement currency and the primary unit across Bybit Earn products. This gives crypto-native traders effective dollar-pegged exposure without converting back through a bank.
On the traditional markets side, Bybit TradFi gives users access to major forex pairs alongside metals, indices, stock CFDs and commodities, with over 300 pairs available in the Bybit interface using USDT as margin.
Bybit TradFi is not the same as fully on-chain FX settlement. The underlying pairs trade through conventional market infrastructure, rather than blockchain rails. However, this reflects the practical direction of travel — that of crypto collateral accessing traditional currency markets through a single account.
Blockchain infrastructure doesn’t automatically make currency settlement safer or more efficient. The actual value of any on-chain FX system depends upon the quality of instruments involved, the governing legal framework and the depth of available on-chain liquidity.
Regulatory clarity remains the most significant constraint. Stablecoins, tokenized deposits and CBDCs face different legal treatment across jurisdictions, and no harmonized framework for on-chain FX settlement currently exists.
On-chain FX liquidity remains a fraction of the interbank OTC market, meaning that price impact for large institutional trades can be significant where depth is thin. For major institutional players accustomed to the vast liquidity of traditional forex, this limitation can be consequential.
Stablecoins carry issuer and reserve risk, while tokenized deposits carry the credit risk of the issuing bank.
Different blockchain networks, banking systems and CBDC platforms may not communicate natively, requiring bridges or intermediary protocols that introduce their own technical exposure. For instance, smart contracts and cross-chain bridges have been the target of significant exploits in crypto markets over the years, resulting in multibillion-dollar losses from hacking attacks.
As such, forex tokenization isn’t inherently safer or more efficient than traditional FX trading; it simply uses blockchain. Its value depends heavily upon liquidity depth, legal clarity, trusted issuers and genuine real-world adoption across institutional counterparties.
Foreign exchange isn’t moving on-chain in any wholesale sense. What is shifting is the settlement and payment infrastructure that moves currency across borders and between institutions. That shift has been gradual, jurisdiction-specific and dependent upon regulatory frameworks that are still being developed.
Stablecoins have already demonstrated that tokenized currency representations can achieve meaningful scale and liquidity within crypto markets. Tokenized deposits and wholesale CBDCs are extending that logic into regulated institutional finance, with central bank pilots and bank-issued on-chain instruments beginning to test settlement rails that could eventually support faster, more programmable cross-border flows.
Nevertheless, for traders operating today the connection between crypto capital and traditional FX markets is already available. Bybit TradFi demonstrates that crypto collateral can back conventional forex positions within a single platform, narrowing the operational gap between on-chain liquidity and the multitrillion-dollar daily FX market.
As institutional players move into forex tokenization, volumes and activity in this area are going to grow further. At some stage, we may see tokenized deposits and CBDCs used as routinely as stablecoin operations are being used today among retail traders.
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