Eco CEO: Stablecoins resemble fragmented FX markets

Ryne Saxe, chief executive of stablecoin infrastructure firm Eco, said stablecoins operate like a fragmented foreign exchange market because dollar liquidity is spread across multiple blockchains, issuers and liquidity pools. He warned that fragmentation produces price gaps, unexpected slippage and makes large transfers harder to execute.

Saxe described the onchain stablecoin ecosystem as “a very special case of a foreign exchange market onchain,” where routing large transactions typically requires multiple steps across chains and venues. The multi-step routing can lead to transaction reversion, unexpected slippage and unfamiliar pricing information when moving dollar-denominated tokens between points.

Stablecoins have a market capitalization above $320 billion, led by USDT and USDC. Traders, corporates and institutions use these tokens for trading, cross-border payments and onchain treasury management. A dollar-pegged token on one chain can differ from the same token on another chain because of different collateral backing, access to markets and pool depth. Those differences tend to widen as trade size increases.

Data collected across numerous fiat-stablecoin corridors show USDC and USDT trade at nearly identical prices in many routes, with roughly 91% of pairs within 10 basis points in one analysis. However, pricing can diverge significantly at the provider level, producing gaps measured in hundreds of basis points depending on where liquidity is sourced and how trades are routed.

For retail-size transactions and very liquid pools, these differences are usually small. For institutional-sized flows, fragmentation acts as a constraint. Attempting to sell $10 million of one stablecoin and buy $10 million of another in a single step typically moves the market, requiring the trade to be split into multiple branches that route differently and then converge at the destination. That process can shift prices and introduce execution uncertainty.

Saxe said the market needs better infrastructure rather than more stablecoin supply. “Fragmentation creates more spread between prices, meaning worse execution in many cases,” he added, and advised that market participants must see the full liquidity picture and route across it.

Companies are building different types of infrastructure to address these issues. Some firms are treating stablecoins as the basis for a connected onchain foreign-exchange system that links multiple currencies, liquidity providers and settlement layers. Other firms focus on execution and routing, aggregating liquidity across chains and venues to find cleaner paths for large transfers.

Traditional banks are also exploring bank-backed tokens denominated in euros and other fiat currencies, which adds new issuers and another layer of liquidity distribution. Developers and service providers say improving cross-venue routing and building tools for large-scale execution are necessary steps to make stablecoins more usable for institutional capital flows.