TLDR Tech / Crypto
Onchain Payments Need Compliance to Scale
McKinsey estimates $390 billion in stablecoin payment volume over the past year, but banks cannot join those rails unless they can screen counterparties against OFAC, EU, and UN sanctions lists, monitor for laundering patterns, and file suspicious activity reports. Protocol-level compliance tooling addresses the screening and blocking layers through allowlists restricted to KYC'd addresses and blocklists that stop sanctioned addresses at settlement, with Tempo's implementation cited as a working example. There is a gap around freeze authority: banks can halt a transaction onchain, but recovering frozen funds requires action from the stablecoin issuer rather than the bank, splitting control in a way that does not map to existing regulatory frameworks. Until that authority question resolves, the largest institutions carry residual legal exposure that blocks adoption regardless of what the payment rails can technically support.
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