After stablecoins and tokenization, crypto seems ready to upgrade the $10T traditional foreign exchange (FX) market.
Chainlink recently announced a move in this direction. The blockchain oracle provider, alongside over 50 European and South Korean banks, formed a Project Pangea.
The project brings together firms handling over $10T in assets and aims to make FX settlement near-instant. Chainlink added,
Existing FX market systems face severe bottlenecks due to delayed T+2 settlement cycles and fragmented market structures.
The program will use regulated Euro-based stablecoins and South Korean won (KRW). The overall system will be a three-tiered network. SWIFT will handle the banking layer for financial messaging between partner banks.
For the blockchain connectivity, Chainlink comes in to securely transfer Euro stablecoins to Korean won settlement chains. At the same time, it will provide real-time data feeds on global FX rates for the on-chain systems.
Finally, the Pangea L1 blockchain, built by FairSquareLab, will handle the settlement layer. The developer is part of the UniKA (Unified Korea Alliance), which includes Korea’s banking giants like JB Bank and Kbank.
On the other hand, Qivalis, a coalition of Euro stablecoin players backed by European banks, is also part of the project.
Will traditional FX benefit from crypto rails?
Commenting on the move, Fernando Vazquez, president of capital markets, Chainlink Labs, said,
This is a major milestone toward rebuilding how global value moves. Project Pangea upgrades the fragmented foreign exchange model of today with direct, atomic currency swaps using stablecoins.
For his part, Joonhong Kim, CEO of FairSquareLab, said the project was purely a push for more efficiency on the Europe-Asia FX corridor.
For Korea, Project Pangea is more than an efficiency gain — it opens a path for the Korean won to connect more directly with global currency markets, reducing reliance on intermediary currencies.
Worth noting that currently, one may need to change their Euros to the global reserve currency (the US dollar) before finally getting their Won (KRW).
But on-chain FX eliminates these hidden costs and middlemen. Interestingly, crypto research firm Delphi Digital had anticipated on-chain FX to find a product market fit this year.
Traditional FX is a multi-trillion dollar market riddled with intermediaries, fragmented settlement rails, and expensive fees. Onchain FX collapses this stack by enabling all currencies to exist as tokenized assets on a shared execution layer, eliminating multiple intermediary hops.
Brazil already classifies stablecoins as foreign exchange. However, USD-based stablecoins are the most dominant. and the IMF has flagged this as a risk for FX exchange rates and demand for local currencies in emerging markets like Nigeria.
It remains to be seen how the niche segment will mature.
Final Summary
- Chainlink and 50 European and South Korean banks are betting on making FX more efficient using stablecoins.
- Delphi Digital had projected on-chain FX as the next product market fit for crypto disruption.