February 17, 2026
High Liquidity vs Exotic Currency Corridors: Why Converting Dollars to Turkish Lira Costs 170x More Than Converting to Euros
Harrison Mann,
Head of Growth
Imagine you need to convert $10 million to euros for a supplier payment. The whole thing—quote, execution, settlement—takes maybe eight minutes. Costs $500 in spread. An experience so seamless it’s basically forgettable.
Now imagine you have to convert $10 million in Turkish lira. This time? Fifteen minutes just to get a quote. The bank comes back with an 85-pip spread—that's $85,000. Settlement takes two full days. During which you just … sweat, hoping the exchange rate doesn't tank and nobody's bank screws something up.
Same transaction. Same amount. Same bank. Why does one cost 170 times more?
The answer isn't “because Turkey is riskier” or “it's a smaller economy.” Those things matter, but they're not the real story. The real answer is infrastructure—more specifically, the complete lack of it in certain corridors.
We think about this constantly. How do you create markets where people can reliably exchange currencies at predictable prices? The traditional FX world has figured this out brilliantly for some currencies and utterly failed for others. Understanding why is basically an archaeology project—digging through decades of decisions that built the system we have today.
So grab a drink, because this is the tale of how currency markets actually work, why some are amazing and others are a complete disaster, and what we're trying to do about it.
Digging through the ruins—how did we get here?
The foreign exchange market trades $9.6 trillion every single day—that's according to the Bank for International Settlements' 2025 Triennial Survey, basically the census of global currency trading. But this thing wasn't built in a day. It's more like finding the ruins of an ancient city. You can tell which roads were main thoroughfares by how wide and well-paved they are, right? Same concept here.
The modern structure crystallized after 1971, when the Bretton Woods system collapsed and currencies started floating freely. That's when the real market-making began—banks had to continuously quote prices because nobody knew what anything was worth anymore. Pretty quickly, certain currencies emerged as the load-bearing pillars of the system.
The G7 Club: Where the action happens
When people talk about “G7 currencies,” they’re referring to the big seven: US dollar, euro, Japanese yen, British pound, Swiss franc, Canadian dollar, and Australian dollar. And USD alone is on one side of over 89% of all trades. EUR/USD—just that one pair—does $2.03 trillion per day, or 21.2% of the entire global market.
Why do these currencies dominate? Three reasons that feed into one another:
Market makers pile in (because volume). When EUR/USD is trading $2 trillion a day, hundreds of banks and trading firms compete to make markets. Why? Because even though they're only making 0.1 to 0.5 pips per trade—that's tiny—they can turn their inventory over thousands of times per day. It's like running a deli: Low margin, high volume, you make it up in quantity.
The math works when you can buy euros from one client and sell them to another client 30 seconds later. Your inventory turnover is measured in milliseconds. You're not really taking currency risk—you're just capturing the spread.
Compare that to Turkish lira. The whole USD/TRY market might do a few billion per day. When you take a position, you might be sitting on it for minutes or hours before you can offload it. During that time, the lira could move against you. So you need much wider spreads to compensate for that risk. Which makes trading more expensive. Which suppresses volume further. See the problem?
Hedging markets. Here's something most people don't realize. When a bank takes a position in EUR/USD, they can hedge it almost instantly. Like, there are euro futures trading on the Chicago Mercantile Exchange. There are options. There are swaps. A whole ecosystem of derivatives that let you offset currency risk in seconds.
This changes everything. If you can perfectly hedge, you're not betting on whether the euro goes up or down. You're running what's called a “matched book”—your long positions (stuff you bought) are balanced by short positions (stuff sold or hedged). You're basically just earning the bid-ask spread with almost no directional risk.
For Turkish lira, there are basically no liquid derivatives. There’s some non-deliverable forwards trading offshore, but those have their own issues. When a bank makes a market in lira, they're warehousing actual currency risk. So they need more capital, face more regulatory scrutiny, and charge you more to do it.
Quick sidebar on “basis risk,” since it matters here: Even when hedging instruments exist, they might not perfectly offset your exposure. Maybe the hedge expires before your underlying position. Maybe it references an offshore rate that diverges from the onshore rate—this happens a lot with capital controls. Maybe the hedge itself is illiquid when you need to adjust it. That's basis risk, and it's way worse in “exotic” markets.
Credit architecture. This one's subtle but super important. When JPMorgan trades with Citibank in the EUR/USD market, they've got massive bilateral credit lines—billions of dollars. These relationships have been built over decades. Everyone knows everyone. There's a whole legal infrastructure. And crucially, there's CLS Bank.
CLS Bank is the secret sauce of G7 currency trading. It settles over $8 trillion every day across 18 currencies. The magic: It settles both legs of an FX trade simultaneously, eliminating “principal risk”—the danger that you deliver your currency, but the other guy never sends you theirs. This is also called “Herstatt risk” after a German bank that failed in 1974 and left everyone holding the bag.
Here's the thing: CLS only works for 18 currencies. Most emerging market currencies aren't in the club. So when you trade those, you're back to bilateral settlement with T+2 timing, which means two days where you're exposed to the other party defaulting. Banks price that risk into their spreads.
Credit also determines how much you can trade. In G7 markets, credit lines are huge because everyone trusts each other (or at least operate under the same rules). In emerging markets? Credit officers have to assess political risk, legal enforceability, settlement infrastructure—all of it. Credit lines end up much smaller, which fragments liquidity further.
See how this all feeds on itself? High volume attracts market makers. More market makers mean better pricing. Better pricing attracts more volume. Plus you've got deep hedging markets and rock-solid credit infrastructure, all of which makes the whole thing even more attractive.
The G7 currencies are sitting pretty at the center of this virtuous cycle. Meanwhile, emerging market currencies are stuck in the opposite spiral: Low volume, few market makers, wide spreads, terrible hedging options, sketchy credit relationships, even lower volume. It's brutal.
Present day: Watching the system in action
Enough history talk. What does it actually look like when you're trying to move money? Let me walk you through the two lifecycles we experienced.
The EUR/USD Trade: Eight minutes, $500
We log into our bank's FX portal. Click 'get quote' for $10 million to euros.
50 milliseconds later: The bank's system has pinged dozens of liquidity providers, aggregated prices, and comes back with 1.0525. Spread is 0.5 pips—that's $500 on this trade.
150 milliseconds later: We click accept. Trade executed. Done.
1 second later: The bank's hedging desk has already offset their position using euro futures or an interbank swap. They're flat again—no currency risk.
8 minutes later: CLS Bank has settled both sides simultaneously. Dollars and euros have moved. We're done. The whole thing felt instantaneous.
Behind the scenes, though? Insane amounts of infrastructure. Multiple ECNs, automated credit checks, hedging systems connected to futures exchanges, CLS Bank coordinating with central banks across time zones, regulatory reporting capturing every detail. Dozens of institutions working in perfect synchrony. It's almost beautiful, really.
The USD/TRY Trade: Two Days, $85,000
Same week, same bank, $10 million in Turkish lira.
5 minutes in: Still waiting. No automated pricing here—it goes to the emerging markets desk, where an actual human is calling around to find liquidity.
10 minutes in: Credit committee needs to approve this. They're checking: How much lira exposure do we already have? What's our credit line with the likely counterparty? Any political news coming out of Turkey today?
15 minutes in: Quote comes back. 85-pip spread. That's $85,000. We wince. Accept it anyway because we need the lira.
Next 48 hours: Settlement hell. The lira isn't CLS-eligible, so we're doing bilateral settlement. The bank delivers dollars to their counterparty's correspondent bank in New York. The counterparty is supposed to deliver lira to our nostro account in Istanbul. There's principal risk the entire time—if they default after getting our dollars, but before sending lira, we're screwed.
48+ hours: Now the lira has to move from our nostro account to the actual supplier's account in Turkey. This involves local correspondent banks, Turkish FX regulations, more documentation. Delays are common.
Total time: 2+ days. Total cost: $85,000 plus a lot of stress. The whole time, we're watching the TRY exchange rate, praying it doesn't move against us while we're in settlement limbo.
Same transaction, different universes.
This is what I mean about infrastructure. It's not that banks are evil or trying to rip you off on lira trades. It's that the entire machinery that makes EUR/USD seamless just doesn't exist for USD/TRY. No deep market maker competition. No hedging instruments. No CLS settlement. Higher credit risk. Everything costs more and takes longer.
This pattern repeats across basically every emerging market currency corridor. Some are better than others, but none come close to the G7 experience.
Stablecoins—history rhyming forward
Here's where it gets interesting for us. We're building stablecoin infrastructure, and when you look at it through this historical lens, you can hear the past rhyming back at us.
Before central banks took over, private banks issued their own notes. These were basically IOUs backed by gold or silver. Whether people trusted your note depended on your reputation and whether everyone believed you actually had the reserves.
Sound familiar? USDC is basically an IOU for dollars, issued by a private company (Circle), where trust depends on whether people believe the reserves exist. We've basically recreated 19th-century private banking, but on blockchains instead of paper. History doesn't repeat, but it’s definitely got a rhythmic cadence.
Why do stablecoins work in places where traditional banking fails? The infrastructure looks totally different.
Traditional exotic trade: You → Bank → Interbank market → Correspondent banks → Local banking system → Local currency. Each step needs credit relationships, adds time, introduces risk.
Stablecoin trade: You → USDC on blockchain → Local crypto exchange → Local currency. Way fewer steps.
But the numbers are real. Stablecoin volume hit $33 trillion in 2025, up 72% from the prior year. USDC alone did $18.3 trillion in transactions. For actual payments—not just trading—we're seeing $20-30 billion daily. Business-to-business payments are running at $36 billion annualized.
The Singapore-China corridor? One of the most active stablecoin channels. Latin America saw a 31% jump in USDC adoption for cross-border payments. Nigeria, Kenya, and South Africa together represent 12% of global peer-to-peer USDC volume.
These are exactly the corridors where traditional banking sucks. That's not a coincidence.
What stablecoins fix
Market maker competition. You don't need a banking license to make markets in stablecoins. Crypto trading firms, automated market makers, even individuals can provide liquidity. Barriers to entry are way lower than traditional FX. This means more competition, which theoretically means tighter spreads.
Settlement risk. Atomic swaps on blockchains settle both legs simultaneously through smart contracts. There's no principal risk. Either the whole trade happens or nothing happens. No two-day window where you're exposed.
Credit friction. You still need to trust the stablecoin issuer, but the on-chain settlement part doesn't require decades-old banking relationships. A market maker in Brazil can transact with someone in Vietnam without traditional correspondent banking.
24/7 operation. Stablecoin markets don't close. Traditional FX closes on weekends, holidays, outside certain hours. Need to move money on Saturday? Traditional banking says no. Stablecoins say yes.
What stablecoins don’t fix (yet)
Hedging markets. This is the big one. Crypto derivatives exist, but they're nowhere near as deep or mature as traditional FX derivatives. A market maker hedging a stablecoin position faces more basis risk and higher costs than hedging EUR/USD. This is improving, but slowly.
Regulatory uncertainty. Different countries have wildly different stances. Some embrace stablecoins. Others restrict them. Some ban them outright. This fragments the market.
Volatility. During crypto market stress, stablecoin liquidity can get wonky. Market makers pull back or widen spreads dramatically.
Realistically, EUR/USD isn't moving to stablecoins. The existing system works too well. But USD/NGN? BRL/KES? All these exotic pairs? That's where stablecoin rails make sense.
The future probably contains multiple layers of infrastructure:
G7 pairs stay in traditional banking (it ain't broke, don't fix it)
Exotic corridors increasingly use stablecoins as a bridge
Hybrid solutions where traditional banks offer stablecoin on/off ramps
Platforms that aggregate both traditional FX liquidity and crypto liquidity
The bottom line: Infrastructure is everything
So why does converting dollars to lira cost 170x more than converting to euros?
Because the infrastructure that took 50 years to build for G7 currencies never got built for emerging markets. Traditional banks can't or won't build it now—the economics don't work with their regulatory requirements and business models.
Market makers won't show up without volume. Volume won't happen without tight spreads. Spreads won't tighten without hedging markets and credit infrastructure. It's all connected, and exotic currencies are stuck in the wrong spiral.
Same transaction, a 170x price difference. Infrastructure tells you everything you need to know about available liquidity. That's currency markets in 2025.
Imagine you need to convert $10 million to euros for a supplier payment. The whole thing—quote, execution, settlement—takes maybe eight minutes. Costs $500 in spread. An experience so seamless it’s basically forgettable.
Now imagine you have to convert $10 million in Turkish lira. This time? Fifteen minutes just to get a quote. The bank comes back with an 85-pip spread—that's $85,000. Settlement takes two full days. During which you just … sweat, hoping the exchange rate doesn't tank and nobody's bank screws something up.
Same transaction. Same amount. Same bank. Why does one cost 170 times more?
The answer isn't “because Turkey is riskier” or “it's a smaller economy.” Those things matter, but they're not the real story. The real answer is infrastructure—more specifically, the complete lack of it in certain corridors.
We think about this constantly. How do you create markets where people can reliably exchange currencies at predictable prices? The traditional FX world has figured this out brilliantly for some currencies and utterly failed for others. Understanding why is basically an archaeology project—digging through decades of decisions that built the system we have today.
So grab a drink, because this is the tale of how currency markets actually work, why some are amazing and others are a complete disaster, and what we're trying to do about it.
Digging through the ruins—how did we get here?
The foreign exchange market trades $9.6 trillion every single day—that's according to the Bank for International Settlements' 2025 Triennial Survey, basically the census of global currency trading. But this thing wasn't built in a day. It's more like finding the ruins of an ancient city. You can tell which roads were main thoroughfares by how wide and well-paved they are, right? Same concept here.
The modern structure crystallized after 1971, when the Bretton Woods system collapsed and currencies started floating freely. That's when the real market-making began—banks had to continuously quote prices because nobody knew what anything was worth anymore. Pretty quickly, certain currencies emerged as the load-bearing pillars of the system.
The G7 Club: Where the action happens
When people talk about “G7 currencies,” they’re referring to the big seven: US dollar, euro, Japanese yen, British pound, Swiss franc, Canadian dollar, and Australian dollar. And USD alone is on one side of over 89% of all trades. EUR/USD—just that one pair—does $2.03 trillion per day, or 21.2% of the entire global market.
Why do these currencies dominate? Three reasons that feed into one another:
Market makers pile in (because volume). When EUR/USD is trading $2 trillion a day, hundreds of banks and trading firms compete to make markets. Why? Because even though they're only making 0.1 to 0.5 pips per trade—that's tiny—they can turn their inventory over thousands of times per day. It's like running a deli: Low margin, high volume, you make it up in quantity.
The math works when you can buy euros from one client and sell them to another client 30 seconds later. Your inventory turnover is measured in milliseconds. You're not really taking currency risk—you're just capturing the spread.
Compare that to Turkish lira. The whole USD/TRY market might do a few billion per day. When you take a position, you might be sitting on it for minutes or hours before you can offload it. During that time, the lira could move against you. So you need much wider spreads to compensate for that risk. Which makes trading more expensive. Which suppresses volume further. See the problem?
Hedging markets. Here's something most people don't realize. When a bank takes a position in EUR/USD, they can hedge it almost instantly. Like, there are euro futures trading on the Chicago Mercantile Exchange. There are options. There are swaps. A whole ecosystem of derivatives that let you offset currency risk in seconds.
This changes everything. If you can perfectly hedge, you're not betting on whether the euro goes up or down. You're running what's called a “matched book”—your long positions (stuff you bought) are balanced by short positions (stuff sold or hedged). You're basically just earning the bid-ask spread with almost no directional risk.
For Turkish lira, there are basically no liquid derivatives. There’s some non-deliverable forwards trading offshore, but those have their own issues. When a bank makes a market in lira, they're warehousing actual currency risk. So they need more capital, face more regulatory scrutiny, and charge you more to do it.
Quick sidebar on “basis risk,” since it matters here: Even when hedging instruments exist, they might not perfectly offset your exposure. Maybe the hedge expires before your underlying position. Maybe it references an offshore rate that diverges from the onshore rate—this happens a lot with capital controls. Maybe the hedge itself is illiquid when you need to adjust it. That's basis risk, and it's way worse in “exotic” markets.
Credit architecture. This one's subtle but super important. When JPMorgan trades with Citibank in the EUR/USD market, they've got massive bilateral credit lines—billions of dollars. These relationships have been built over decades. Everyone knows everyone. There's a whole legal infrastructure. And crucially, there's CLS Bank.
CLS Bank is the secret sauce of G7 currency trading. It settles over $8 trillion every day across 18 currencies. The magic: It settles both legs of an FX trade simultaneously, eliminating “principal risk”—the danger that you deliver your currency, but the other guy never sends you theirs. This is also called “Herstatt risk” after a German bank that failed in 1974 and left everyone holding the bag.
Here's the thing: CLS only works for 18 currencies. Most emerging market currencies aren't in the club. So when you trade those, you're back to bilateral settlement with T+2 timing, which means two days where you're exposed to the other party defaulting. Banks price that risk into their spreads.
Credit also determines how much you can trade. In G7 markets, credit lines are huge because everyone trusts each other (or at least operate under the same rules). In emerging markets? Credit officers have to assess political risk, legal enforceability, settlement infrastructure—all of it. Credit lines end up much smaller, which fragments liquidity further.
See how this all feeds on itself? High volume attracts market makers. More market makers mean better pricing. Better pricing attracts more volume. Plus you've got deep hedging markets and rock-solid credit infrastructure, all of which makes the whole thing even more attractive.
The G7 currencies are sitting pretty at the center of this virtuous cycle. Meanwhile, emerging market currencies are stuck in the opposite spiral: Low volume, few market makers, wide spreads, terrible hedging options, sketchy credit relationships, even lower volume. It's brutal.
Present day: Watching the system in action
Enough history talk. What does it actually look like when you're trying to move money? Let me walk you through the two lifecycles we experienced.
The EUR/USD Trade: Eight minutes, $500
We log into our bank's FX portal. Click 'get quote' for $10 million to euros.
50 milliseconds later: The bank's system has pinged dozens of liquidity providers, aggregated prices, and comes back with 1.0525. Spread is 0.5 pips—that's $500 on this trade.
150 milliseconds later: We click accept. Trade executed. Done.
1 second later: The bank's hedging desk has already offset their position using euro futures or an interbank swap. They're flat again—no currency risk.
8 minutes later: CLS Bank has settled both sides simultaneously. Dollars and euros have moved. We're done. The whole thing felt instantaneous.
Behind the scenes, though? Insane amounts of infrastructure. Multiple ECNs, automated credit checks, hedging systems connected to futures exchanges, CLS Bank coordinating with central banks across time zones, regulatory reporting capturing every detail. Dozens of institutions working in perfect synchrony. It's almost beautiful, really.
The USD/TRY Trade: Two Days, $85,000
Same week, same bank, $10 million in Turkish lira.
5 minutes in: Still waiting. No automated pricing here—it goes to the emerging markets desk, where an actual human is calling around to find liquidity.
10 minutes in: Credit committee needs to approve this. They're checking: How much lira exposure do we already have? What's our credit line with the likely counterparty? Any political news coming out of Turkey today?
15 minutes in: Quote comes back. 85-pip spread. That's $85,000. We wince. Accept it anyway because we need the lira.
Next 48 hours: Settlement hell. The lira isn't CLS-eligible, so we're doing bilateral settlement. The bank delivers dollars to their counterparty's correspondent bank in New York. The counterparty is supposed to deliver lira to our nostro account in Istanbul. There's principal risk the entire time—if they default after getting our dollars, but before sending lira, we're screwed.
48+ hours: Now the lira has to move from our nostro account to the actual supplier's account in Turkey. This involves local correspondent banks, Turkish FX regulations, more documentation. Delays are common.
Total time: 2+ days. Total cost: $85,000 plus a lot of stress. The whole time, we're watching the TRY exchange rate, praying it doesn't move against us while we're in settlement limbo.
Same transaction, different universes.
This is what I mean about infrastructure. It's not that banks are evil or trying to rip you off on lira trades. It's that the entire machinery that makes EUR/USD seamless just doesn't exist for USD/TRY. No deep market maker competition. No hedging instruments. No CLS settlement. Higher credit risk. Everything costs more and takes longer.
This pattern repeats across basically every emerging market currency corridor. Some are better than others, but none come close to the G7 experience.
Stablecoins—history rhyming forward
Here's where it gets interesting for us. We're building stablecoin infrastructure, and when you look at it through this historical lens, you can hear the past rhyming back at us.
Before central banks took over, private banks issued their own notes. These were basically IOUs backed by gold or silver. Whether people trusted your note depended on your reputation and whether everyone believed you actually had the reserves.
Sound familiar? USDC is basically an IOU for dollars, issued by a private company (Circle), where trust depends on whether people believe the reserves exist. We've basically recreated 19th-century private banking, but on blockchains instead of paper. History doesn't repeat, but it’s definitely got a rhythmic cadence.
Why do stablecoins work in places where traditional banking fails? The infrastructure looks totally different.
Traditional exotic trade: You → Bank → Interbank market → Correspondent banks → Local banking system → Local currency. Each step needs credit relationships, adds time, introduces risk.
Stablecoin trade: You → USDC on blockchain → Local crypto exchange → Local currency. Way fewer steps.
But the numbers are real. Stablecoin volume hit $33 trillion in 2025, up 72% from the prior year. USDC alone did $18.3 trillion in transactions. For actual payments—not just trading—we're seeing $20-30 billion daily. Business-to-business payments are running at $36 billion annualized.
The Singapore-China corridor? One of the most active stablecoin channels. Latin America saw a 31% jump in USDC adoption for cross-border payments. Nigeria, Kenya, and South Africa together represent 12% of global peer-to-peer USDC volume.
These are exactly the corridors where traditional banking sucks. That's not a coincidence.
What stablecoins fix
Market maker competition. You don't need a banking license to make markets in stablecoins. Crypto trading firms, automated market makers, even individuals can provide liquidity. Barriers to entry are way lower than traditional FX. This means more competition, which theoretically means tighter spreads.
Settlement risk. Atomic swaps on blockchains settle both legs simultaneously through smart contracts. There's no principal risk. Either the whole trade happens or nothing happens. No two-day window where you're exposed.
Credit friction. You still need to trust the stablecoin issuer, but the on-chain settlement part doesn't require decades-old banking relationships. A market maker in Brazil can transact with someone in Vietnam without traditional correspondent banking.
24/7 operation. Stablecoin markets don't close. Traditional FX closes on weekends, holidays, outside certain hours. Need to move money on Saturday? Traditional banking says no. Stablecoins say yes.
What stablecoins don’t fix (yet)
Hedging markets. This is the big one. Crypto derivatives exist, but they're nowhere near as deep or mature as traditional FX derivatives. A market maker hedging a stablecoin position faces more basis risk and higher costs than hedging EUR/USD. This is improving, but slowly.
Regulatory uncertainty. Different countries have wildly different stances. Some embrace stablecoins. Others restrict them. Some ban them outright. This fragments the market.
Volatility. During crypto market stress, stablecoin liquidity can get wonky. Market makers pull back or widen spreads dramatically.
Realistically, EUR/USD isn't moving to stablecoins. The existing system works too well. But USD/NGN? BRL/KES? All these exotic pairs? That's where stablecoin rails make sense.
The future probably contains multiple layers of infrastructure:
G7 pairs stay in traditional banking (it ain't broke, don't fix it)
Exotic corridors increasingly use stablecoins as a bridge
Hybrid solutions where traditional banks offer stablecoin on/off ramps
Platforms that aggregate both traditional FX liquidity and crypto liquidity
The bottom line: Infrastructure is everything
So why does converting dollars to lira cost 170x more than converting to euros?
Because the infrastructure that took 50 years to build for G7 currencies never got built for emerging markets. Traditional banks can't or won't build it now—the economics don't work with their regulatory requirements and business models.
Market makers won't show up without volume. Volume won't happen without tight spreads. Spreads won't tighten without hedging markets and credit infrastructure. It's all connected, and exotic currencies are stuck in the wrong spiral.
Same transaction, a 170x price difference. Infrastructure tells you everything you need to know about available liquidity. That's currency markets in 2025.
Imagine you need to convert $10 million to euros for a supplier payment. The whole thing—quote, execution, settlement—takes maybe eight minutes. Costs $500 in spread. An experience so seamless it’s basically forgettable.
Now imagine you have to convert $10 million in Turkish lira. This time? Fifteen minutes just to get a quote. The bank comes back with an 85-pip spread—that's $85,000. Settlement takes two full days. During which you just … sweat, hoping the exchange rate doesn't tank and nobody's bank screws something up.
Same transaction. Same amount. Same bank. Why does one cost 170 times more?
The answer isn't “because Turkey is riskier” or “it's a smaller economy.” Those things matter, but they're not the real story. The real answer is infrastructure—more specifically, the complete lack of it in certain corridors.
We think about this constantly. How do you create markets where people can reliably exchange currencies at predictable prices? The traditional FX world has figured this out brilliantly for some currencies and utterly failed for others. Understanding why is basically an archaeology project—digging through decades of decisions that built the system we have today.
So grab a drink, because this is the tale of how currency markets actually work, why some are amazing and others are a complete disaster, and what we're trying to do about it.
Digging through the ruins—how did we get here?
The foreign exchange market trades $9.6 trillion every single day—that's according to the Bank for International Settlements' 2025 Triennial Survey, basically the census of global currency trading. But this thing wasn't built in a day. It's more like finding the ruins of an ancient city. You can tell which roads were main thoroughfares by how wide and well-paved they are, right? Same concept here.
The modern structure crystallized after 1971, when the Bretton Woods system collapsed and currencies started floating freely. That's when the real market-making began—banks had to continuously quote prices because nobody knew what anything was worth anymore. Pretty quickly, certain currencies emerged as the load-bearing pillars of the system.
The G7 Club: Where the action happens
When people talk about “G7 currencies,” they’re referring to the big seven: US dollar, euro, Japanese yen, British pound, Swiss franc, Canadian dollar, and Australian dollar. And USD alone is on one side of over 89% of all trades. EUR/USD—just that one pair—does $2.03 trillion per day, or 21.2% of the entire global market.
Why do these currencies dominate? Three reasons that feed into one another:
Market makers pile in (because volume). When EUR/USD is trading $2 trillion a day, hundreds of banks and trading firms compete to make markets. Why? Because even though they're only making 0.1 to 0.5 pips per trade—that's tiny—they can turn their inventory over thousands of times per day. It's like running a deli: Low margin, high volume, you make it up in quantity.
The math works when you can buy euros from one client and sell them to another client 30 seconds later. Your inventory turnover is measured in milliseconds. You're not really taking currency risk—you're just capturing the spread.
Compare that to Turkish lira. The whole USD/TRY market might do a few billion per day. When you take a position, you might be sitting on it for minutes or hours before you can offload it. During that time, the lira could move against you. So you need much wider spreads to compensate for that risk. Which makes trading more expensive. Which suppresses volume further. See the problem?
Hedging markets. Here's something most people don't realize. When a bank takes a position in EUR/USD, they can hedge it almost instantly. Like, there are euro futures trading on the Chicago Mercantile Exchange. There are options. There are swaps. A whole ecosystem of derivatives that let you offset currency risk in seconds.
This changes everything. If you can perfectly hedge, you're not betting on whether the euro goes up or down. You're running what's called a “matched book”—your long positions (stuff you bought) are balanced by short positions (stuff sold or hedged). You're basically just earning the bid-ask spread with almost no directional risk.
For Turkish lira, there are basically no liquid derivatives. There’s some non-deliverable forwards trading offshore, but those have their own issues. When a bank makes a market in lira, they're warehousing actual currency risk. So they need more capital, face more regulatory scrutiny, and charge you more to do it.
Quick sidebar on “basis risk,” since it matters here: Even when hedging instruments exist, they might not perfectly offset your exposure. Maybe the hedge expires before your underlying position. Maybe it references an offshore rate that diverges from the onshore rate—this happens a lot with capital controls. Maybe the hedge itself is illiquid when you need to adjust it. That's basis risk, and it's way worse in “exotic” markets.
Credit architecture. This one's subtle but super important. When JPMorgan trades with Citibank in the EUR/USD market, they've got massive bilateral credit lines—billions of dollars. These relationships have been built over decades. Everyone knows everyone. There's a whole legal infrastructure. And crucially, there's CLS Bank.
CLS Bank is the secret sauce of G7 currency trading. It settles over $8 trillion every day across 18 currencies. The magic: It settles both legs of an FX trade simultaneously, eliminating “principal risk”—the danger that you deliver your currency, but the other guy never sends you theirs. This is also called “Herstatt risk” after a German bank that failed in 1974 and left everyone holding the bag.
Here's the thing: CLS only works for 18 currencies. Most emerging market currencies aren't in the club. So when you trade those, you're back to bilateral settlement with T+2 timing, which means two days where you're exposed to the other party defaulting. Banks price that risk into their spreads.
Credit also determines how much you can trade. In G7 markets, credit lines are huge because everyone trusts each other (or at least operate under the same rules). In emerging markets? Credit officers have to assess political risk, legal enforceability, settlement infrastructure—all of it. Credit lines end up much smaller, which fragments liquidity further.
See how this all feeds on itself? High volume attracts market makers. More market makers mean better pricing. Better pricing attracts more volume. Plus you've got deep hedging markets and rock-solid credit infrastructure, all of which makes the whole thing even more attractive.
The G7 currencies are sitting pretty at the center of this virtuous cycle. Meanwhile, emerging market currencies are stuck in the opposite spiral: Low volume, few market makers, wide spreads, terrible hedging options, sketchy credit relationships, even lower volume. It's brutal.
Present day: Watching the system in action
Enough history talk. What does it actually look like when you're trying to move money? Let me walk you through the two lifecycles we experienced.
The EUR/USD Trade: Eight minutes, $500
We log into our bank's FX portal. Click 'get quote' for $10 million to euros.
50 milliseconds later: The bank's system has pinged dozens of liquidity providers, aggregated prices, and comes back with 1.0525. Spread is 0.5 pips—that's $500 on this trade.
150 milliseconds later: We click accept. Trade executed. Done.
1 second later: The bank's hedging desk has already offset their position using euro futures or an interbank swap. They're flat again—no currency risk.
8 minutes later: CLS Bank has settled both sides simultaneously. Dollars and euros have moved. We're done. The whole thing felt instantaneous.
Behind the scenes, though? Insane amounts of infrastructure. Multiple ECNs, automated credit checks, hedging systems connected to futures exchanges, CLS Bank coordinating with central banks across time zones, regulatory reporting capturing every detail. Dozens of institutions working in perfect synchrony. It's almost beautiful, really.
The USD/TRY Trade: Two Days, $85,000
Same week, same bank, $10 million in Turkish lira.
5 minutes in: Still waiting. No automated pricing here—it goes to the emerging markets desk, where an actual human is calling around to find liquidity.
10 minutes in: Credit committee needs to approve this. They're checking: How much lira exposure do we already have? What's our credit line with the likely counterparty? Any political news coming out of Turkey today?
15 minutes in: Quote comes back. 85-pip spread. That's $85,000. We wince. Accept it anyway because we need the lira.
Next 48 hours: Settlement hell. The lira isn't CLS-eligible, so we're doing bilateral settlement. The bank delivers dollars to their counterparty's correspondent bank in New York. The counterparty is supposed to deliver lira to our nostro account in Istanbul. There's principal risk the entire time—if they default after getting our dollars, but before sending lira, we're screwed.
48+ hours: Now the lira has to move from our nostro account to the actual supplier's account in Turkey. This involves local correspondent banks, Turkish FX regulations, more documentation. Delays are common.
Total time: 2+ days. Total cost: $85,000 plus a lot of stress. The whole time, we're watching the TRY exchange rate, praying it doesn't move against us while we're in settlement limbo.
Same transaction, different universes.
This is what I mean about infrastructure. It's not that banks are evil or trying to rip you off on lira trades. It's that the entire machinery that makes EUR/USD seamless just doesn't exist for USD/TRY. No deep market maker competition. No hedging instruments. No CLS settlement. Higher credit risk. Everything costs more and takes longer.
This pattern repeats across basically every emerging market currency corridor. Some are better than others, but none come close to the G7 experience.
Stablecoins—history rhyming forward
Here's where it gets interesting for us. We're building stablecoin infrastructure, and when you look at it through this historical lens, you can hear the past rhyming back at us.
Before central banks took over, private banks issued their own notes. These were basically IOUs backed by gold or silver. Whether people trusted your note depended on your reputation and whether everyone believed you actually had the reserves.
Sound familiar? USDC is basically an IOU for dollars, issued by a private company (Circle), where trust depends on whether people believe the reserves exist. We've basically recreated 19th-century private banking, but on blockchains instead of paper. History doesn't repeat, but it’s definitely got a rhythmic cadence.
Why do stablecoins work in places where traditional banking fails? The infrastructure looks totally different.
Traditional exotic trade: You → Bank → Interbank market → Correspondent banks → Local banking system → Local currency. Each step needs credit relationships, adds time, introduces risk.
Stablecoin trade: You → USDC on blockchain → Local crypto exchange → Local currency. Way fewer steps.
But the numbers are real. Stablecoin volume hit $33 trillion in 2025, up 72% from the prior year. USDC alone did $18.3 trillion in transactions. For actual payments—not just trading—we're seeing $20-30 billion daily. Business-to-business payments are running at $36 billion annualized.
The Singapore-China corridor? One of the most active stablecoin channels. Latin America saw a 31% jump in USDC adoption for cross-border payments. Nigeria, Kenya, and South Africa together represent 12% of global peer-to-peer USDC volume.
These are exactly the corridors where traditional banking sucks. That's not a coincidence.
What stablecoins fix
Market maker competition. You don't need a banking license to make markets in stablecoins. Crypto trading firms, automated market makers, even individuals can provide liquidity. Barriers to entry are way lower than traditional FX. This means more competition, which theoretically means tighter spreads.
Settlement risk. Atomic swaps on blockchains settle both legs simultaneously through smart contracts. There's no principal risk. Either the whole trade happens or nothing happens. No two-day window where you're exposed.
Credit friction. You still need to trust the stablecoin issuer, but the on-chain settlement part doesn't require decades-old banking relationships. A market maker in Brazil can transact with someone in Vietnam without traditional correspondent banking.
24/7 operation. Stablecoin markets don't close. Traditional FX closes on weekends, holidays, outside certain hours. Need to move money on Saturday? Traditional banking says no. Stablecoins say yes.
What stablecoins don’t fix (yet)
Hedging markets. This is the big one. Crypto derivatives exist, but they're nowhere near as deep or mature as traditional FX derivatives. A market maker hedging a stablecoin position faces more basis risk and higher costs than hedging EUR/USD. This is improving, but slowly.
Regulatory uncertainty. Different countries have wildly different stances. Some embrace stablecoins. Others restrict them. Some ban them outright. This fragments the market.
Volatility. During crypto market stress, stablecoin liquidity can get wonky. Market makers pull back or widen spreads dramatically.
Realistically, EUR/USD isn't moving to stablecoins. The existing system works too well. But USD/NGN? BRL/KES? All these exotic pairs? That's where stablecoin rails make sense.
The future probably contains multiple layers of infrastructure:
G7 pairs stay in traditional banking (it ain't broke, don't fix it)
Exotic corridors increasingly use stablecoins as a bridge
Hybrid solutions where traditional banks offer stablecoin on/off ramps
Platforms that aggregate both traditional FX liquidity and crypto liquidity
The bottom line: Infrastructure is everything
So why does converting dollars to lira cost 170x more than converting to euros?
Because the infrastructure that took 50 years to build for G7 currencies never got built for emerging markets. Traditional banks can't or won't build it now—the economics don't work with their regulatory requirements and business models.
Market makers won't show up without volume. Volume won't happen without tight spreads. Spreads won't tighten without hedging markets and credit infrastructure. It's all connected, and exotic currencies are stuck in the wrong spiral.
Same transaction, a 170x price difference. Infrastructure tells you everything you need to know about available liquidity. That's currency markets in 2025.
Frequently Asked Questions
1. Why can't countries like Turkey or Nigeria just "join" CLS Bank to fix the settlement risk?
Because CLS is an exclusive mutual defense pact, not a public utility.
To be admitted, a currency needs more than just trading volume. It requires "Settlement Finality"—a legal guarantee from the country’s legal system that once a payment is made, it cannot be revoked by a court (even in bankruptcy).
Many emerging markets lack these legal frameworks. CLS won't touch them because if one member fails and a local court tries to claw back the money, it could collapse the entire $8 trillion system. This is why "just improving the tech" isn't enough; you often have to rewrite national laws.
2. You mentioned "Basis Risk" in hedging. What does that look like in practice?
Imagine you are a market maker who just sold Turkish Lira to a client. You want to hedge, but there are no liquid Lira futures. So, you might short the South African Rand (ZAR) instead, hoping that since both are "volatile emerging market currencies," they will move in the same direction. This is a "Proxy Hedge."
If the Lira tanks but the Rand stays flat, your hedge failed. You lost money on the trade even though you tried to insure it. This imperfection is "Basis Risk," and banks charge you wider spreads to cover the possibility that their hedges won't work perfectly.
3. If stablecoins offer "Atomic Settlement," why do we need market makers at all?
Because Settlement is not Liquidity.
Atomic settlement means the trade happens safely (no Herstatt risk). But someone still needs to be on the other side of the trade to give you the price you want (Liquidity). If you want to sell $10M of stablecoins for Brazilian Reals, you still need a counterparty in Brazil with $10M of Reals ready to swap. Stablecoins fix the safety of the swap, but they don't automatically create the inventory required to fill it. You still need professional providers to warehouse that capital.
4. Why is "Credit" described as the biggest barrier to entry?
In the traditional world, you can't trade if you don't have a credit line. JPMorgan won't trade with a small fintech because they don't trust the fintech to pay up in 2 days (T+2 settlement).
Building these bilateral credit lines takes decades of relationships and massive balance sheets. This is why Silicon Valley startups struggle to disrupt FX—they have the code, but they don't have the Credit Trust. This is exactly why the "Pre-funded" model of stablecoins (where you must have the funds to trade) is so disruptive: it replaces Credit Trust with Mathematical Proof.
5. Will the G7 currencies eventually move to stablecoin rails?
Likely not in the near term, because the current system isn't broken for them.
EUR/USD trading is already efficient, cheap, and settles safely via CLS. The cost to switch to blockchain rails offers diminishing returns for these pairs. The revolution is happening in the "Long Tail"—the 100+ currencies where the current system is broken. Expect a bifurcated world: Traditional rails for the G7 "Highways," and Stablecoin rails for the Emerging Market "Off-road" tracks.
6. As a Treasurer, what is the one takeaway I should apply today?
Segment your strategy.
Stop treating all "Foreign Exchange" as one bucket. You have a "G7 Strategy" (focus on price, use aggregators, minimal risk) and an "Exotic Strategy" (focus on settlement certainty, liquidity depth, and reducing failure rates).
If you apply your G7 mindset (chasing the lowest pip) to your Exotic flows, you will eventually get burned by a failed settlement or a liquidity drought. In Exotics, reliability is cheaper than Price.
Frequently Asked Questions
1. Why can't countries like Turkey or Nigeria just "join" CLS Bank to fix the settlement risk?
Because CLS is an exclusive mutual defense pact, not a public utility.
To be admitted, a currency needs more than just trading volume. It requires "Settlement Finality"—a legal guarantee from the country’s legal system that once a payment is made, it cannot be revoked by a court (even in bankruptcy).
Many emerging markets lack these legal frameworks. CLS won't touch them because if one member fails and a local court tries to claw back the money, it could collapse the entire $8 trillion system. This is why "just improving the tech" isn't enough; you often have to rewrite national laws.
2. You mentioned "Basis Risk" in hedging. What does that look like in practice?
Imagine you are a market maker who just sold Turkish Lira to a client. You want to hedge, but there are no liquid Lira futures. So, you might short the South African Rand (ZAR) instead, hoping that since both are "volatile emerging market currencies," they will move in the same direction. This is a "Proxy Hedge."
If the Lira tanks but the Rand stays flat, your hedge failed. You lost money on the trade even though you tried to insure it. This imperfection is "Basis Risk," and banks charge you wider spreads to cover the possibility that their hedges won't work perfectly.
3. If stablecoins offer "Atomic Settlement," why do we need market makers at all?
Because Settlement is not Liquidity.
Atomic settlement means the trade happens safely (no Herstatt risk). But someone still needs to be on the other side of the trade to give you the price you want (Liquidity). If you want to sell $10M of stablecoins for Brazilian Reals, you still need a counterparty in Brazil with $10M of Reals ready to swap. Stablecoins fix the safety of the swap, but they don't automatically create the inventory required to fill it. You still need professional providers to warehouse that capital.
4. Why is "Credit" described as the biggest barrier to entry?
In the traditional world, you can't trade if you don't have a credit line. JPMorgan won't trade with a small fintech because they don't trust the fintech to pay up in 2 days (T+2 settlement).
Building these bilateral credit lines takes decades of relationships and massive balance sheets. This is why Silicon Valley startups struggle to disrupt FX—they have the code, but they don't have the Credit Trust. This is exactly why the "Pre-funded" model of stablecoins (where you must have the funds to trade) is so disruptive: it replaces Credit Trust with Mathematical Proof.
5. Will the G7 currencies eventually move to stablecoin rails?
Likely not in the near term, because the current system isn't broken for them.
EUR/USD trading is already efficient, cheap, and settles safely via CLS. The cost to switch to blockchain rails offers diminishing returns for these pairs. The revolution is happening in the "Long Tail"—the 100+ currencies where the current system is broken. Expect a bifurcated world: Traditional rails for the G7 "Highways," and Stablecoin rails for the Emerging Market "Off-road" tracks.
6. As a Treasurer, what is the one takeaway I should apply today?
Segment your strategy.
Stop treating all "Foreign Exchange" as one bucket. You have a "G7 Strategy" (focus on price, use aggregators, minimal risk) and an "Exotic Strategy" (focus on settlement certainty, liquidity depth, and reducing failure rates).
If you apply your G7 mindset (chasing the lowest pip) to your Exotic flows, you will eventually get burned by a failed settlement or a liquidity drought. In Exotics, reliability is cheaper than Price.
Frequently Asked Questions
1. Why can't countries like Turkey or Nigeria just "join" CLS Bank to fix the settlement risk?
Because CLS is an exclusive mutual defense pact, not a public utility.
To be admitted, a currency needs more than just trading volume. It requires "Settlement Finality"—a legal guarantee from the country’s legal system that once a payment is made, it cannot be revoked by a court (even in bankruptcy).
Many emerging markets lack these legal frameworks. CLS won't touch them because if one member fails and a local court tries to claw back the money, it could collapse the entire $8 trillion system. This is why "just improving the tech" isn't enough; you often have to rewrite national laws.
2. You mentioned "Basis Risk" in hedging. What does that look like in practice?
Imagine you are a market maker who just sold Turkish Lira to a client. You want to hedge, but there are no liquid Lira futures. So, you might short the South African Rand (ZAR) instead, hoping that since both are "volatile emerging market currencies," they will move in the same direction. This is a "Proxy Hedge."
If the Lira tanks but the Rand stays flat, your hedge failed. You lost money on the trade even though you tried to insure it. This imperfection is "Basis Risk," and banks charge you wider spreads to cover the possibility that their hedges won't work perfectly.
3. If stablecoins offer "Atomic Settlement," why do we need market makers at all?
Because Settlement is not Liquidity.
Atomic settlement means the trade happens safely (no Herstatt risk). But someone still needs to be on the other side of the trade to give you the price you want (Liquidity). If you want to sell $10M of stablecoins for Brazilian Reals, you still need a counterparty in Brazil with $10M of Reals ready to swap. Stablecoins fix the safety of the swap, but they don't automatically create the inventory required to fill it. You still need professional providers to warehouse that capital.
4. Why is "Credit" described as the biggest barrier to entry?
In the traditional world, you can't trade if you don't have a credit line. JPMorgan won't trade with a small fintech because they don't trust the fintech to pay up in 2 days (T+2 settlement).
Building these bilateral credit lines takes decades of relationships and massive balance sheets. This is why Silicon Valley startups struggle to disrupt FX—they have the code, but they don't have the Credit Trust. This is exactly why the "Pre-funded" model of stablecoins (where you must have the funds to trade) is so disruptive: it replaces Credit Trust with Mathematical Proof.
5. Will the G7 currencies eventually move to stablecoin rails?
Likely not in the near term, because the current system isn't broken for them.
EUR/USD trading is already efficient, cheap, and settles safely via CLS. The cost to switch to blockchain rails offers diminishing returns for these pairs. The revolution is happening in the "Long Tail"—the 100+ currencies where the current system is broken. Expect a bifurcated world: Traditional rails for the G7 "Highways," and Stablecoin rails for the Emerging Market "Off-road" tracks.
6. As a Treasurer, what is the one takeaway I should apply today?
Segment your strategy.
Stop treating all "Foreign Exchange" as one bucket. You have a "G7 Strategy" (focus on price, use aggregators, minimal risk) and an "Exotic Strategy" (focus on settlement certainty, liquidity depth, and reducing failure rates).
If you apply your G7 mindset (chasing the lowest pip) to your Exotic flows, you will eventually get burned by a failed settlement or a liquidity drought. In Exotics, reliability is cheaper than Price.
Share article
FX liquidity available 24/7
Settle multiple times a day. Withdraw in under 60 mins.
FX liquidity available 24/7
Settle multiple times a day. Withdraw in under 60 mins.
FX liquidity available 24/7
Settle multiple times a day. Withdraw in under 60 mins.
Read other articles
Stay informed with our latest articles on currency launches, institutional FX trends, and global liquidity.
Making money move as
freely as data
Ask AI about OpenFX
Global network
Teams operating across North America, Europe, Middle East, and Asia
Operating Hours
We never close. Our platform and
support teams are available 24/7/365
Write to us
Red Envelope Delta, Inc, NMLS ID No. 2680829
All rights reserved, © OpenFX 2026.
Making money move as
freely as data
Ask AI about OpenFX
Global network
Teams operating across North America, Europe, Middle East, and Asia
Operating Hours
We never close. Our platform and support teams are available 24/7/365
Write to us
Red Envelope Delta, Inc, NMLS ID No. 2680829
All rights reserved, © OpenFX 2026.
Making money move as
freely as data
Ask AI about OpenFX
Global network
Teams operating across North America, Europe, Middle East, and Asia
Operating Hours
We never close. Our platform
and support teams are available 24/7/365
Write to us
Red Envelope Delta, Inc, NMLS ID No. 2680829
All rights reserved, © OpenFX 2026.