Over the past 12 months, a series of landmark shifts in U.S. stablecoin regulation and commercial adoption have created an entirely new financial landscape that Caribbean banking leaders can no longer afford to ignore. In July 2025, the U.S. passed the GENIUS Act, establishing the first-ever federal regulatory framework for payment stablecoins. By February 2026, the Office of the Comptroller of the Currency had released the first full set of implementing rules for the legislation. Parallel to this regulatory progress, financial giant Visa has already begun processing international transactions via stablecoins, hitting an annualized transaction volume of $4.5 billion by January 2026. Industry projections paint a dramatic growth trajectory: the U.S. Treasury estimates total stablecoin supply could reach $3 trillion by 2030, while EY forecasts that stablecoins will capture between 5% and 10% of all global cross-border payment volume by that date – equal to $2.1 trillion to $4.2 trillion in annual transaction value. These developments arrive against a 10-year backdrop of steady correspondent banking withdrawal across the Caribbean, a challenge the region has addressed through persistent diplomacy and collaborative policy work. This piece, the second installment of The Caribbean Ledger’s Caribbean Banking Series (following *“The Cost of Money in the ECCU”*), builds on ongoing work led by the Eastern Caribbean Central Bank, Central Bank of The Bahamas, Bank of Jamaica, Caribbean Development Bank, Caribbean Association of Banks, CARICOM, and regional member governments that began at least as early as 2015. Rather than introducing this conversation for the first time, it aims to advance it: confronting the reality of shrinking international banking access, addressing the core question of how long the region will retain robust access, and evaluating which alternative financial infrastructure can deliver tangible solutions.\n\n## Why This Is A Growth Challenge, Not Just A Banking Challenge\nThe Caribbean has set bold, explicit regional growth targets that depend entirely on continued access to reliable international banking services. In March 2026, Eastern Caribbean Central Bank (ECCB) Governor Timothy Antoine launched the 2026–2031 strategic plan under his “Big Push” initiative, which calls for the Eastern Caribbean Currency Union to double its GDP over a decade – requiring 7% annual growth, compared to the current 3% trajectory that Antoine describes as “maintenance rather than transformation.” The Caribbean Development Bank’s 2026–2035 Strategic Plan, framed by President Daniel Best as a “decade of decision,” sets aligned ambitious regional growth goals. Both of these roadmaps rest on a critical, easily overlooked assumption: that the region will remain an attractive, bankable destination for investment. This assumption is exactly what ongoing de-risking threatens to undermine, and the link to growth is direct. As Governor Antoine argues, no stability means no investor confidence, no confidence means no new investment, and no investment means no sustained long-term growth. Foreign direct investment cannot flow into a region where local banks struggle to clear U.S. dollar transactions or repatriate investment returns. A shrinking, more expensive, and more concentrated pool of correspondent banking relationships is not just an operational headache: it raises the cost of capital across the region, erodes investor confidence, and directly undermines the growth targets the region has set. Reliable international banking access is a foundational enabler of the Big Push, and securing it is a core shared responsibility for the regional financial services sector to support leading central banks and governments.\n\n## A Decade-Long Conversation About A Growing Crisis\nThe issue of correspondent banking withdrawal is not new to the Caribbean. In November 2015, the World Bank released its first comprehensive analysis of the trend, titled *Withdrawal from Correspondent Banking: Where, Why, and What to Do About It*. The report’s conclusion was unflinching: de-risking, driven by soaring global compliance costs and growing risk aversion among large international banks, was cutting off financial access across entire developing regions, with small economies like those in the Caribbean and Pacific bearing the heaviest burden. That single report foreshadowed the heavy compliance costs and documentation requirements that define Caribbean banking today: the region’s banks do not imagine the heavy regulatory weight they carry – the global community identified a decade ago that this burden would fall disproportionately on them. To frame the issue clearly, a quick definition helps: in a correspondent banking relationship, the local (respondent) Caribbean bank holds an account at a larger international correspondent bank to access the global payment system, clear U.S. dollar transactions, and move cross-border funds for its customers. When a correspondent bank withdraws from the relationship, the local bank does not just lose a vendor – it loses its primary connection to the global economy. By 2017, the Caribbean Association of Banks found that 21 of 23 surveyed banks across 12 regional countries had lost at least one correspondent relationship, with the Eastern Caribbean, Suriname, and Belize hit hardest. The Financial Stability Board warned that the trend could become a systemic threat to the entire regional financial system. After more than a decade of this pressure, the key question for regional bank boards is no longer just how to preserve existing relationships: it requires a proactive action plan for the scenario of a rapid, correlated exit of remaining correspondents that would leave the region with no quick path to recovery. A decade of regional advocacy has slowed the rate of withdrawal, but it has not reversed the trend. Acknowledging this reality is not criticism of the institutions that have led the response – it is the necessary starting point for a more urgent, honest conversation about the path forward.\n\n## Why International Correspondent Banks Are Leaving The Caribbean\nTo understand the challenge, it is critical to examine the actual decision-making process that leads correspondent banks to exit regional relationships. Large international banks do not cut ties with Caribbean institutions out of malice: they are responding to the rising cost of serving small respondent banks under modern anti-money laundering (AML) rules, a cost that has climbed steadily for 15 years. Three core dynamics drive this trend. First is the “KYCC” (know your customer’s customer) requirement imposed on correspondent banks. Under current global standards, correspondents are not only required to vet their direct respondent bank: they must also verify that the respondent bank itself conducts robust due diligence on its own customers, including downstream financial institutions. In effect, the correspondent bank is guaranteeing the quality of the respondent’s entire customer due diligence program. Any gaps at the respondent level – incomplete beneficial ownership data, inconsistent transaction monitoring, insufficient documentation for high-risk accounts – translate directly into additional regulatory risk for the correspondent. These local gaps are the single most common trigger for a correspondent’s decision to exit. Second, the fixed costs of enhanced due diligence (EDD) make low-volume relationships with small Caribbean banks economically unviable. The cost of onboarding, ongoing monitoring, regulatory screening, and periodic re-evaluation of a respondent bank is mostly fixed, regardless of transaction volume. When that fixed cost is spread across the small transaction volumes generated by most small Caribbean banks, the per-transaction margin becomes untenable very quickly. This dynamic was accurately described by Prime Minister Mia Mottley during her September 2022 testimony to the U.S. House Committee on Financial Services: 40 countries had lost more than 40% of their correspondent relationships, 20 (most in the Caribbean) had lost more than half, and according to Bank for International Settlements data, eight countries could not receive international payments at all, while four could not send them. Mottley’s core point, which still holds, is that in most cases these exits are not driven by confirmed money laundering activity at local banks. Instead, they are driven by the fixed cost of enhanced monitoring – much of it triggered by FATF (Financial Action Task Force) and FATF-style regional body listings – which falls disproportionately on small economies. This is the dominant pattern across the region, though it is not universal. Third is the impact of FATF’s listing process. When a jurisdiction is placed on FATF’s “grey list” of countries under increased monitoring, correspondent banks are automatically required to apply enhanced due diligence to all relationships with banks in that jurisdiction. As of the February 2026 FATF plenary, roughly two dozen jurisdictions were on the grey list. Grey-listing rarely confirms that a jurisdiction’s banks are actively laundering money: it most often reflects technical deficiencies in a country’s national AML regulatory framework. Even so, the automatic enhanced due diligence requirement raises the cost of serving banks in the jurisdiction, and for many correspondents, the simplest response to higher costs is to exit rather than invest additional resources in monitoring. Belize offers a clear, instructive case study. Between 2015 and 2016, Belize lost 83% to 87% of its correspondent banking relationships, when Bank of America and other large institutions cut ties with its largest banks – the steepest decline in the entire Caribbean. This followed Belize being grey-listed by the Caribbean Financial Action Task Force after its third-round mutual evaluation, and alongside Guyana, it was subject to calls for countermeasures over strategic AML/CFT deficiencies. A large offshore banking sector combined with a very small domestic economy amplified the pressure. In Belize’s case, documented weaknesses in its regulatory framework were part of the story, even though the IMF found no clear regional correlation between AML compliance quality and the rate of correspondent banking withdrawal. By 2025, Belize’s fourth-round mutual evaluation rated it fully compliant on 38 of FATF’s 40 recommendations, a remarkable turnaround that proves remediation can restore international standing. The key takeaway is not that the region is entirely innocent or entirely at fault: it is that addressing genuine regulatory deficiencies and pushing back against indiscriminate, cost-driven withdrawals are both critical parts of the solution.\n\n## The Canadian Bank Retreat: A Clear Warning Sign\nThe most tangible evidence that de-risking is not an abstract trend can be seen in the exit of major Canadian banks that have served the Caribbean for more than a century. For 100 years, Royal Bank of Canada (RBC), Scotiabank, and Canadian Imperial Bank of Commerce (CIBC) were core pillars of the Caribbean banking sector. One by one, all three have exited most of their regional operations. RBC sold its Jamaican business to Sagicor in 2014, its Suriname operations to Republic Bank in 2015, and exited the entire Eastern Caribbean in 2021, selling its assets to a consortium of local indigenous banks including the 1st National Bank of St Lucia and the Bank of Nevis. In 2024, RBC cut $200 million in capital from its remaining Caribbean entity, fueling widespread speculation of a full regional exit. Scotiabank sold its operations across nine Caribbean markets to Trinidad-based Republic Financial Holdings, and has since scaled back its presence in Panama, Costa Rica, and Colombia. Most recently, in May 2026, CIBC agreed to sell its controlling stake in CIBC Caribbean to Bermuda-based Butterfield Bank in a $1.8 billion deal. This trend sends a clear signal that cannot be ignored: these were not marginal players in the region. RBC, Scotiabank, and CIBC were themselves correspondent banks for smaller local institutions, and Scotiabank’s regional presence in particular was a direct channel for Caribbean territories to access the global payment system. When institutions with a century of local market knowledge and their own built-in global correspondent networks conclude that the risk-adjusted returns are no longer sufficient to justify remaining in the region, this is de-risking playing out at the ownership level, not just the individual account level. Two additional signals stand out: first, the buyers of these assets are mostly regional and offshore institutions – Republic Bank, Butterfield, local consortiums – which now have to secure their own correspondent relationships rather than relying on a Canadian parent’s existing global network. Second, regional regulators have occasionally blocked these sales over concerns about market concentration and systemic risk, a clear sign of the region’s own unease about the ongoing consolidation of regional banking ownership. The map of Caribbean banking is being redrawn, and increasingly, the region is taking ownership of its own banking system.\n\n## Factors That Amplify Perceived Risk\nCorrespondent exit decisions are ultimately driven by cost, but cost is directly shaped by perceived risk. Three separate forces are pushing the Caribbean’s perceived risk higher, compounding existing de-risking pressure – none of which imply any wrongdoing by the region’s banks, but all of which make serving Caribbean banks less economically attractive for international correspondents. First is a quiet structural feature of the regional financial system: a large share of the regional population is served by credit unions, which are large, trusted, and deeply rooted in local communities. However, credit unions are generally not directly supervised by national central banks; they report to separate national cooperative or financial services regulators, so their AML/CFT compliance standards vary widely across jurisdictions. Critically, when credit unions need to process cross-border transactions, they almost always use the correspondent relationship of a local commercial bank. This adds additional risk-weighted exposure to a commercial bank’s correspondent relationship that is already under scrutiny, and the correspondent bank has no visibility into the credit union’s own compliance controls. This is a structural feature of the regional financial system that cannot be fixed by any single bank acting alone. Second, the Caribbean’s geographic position amid shifting global drug trafficking routes drives higher perceived risk, regardless of actual compliance performance. The United Nations Office on Drugs and Crime (UNODC)’s most recent assessment found global cocaine production has hit record levels, rising roughly one-third in a single year driven by expanded cultivation in the Andes. As interdiction efforts have intensified in other regions, a larger share of cocaine trafficking now moves through Caribbean maritime corridors. U.S. Coast Guard cocaine seizures hit a new all-time high of roughly 231,000 kilograms in fiscal 2025. For a correspondent bank’s risk committee based in North America or Europe, no evidence of actual money laundering through a respondent bank is needed to change their assessment: this trend simply raises the baseline money laundering risk they assign to the entire region, and that higher perceived risk is directly priced into the cost of serving Caribbean banks. While the region has implemented substantial responses – including UNODC-led container control programs and strengthened national financial intelligence units – risk perception shifts much faster than remediation can reverse it. Third, the Caribbean’s long history as a hub for offshore finance keeps it permanently at the center of global tax transparency efforts. It remains a permanent focus of initiatives including FATCA, the OECD Common Reporting Standard, the OECD’s Pillar Two global minimum tax, and the EU’s list of non-cooperative jurisdictions, which was most recently updated in February 2026 (adding the Turks and Caicos Islands and removing Trinidad and Tobago). Regional governments have already completed most of the required substantive work to meet international standards, including passing economic substance legislation and implementing information exchange agreements. The point here is not to defend or contest these standards: it is that tax transparency compliance stacks on top of existing AML/CFT requirements, increasing the documentation burden for small regional institutions and reinforcing the perception of the Caribbean as a “high-attention” region, which correspondent banks directly price into their service costs.\n\n## The Regulatory Tide Is Still Rising: What That Means For The Future\nWhen asking the question “banked, but for how long”, the clearest insight comes from looking forward at upcoming regulatory changes that will shape the cost of serving Caribbean respondent banks in 2027 and 2028. The trend is clear: regulatory requirements are not loosening, they are tightening. In the European Union, a new centralized Anti-Money Laundering Authority launched operations in Frankfurt on July 1, 2025. A single, directly applicable EU AML rulebook will enter into force on July 10, 2027, with the Authority beginning direct supervision of selected high-risk financial institutions from 2028, and penalties for non-compliance reaching tens of millions of euros. In the United States, implementing rules for the GENIUS Act are being developed across the OCC, FDIC, Federal Reserve, NCUA, FinCEN, and Treasury throughout 2026, with FinCEN expected to introduce new AML obligations for stablecoin issuers. FATF continues its three annual listing cycles, and enhanced due diligence for grey-listed counterparties remains the global default. The overall direction of travel is toward stricter, more harmonized, more automated supervision, which increases rather than reduces the cost that correspondent banks incur from serving small Caribbean respondent banks. This leads to a critical conclusion: the most important conversations now need to happen with global lawmakers and regulators, not just with correspondent banks. Bilateral bank-to-bank dialogue can preserve individual relationships, but it cannot change the overall upward trajectory of regulatory costs. This collective engagement – with the U.S. Treasury, EU institutions, FATF, and the Caribbean FATF – is where the region’s collective advocacy is most needed, and it is properly the responsibility of regional governments, central banks, and the regional bodies that convene them. When it comes to the intentions of major correspondent banks, public statements from the largest U.S. institutions point to continued selective rationalization of low-margin, high-compliance-cost relationships, rather than a return to expanded activity in the Caribbean. No major U.S. correspondent has announced a strategic return to serving small Caribbean jurisdictions. This is the honest answer to the core question: the region is banked today, but on the current trajectory, the number of remaining relationships will keep shrinking, costs will keep rising, and the market will become even more concentrated. The most prudent assumption is not that the tide will reverse, but that it will keep rising.\n\n## Evaluating Alternative Pathways For Caribbean Banking\nWhile defending existing correspondent relationships is necessary, it is not sufficient on its own. So what alternatives are available to Caribbean banks today, and which can deliver real results? To understand the potential of new payment infrastructure, it is important to highlight how it differs from the traditional correspondent banking model. A conventional cross-border payment moves through a chain of multiple correspondent banks, each holding balances with the next, each conducting regulatory screening, each adding time and cost. Settlement can take multiple days. A stablecoin payment collapses this entire chain. A stablecoin is a digital token designed to hold a fixed value; under the U.S. GENIUS Act, it must be backed 1:1 by high-quality liquid assets, audited regularly, and subject to Bank Secrecy Act compliance requirements. Value moves directly between two parties on a shared distributed ledger and settles in seconds, with currency conversion handled only at the point where funds enter and exit the network. The long intermediary chain – and most of its associated cost and delay – is eliminated. This is why total real-economy stablecoin payments reached roughly $400 billion in 2025, 60% of which were business-to-business transactions. But the honest question is whether stablecoins and digital assets can address the de-risking challenge for Caribbean banks, and the answer is that they can deliver partial solutions, but not a full wholesale fix yet. To assess the realistic options, we can compare them side by side. Traditional money transfer operators like Western Union remain critical for processing rem
