Amid the intensifying competition in the cryptocurrency industry, several of the largest banks in the United States are carefully exploring the possibility of jointly issuing a stablecoin as a strategic response to industry transformations. According to sources familiar with the matter, as of now, the ongoing negotiations have involved companies owned by major commercial banks such as JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo. Notably, Early Warning Services, the operator of the peer-to-peer payment system Zelle, and the Clearing House, a real-time payment network, are also part of these discussions.
However, the current discussions among the banking consortium regarding the joint stablecoin remain in the early conceptual stage, with many details and directions still subject to change. The final decision, if any, will hinge on the fate of legislative actions surrounding stablecoins and other factors, such as whether banks deem there is sufficient demand for stablecoins in the market.
In fact, since the tenure of President Donald Trump, banks have been preparing for the potential widespread adoption of stablecoins. As a unique type of cryptocurrency, stablecoins feature relatively stable values. There is a concern that they could siphon off the deposits and transactions that banks currently handle, especially if large technology companies or retailers also enter the stablecoin space. After the regulatory crackdown on the cryptocurrency industry two years ago, the banking sector has been playing catch-up in the cryptocurrency field.
Stablecoins act as digital dollars in the cryptocurrency market and are currently used for storing cash or purchasing other tokens. Ideally, they maintain a 1:1 exchange rate with the US dollar or other government-issued currencies and are backed by reserves of cash or cash-like assets, such as US Treasury bonds, to ensure their value stability.
The banking community generally believes that stablecoins have the potential to significantly boost the efficiency of routine transactions. Take cross-border payments as an example. In traditional payment systems, such transactions often take several days to complete, but stablecoins could potentially cut down this time considerably. Nevertheless, some informed sources have pointed out that questions still linger regarding the security of stablecoins and the regulatory implications for banks venturing into the digital asset space.
The possibility of Wall Street’s traditional financial giants joining hands to issue a stablecoin signals that the gap between mainstream finance and cryptocurrency finance is gradually narrowing. As an efficient means of fund transfer, stablecoins have long been regarded as a logical bridge connecting these two worlds, and this trend is becoming increasingly evident.
Just last month, The Wall Street Journal reported that several cryptocurrency companies plan to apply for banking charters or licenses from regulatory authorities, taking advantage of a bill that aims to establish a regulatory framework for the issuance of stablecoins by both banks and non-bank institutions. This week, the Senate cleared a procedural hurdle for the bill known as the “GENIUS Act.” According to a memorandum released by law firm Paul Hastings on Thursday, the latest version of the bill includes restrictions on the issuance of stablecoins by non-financial listed companies. However, it does not completely ban non-financial listed companies from issuing stablecoins, as sought by bank lobbyists.
In March this year, World Liberty Financial, owned by the Trump family, announced the upcoming launch of a stablecoin. Additionally, Donald Trump has also entered the meme coin arena and plans to host a dinner for the largest holders of this meme coin on Thursday.
According to insiders, one of the models under discussion for the banking consortium is to allow other banks to use the stablecoin, in addition to the co-owners of the Clearing House and Early Warning Services. Meanwhile, some regional and community banks are also considering whether to form an independent stablecoin consortium. For smaller banks, such an endeavor poses more challenges and difficulties.
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