Major U.S. Banks Mull Joint Stablecoin Project to Challenge Crypto Dominance
Major Banks in the U.S. Contemplate Collaboration to Contend Stablecoin Market Worth $245 Billion: WSJ (rephrased)
Major American banks, including JPMorgan and Bank of America, are reportedly considering launching a joint stablecoin project to diversify digital payments and compete with the growing crypto sector's influence. The discussions are in progress through their co-owned payment companies, including Early Warning Services and the Clearing House, according to a Wall Street Journal report.
The banks' foray into the stablecoin sector hinges on the passage of federal legislation, such as the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act. This bill recently passed a Senate vote with a 66–32 margin and aims to set regulatory standards for stablecoin issuance and oversight, providing banks with a clear path into the market.
Stablecoins, digital currencies pegged to traditional fiat currencies, have gained popularity due to their potential to facilitate seamless transactions and bridge the gap between traditional finance and the growing crypto industry. While some view these digital assets as potentially destabilizing economic policy, they have appealed largely to individuals and businesses, according to Pedro Lapenta, head of research at Hashdex Asset Management.
Circle and Tether currently dominate the stablecoin market, with over $245 billion in combined capitalization. Circle, a U.S.-regulated issuer, launched its USDC stablecoin in 2018 as an alternative to Tether's USDT, which debuted in 2014 on the Bitcoin-based Omni Layer. Despite Tether's years of scrutiny regarding the transparency of its reserves, it maintains a dominant market position, accounting for over 60% of the market.
Circle has sought to differentiate itself by presenting USDC as a more compliant product, pointing to third-party attestations and its closer collaboration with U.S. regulators. However, Circle has faced its own challenges, including temporary depegging, stalled plans to go public via a SPAC deal, and declining market share.
The entry of major global financial institutions may test the longevity of both industry titans and potentially erode their dominance. The arrival of more traditional financial backing could attract a new wave of conservative investors and users accustomed to the stability and reputation of traditional banks.
Hong Yea, co-founder and CEO of GRVT, a licensed on-chain exchange, suggested that crypto-native stablecoin issuers like Circle and Tether would continue to play a vital role in helping traditional finance construct institutional-grade stablecoin infrastructure. Crypto-natives have built their expertise and knowledge over the years, making them invaluable guides in constructing compliant and secure digital assets for the banking sector.
However, successful implementation of banks' stablecoin projects would require thorough engagement with regulators and a willingness to adopt compliance measures that cater to the evolving regulatory landscape. "I would advocate for industry leaders to adopt a more proactive stance on regulations and compliance," Yea said. A coordinated effort between banks and crypto issuers would be crucial to fostering growth and building investor trust in the stablecoin sector.
For now, discussions among banks remain in their early stages, according to the report. Tether and Circle did not immediately respond to requests for comment. If the banks move forward with their plans, they will be entering a market that is maturing rapidly and has shown resilience in the face of challenges. The banking sector's entry could usher in a new era of growth and innovation for the stablecoin industry.
- The stablecoin project by major American banks, such as JPMorgan and Bank of America, aims to compete with the growing crypto sector and diversify digital payments.
- The banks' foray into stablecoins is contingent on the passage of federal legislation, like the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act.
- Stablecoins, digital currencies tied to traditional fiat currencies, have gained popularity due to their potential to facilitate seamless transactions and bridge the gap between traditional finance and crypto industry.
- Circle and Tether are currently the leaders in the stablecoin market, with over $245 billion in combined capitalization.
- The entry of major global financial institutions, such as banks, could test the longevity of industry titans and potentially erode their dominance.
- Successful implementation of banks' stablecoin projects would require thorough engagement with regulators and a willingness to adopt compliance measures catering to the evolving regulatory landscape.
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