America’s Biggest Banks Consider Teaming Up to Challenge $245B Stablecoin Market: WSJ

Major U.S. banks are reportedly exploring a joint stablecoin venture to compete directly with the crypto industry’s growing dominance in digital payments.

Discussions are ongoing between JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, and others through their co-owned payment companies, including Early Warning Services and the Clearing House, according to a Wall Street Journal report.

Those discussions hinge on forthcoming stablecoin legislation that could help form frameworks for banks and non-banks to issue stablecoins.

Stablecoins are digital currencies typically pegged to the U.S. dollar or other fiat currencies and, in recent years, are increasingly being backed by Treasurys.

While some see them as “destabilizing” to economic and fiscal policy, “individuals and businesses see a tremendous benefit,” Pedro Lapenta, head of research at Hashdex Asset Management, told Decrypt.

And the timing couldn’t be more apt.

This week, the Senate moved forward with the GENIUS Act, a bipartisan bill that aims to regulate payment stablecoins by setting federal reserve standards, transparency, and issuer oversight.

If the act becomes law, stablecoins could “accelerate the adoption of digital assets” in general and strengthen “the investment case for Bitcoin and other crypto,” Lapenta said.

But it isn’t really about the investor. Banks see the changing regulatory landscape as a possible green light to begin exploring ways to challenge the dominance of Circle and Tether’s stranglehold over the $245 billion stablecoin market.

Circle, a U.S.-regulated issuer, launched its USDC stablecoin in 2018 alongside Coinbase through the Centre Consortium, in a bid to offer an alternative to Tether’s market-leading USDT, which debuted in 2014 on the Bitcoin-based Omni Layer.

Tether has maintained a dominant position in the stablecoin sector despite years of scrutiny over the transparency of its reserves.

Since 2022, the stablecoin issuer has released quarterly attestations, attempting to assuage concerns that its liabilities may exceed its assets. It now accounts for more than 60% of the market.

Circle, on the other hand, has sought to differentiate USDC by positioning it as a more compliant product, citing third-party attestations and closer regulatory engagement in the U.S.

But it, too, has had its own set of problems, including a temporary depegging of USDC in 2023 following the collapse of Silicon Valley Bank, stalled plans to go public via a SPAC deal in 2022, and declining market share.

The entry of major global financial firms may soon test the staying power of both incumbents and chip away at their dominance.

For now, the discussion among banks remains in its infancy and could change at any time, per the report.

Tether and Circle did not immediately respond to requests for comment.

Edited by Sebastian Sinclair