WSJ: Large banks are exploring joint stablecoins to enter the crypto space

Source: Wall Street News; Compiled by Wuzhu, Golden Finance

Several of the largest banks in the United States are exploring whether to join forces to issue a joint stablecoin, a move aimed at fending off growing competition in the cryptocurrency industry.

According to people familiar with the matter, the talks so far involve companies jointly owned by JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and other large commercial banks. These companies include Early Warning Services, the operator of the peer-to-peer payment system Zelle, and the Real-Time Payment Network Clearing House.

Discussions of the bank alliance are in the early conceptual stage and may change. Any final decision will depend on the fate of legislative action around stablecoins and other factors, such as whether banks see enough demand for stablecoins.

Banks have been preparing for the possibility that stablecoins will be widely adopted during Trump's presidency, and stablecoins could siphon off deposits and transactions they process, especially if large technology companies or retailers also get on board. The banking industry is in catch-up mode in the cryptocurrency field after a regulatory crackdown two years ago.

Stablecoins play the role of digital dollars in the cryptocurrency market and are currently used to store cash or buy other tokens. They should be pegged to the dollar or other government currencies and backed by reserves of cash or cash-like assets, such as U.S. Treasuries.

Banks see stablecoins as an opportunity to speed up more routine transactions, such as cross-border payments that can take days to complete in traditional payment systems. Some people familiar with the matter said there are still some questions about the safety of stablecoins and the regulatory implications of getting involved in digital assets.

The possibility of traditional Wall Street giants joining forces to issue stablecoins is a sign that mainstream finance and crypto finance are gradually getting closer. Given that stablecoins are an efficient way to transfer funds, it has long been seen as a logical link between the two worlds.

Last month, the Wall Street Journal reported that several cryptocurrency companies are planning to apply to regulators for banking charters or licenses, thanks to a bill that would establish a regulatory framework for banks and non-bank institutions to issue stablecoins.

The Senate passed the procedural hurdle of the bill, called the GENIUS Act, this week. The latest version of the bill includes restrictions on non-financial public companies issuing stablecoins, according to a memo released Thursday by Paul Hastings, a law firm. But the bill does not completely ban non-financial public companies from issuing stablecoins, as bank lobbyists have sought.

In March, World Liberty Financial, owned by the Trump family, announced it would launch a stablecoin. Trump also launched a meme coin and plans to host a dinner for its largest holders on Thursday.

One model of a bank alliance that has been discussed is to allow other banks to use stablecoins in addition to the co-owners of the clearing house and early warning service, some people familiar with the matter said.

Some regional and community banks are also considering whether to form an independent stablecoin alliance, according to people familiar with the matter. Such an attempt would be more difficult for smaller banks.