A consortium of banks is currently evaluating the issuance of stablecoins, which are pegged to some of the major fiat currencies like the US dollar, euro, and Japanese yen.
In a recent statement issued by BNP Paribas, notable banks such as Bank of America, Goldman Sachs, Deutsche Bank, and Citi announced their project aimed at considering a digital currency that is 1:1 reserve-backed. This initiative hopes to enhance market competition while managing regulatory compliance and best practices on risk.
“The objective of the initiative is to explore whether a new industry-wide offering could bring the benefits of digital assets and enhance competition across the market, while ensuring full compliance with regulatory requirements and best practice risk management,” stated the banks.
The release did not imply any specific timeline for this undertaking, which might compete with Tether’s USDT, the largest stablecoin based on market capitalization.
Their endeavor would be bolstered by the recent passage of the GENIUS Act, a legislation that governs payment stablecoins. This law was signed by US President Donald Trump in July. Although it is now law, the effective date is projected to be 15 months later, contingent upon the finalization of regulations by the US Treasury and Federal Reserve.
Concerns have been voiced regarding the GENIUS Act. Despite predominantly positive feedback from cryptocurrency supporters, several banks have urged lawmakers to address perceived loopholes that may allow interest-bearing stablecoins, which they argue could jeopardize financial stability.
Tushar Jain from Multicoin Capital remarked on the potential banking shifts likely due to the legislation, suggesting that people may transfer their deposits to higher yielding stablecoins, enhancing the competitive landscape for technology firms.
Nonetheless, Dante Disparte expressed that the bill’s language is designed to prevent both banking and tech entities from monopolizing the stablecoin sector.
Prominent stablecoins besides USDT include USDC, Dai, Ethena USDe, PayPal USD, and USD1, the latter introduced by a crypto firm associated with the Trump family.
