Leading U.S. banks are in early talks to launch a joint stablecoin venture

Major U.S. banks, including JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo, are exploring a collaborative stablecoin initiative

Leading U.S. banks are in early talks to launch a joint stablecoin venture, while the Trump family’s USD1 stablecoin has surged to prominence, highlighting blockchain’s growing role in reshaping digital payments and raising ethical concerns.

Major U.S. banks, including JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo, are exploring a collaborative stablecoin initiative to compete in the $245 billion stablecoin market, currently led by Circle’s USDC and Tether’s USDT, The Wall Street Journal reported.

These discussions also involve payment firms Early Warning Services, which operates Zelle, and The Clearing House, which is co-owned by the banks. The move is driven by the surging popularity of crypto-based digital payments, which threaten to siphon off deposits and transaction volumes from traditional banking.

Stablecoins, which are pegged to the U.S. dollar, offer fast and low-cost cross-border transfer capabilities, making them attractive for global financial institutions. A recent survey by Fireblocks found that 58% of traditional banks already use stablecoins for such payments, highlighting their institutional adoption.

The consortium model could enable broader participation from other financial institutions, further expanding the stablecoin’s reach. However, the venture’s progress depends on the passage of U.S. stablecoin legislation.

The GENIUS Act, which recently cleared a Senate procedural vote with bipartisan support, aims to regulate stablecoins by requiring them to be 1:1 backed by liquid reserves and comply with anti-money laundering regulations, addressing concerns raised by Senator Elizabeth Comer. The Act also includes provisions for consumer protections and financial stability, aiming to mitigate risks highlighted by Senator Warren, who expressed concerns over foreign investments flowing into stablecoins.

Parallel to the banks’ initiative, the Trump family’s World Liberty Financial has launched USD1, a dollar-backed stablecoin that has seen a rapid surge in prominence.

Issued by BitGo Trust Company in accordance with U.S. regulatory requirements, USD1 has seen its market cap soar to $2.14 billion, making it the second-largest stablecoin on BNB Chain after USDT.

A significant boost to USD1 came with a $2 billion investment by Abu Dhabi’s MGX fund to acquire a stake in Binance using the stablecoin, showcasing its global appeal.

However, the Trump family’s 60% stake in World Liberty Financial has raised concerns about potential conflicts of interest, especially given President Trump’s crypto-friendly policies.

Critics, including Senator Elizabeth Comer, have pointed out that the Biden administration is aiming for the U.S. to dominate the crypto sector, much like the U.S. aims for hegemony in the global economic and financial system through the USD.

President Trump himself alluded to this ambition at a TRUMP token holders’ event, stating that the U.S. should be no. 1 in crypto, much like it leads in the USD and economic might.

The U.S. banks’ joint stablecoin venture and the rapid rise of USD1 are both fueled by this broader ambition to position the U.S. at the forefront of the emerging Web3 landscape.

Banks are seeking to modernize and optimize payment systems by leveraging blockchain’s efficiency, while the narrative around USD1 highlights the potential of crypto to disrupt existing financial paradigms and offer new avenues for investment and wealth creation.

However, both initiatives face challenges that could hinder their progress.

For the banks, regulatory clarity and public trust are crucial for the success of their stablecoin, which could be used for cross-border payments and other financial services.

Meanwhile, critics like Senator Elizabeth Comer highlight the financial stability risks posed by stablecoins, comparing them to the volatile money-market funds that contributed to the 2008 financial crisis.

Both the U.S. banks’ initiative and the Trump family’s USD1 venture are unfolding rapidly, fueled by the transformative potential of blockchain technology and the growing demand for efficient digital payment solutions.

As these ventures progress, they will need to navigate ethical concerns, regulatory hurdles, and navigate the financial stability risks posed by stablecoins.