Key Highlights
- A consortium of major U.S. banks is collaborating to develop a joint U.S. dollar-backed stablecoin
- The list of banks that joined this collaborative initiative includes big names like Bank of America, Goldman Sachs, Deutsche Bank, and others
- This bank-led initiative comes after the passage of the first major U.S. federal crypto law, the GENIUS Act
According to the latest report, many major U.S. banks are collaborating to jointly launch a USD-backed stablecoin.
Amid the boom in the stablecoin market, currently standing at $314.06 billion, this launch from the biggest collaboration of banks will help them to take on crypto-native issuers like Tether and Circle.
The news was first reported by The Wall Street Journal in May. Since then, the discussion has evolved from exploratory discussions into concrete preparations for a 2026 launch. The purpose behind this initiative is to leverage blockchain technology for faster, cheaper cross-border payments to maintain the stability of the USD.
Group of Banks Prepares to Launch Stablecoin
The consortium’s stablecoin will be fully backed by USD. The banks will hold 1 USD or an equivalent safe asset, like short-term U.S. Treasury bills, for every digital token in circulation. These reserves will be kept in separate accounts at the Federal Reserve or other insured banks.
To ensure complete transparency and maintain trust, the banks will publish monthly reports on the reserves and undergo yearly audits by independent accounting firms. This system is designed to prevent the kind of crashes that have affected other digital currencies in the past.
Unlike decentralized cryptocurrencies, this bank-issued token will operate on a controlled network where only verified participants can use it, reducing risks related to illegal finance.
Boom in the Stablecoin Market
This collaboration comes amid the growing demand for efficient digital payment methods by banks’ clients.
Earlier, Bank of America CEO Brian Moynihan compared this trend to the widespread adoption of the Zelle payment app. He stated that with new regulations now in place, the banks are prepared to move forward with this new digital currency that works seamlessly with existing banking systems.
Moynihan stated in a conference call with analysts, “We are also studying its size, because in some areas there is not a large flow of funds. So you will see that our company will take action in this regard.”
“We are studying the market environment, uses, and potential uses for our customers. But it is still too early, especially since the differences between our business and the business of our competitors, and how stablecoins will play a role in it, still need to be monitored,” he added further.
Similarly, Citibank CEO Jane Fraser also revealed in a post-earnings conference call, saying that “We are looking at the issuance of a Citi stablecoin, but probably most importantly, is the tokenized deposit space, where we’re very active. This is a good opportunity for us.”
Approval of the GENIUS Act Provides Much-Needed Regulatory Clarity to the Stablecoin Market
The stablecoin market has grown impressively after the creation of the first federal law for cryptocurrency in the U.S. In July, the pro-crypto president, Donald Trump, signed legislation to officially pass the GENIUS Act. This bipartisan legislation is putting an end to long-standing regulatory ambiguity.
The new law mandates that all stablecoins must be backed one-to-one by safe, liquid assets. It classifies stablecoin issuers as financial institutions, which requires them to follow strict anti-money laundering rules.
The law also prevents unapproved entities from issuing stablecoins in the U.S. and establishes a committee, chaired by the Treasury Secretary, to review and approve major issuers to ensure they do not pose a risk to the financial system.
Europe Prepares for EURO-backed Stablecoin to Counter USD
The rise of U.S. dollar-backed digital tokens has caused concern in other parts of the world, particularly in Europe. Leaders at the European Central Bank, including President Christine Lagarde, have warned that the dominance of dollar-pegged digital currencies could threaten the euro’s role and financial stability.
While emphasizing the need for EURO-backed stablecoin, Pierre Gramegna, Managing Director of the European Stability Mechanism (ESM), said, “Europe should not be dependent on US dollar-denominated stablecoins, which are currently dominating markets. Stablecoins are an inevitable part of this equation.!”