Why America’s Biggest Banks Want to Reinvent the Stablecoin

After years of skepticism, traditional finance is not just dipping a toe into crypto. It may just be preparing to swim.

That’s what is being implied by the news Thursday (May 22) that several of the United States’ largest banks are quietly planning a collective leap into the world of cryptocurrency. JPMorgan Chase, Bank of America (BofA), Wells Fargo and Citigroup are exploring the launch of a jointly operated stablecoin: a digital dollar designed not by Silicon Valley startups or crypto-native firms, but by Wall Street’s old guard.

The timing of this venture is no coincidence. For years, stablecoins, which are digital tokens pegged to traditional currencies like the U.S. dollar, have promised to blend the best of both worlds: the efficiency of blockchain transactions and the stability of fiat currency.

They have grown rapidly, with Tether (USDT) and Circle’s USD Coin (USDC) reaching hundreds of billions in circulation. Yet, their mainstream usage has remained limited due to regulatory uncertainty and a perception that they operate outside the traditional financial system.

Enter the banks.

Read more: The Payment Professional’s Guide to Stablecoins

The proposed consortium is reportedly considering using existing rails like Early Warning Services (operator of Zelle) and The Clearing House to develop a new kind of stablecoin infrastructure — one built by regulated entities from the ground up. Their idea? To issue a token that could eventually be used for everything from peer-to-peer payments to B2B settlements, all potentially under the watchful eye of federal regulators.

Because the U.S. stablecoin landscape has not yet found shelter under a clear regulatory framework, the banks are still in the exploratory phase, with a shared commitment to finding a model that’s compliant, scalable and secure. Their proposed stablecoin would be fully backed by fiat held at the banks and function similarly to other stablecoins, but with a key differentiator: trust in institutional governance.

This vision is a clear departure from the early crypto ethos of disrupting incumbents. Instead, it’s a bet that those same incumbents are best positioned to bring digital dollars into the mainstream.

“When you think about the needs of every FinTech or payments company, or a bank that wants to enter the [stablecoin] space, they need secure infrastructure, from the creation of assets, such as tokenizing them, to holding them, and of course moving them,” Utila Co-founder and CEO Bentzi Rabi told PYMNTS last month.

“Everyone will enter the stablecoin era in the end,” Rabi added.

See also: Why Stablecoins Are Stuck at the Acceptance Hurdle

Still, despite their promise, the majority of stablecoins are used for just one purpose: facilitating trading on crypto exchanges. They are a key foundational element of crypto markets, but not yet for payments and commerce.

The involvement of major banks could change that.

At the same time, creating a stablecoin is one thing. Coordinating among multiple banks — each with its own technology stack, risk appetite and strategic priorities — is another. This kind of collaboration will require a shared governance model, common technical standards and airtight security protocols.

That’s why, for banks, the legislative momentum in the U.S. is a prerequisite. Institutions like JPMorgan and BofA are unlikely to risk their core operations on loosely regulated ventures. Instead, they see regulation as a moat, a way to differentiate themselves from crypto-native competitors and legitimize the space.

In February, Bank of America CEO Brian Moynihan said in an interview that the bank would “go into” stablecoins if regulation were passed in the U.S., and regulatory compliance remains a key concern for financial stakeholders.

But the banks’ entry into the stablecoin market will not go uncontested. FinTechs like Circle and Paxos have spent years developing robust infrastructures and building partnerships with payment processors, exchanges and merchants. On Wednesday (May 21), it was announced that the Circle Payments Network (CPN) is now live, enabling stablecoin-powered cross-border payments.

To succeed, the banks will need to articulate a clear value proposition — what does their stablecoin offer that existing ones don’t? One answer could lie in the integration with existing banking services. Imagine a Zelle payment settled instantly in a stablecoin, or a corporate treasury using tokenized dollars for real-time reconciliation. These are tangible use cases that banks are uniquely positioned to serve.

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