U.S. and EU banks accelerate stablecoin plans as regulation and demand grow

Odaily Report: As regulatory transparency continues to increase and market demand remains strong, banks in the US and across Europe are ramping up their efforts to issue stablecoins. The introduction of the EU's Crypto Asset Markets (MiCA) regulation and growing global interest in blockchain-based payment solutions are driving traditional financial institutions to compete with established crypto companies like Tether Holdings. Many European banks have already started deploying their own stablecoins to capture a share of the potentially multi-billion dollar market. Societe Generale's digital asset subsidiary SG-Forge has now opened its euro stablecoin to retail investors. Similarly, Oddo BHF SCA in Frankfurt and Revolut in London are also considering launching euro stablecoins, while AllUnity, backed by Deutsche Bank's asset management arm DWS, plans to launch its euro stablecoin by 2025. SG-Forge CEO Jean-Marc Stenger says more banks will adopt bank-issued stablecoins. SG-Forge is currently in discussions with around 10 banks as potential partners or users of its stablecoin issuance technology. Global payments giant Visa Inc. is also working with banks like BBVA to create stablecoin solutions using blockchain. Visa's crypto chief Cuy Sheffield says the company is in negotiations with institutions in Hong Kong, Singapore and Brazil. In the US, as the regulatory environment is discussed, some banks like JPMorgan Chase have started testing blockchain-based payment systems. While JPMorgan has used its deposit token JPM Coin for internal transfers, it lacks the open connectivity of true stablecoins that can be accessed through any crypto wallet. Kinexys, the co-head of JPMorgan's digital assets division, Naveen Mallela, expects JPM Coin to gain more market acceptance in the next three years. He notes that stablecoins and tokenized deposits can coexist as different payment methods. However, some issues may pose challenges for US banks, such as the types of reserves that can back stablecoins and whether these deposits would qualify for federal insurance, which could cause disruptions during financial turmoil. The MiCA regulatory rules, set to take effect on December 30, 2024, are a key milestone for stablecoin issuers in Europe. MiCA ensures stablecoin providers have the proper licenses to operate in the EU and sets guidelines on reserve management and investor protection. Circle's USDC has been approved under MiCA and can now be used more widely across the region. However, market leader Tether Holdings has not mentioned plans to obtain a euro stablecoin license, which could open up opportunities for banks and their competitors to enter this space. Meanwhile, the European Central Bank has expressed concerns about the potential impact of stablecoins on traditional banking. A recent ECB study found that converting retail deposits into stablecoins could weaken banks' liquidity coverage ratios. As commercial banks start issuing stablecoins, central banks are also actively developing CBDCs. These government-backed digital currencies may eventually compete with or replace bank-issued stablecoins in wholesale payment systems. As Libre Capital CEO Avtar Sehra points out, "Everyone is exploring some form of commercial bank digital currency. But many may prefer consortium coins."