Author: Zhang Yaqi, Wall Street Journal
The stablecoin USDT, the "anchor" of the crypto world, is quietly disrupting the traditional financial industry.
More and more banks are beginning to venture into the stablecoin market. According to Bloomberg, Société Générale, Oddo BHF, Revolut, and even the Hong Kong Monetary Authority have all begun to layout the stablecoin market, hoping to get a share of this field.
Previously, Tether Holdings Ltd., the world's largest stablecoin issuer, is expected to have a net profit of over $10 billion by 2024. CEO Paolo Ardoino of the company said in an interview that the company has already used more than half of its net profits for investment this year.
Naveen Mallela, Global Co-Head of Kinexys, the digital asset division of JPMorgan Chase, said that bank-issued stablecoins are expected to accelerate development and become mainstream products within the next three years. With the improvement of the policy framework and technological progress, stablecoins are expected to become an important part of the future financial market.
Financial institutions are actively exploring the issuance of stablecoins
Faced with such an enticing "cake", banks can't sit still. In Europe, financial institutions are actively exploring the issuance of stablecoins. The subsidiary of Société Générale, Forge, has already launched a euro-backed stablecoin for retail investors.
At the same time, Oddo BHF SCA is also developing a euro-denominated version, while Revolut, headquartered in London, is considering issuing its own stablecoin version.
One of the driving factors of this trend is the policy clarity brought by the European Crypto-Asset Regulation (MICA). In addition, Tether's decision to stop issuing its EURt stablecoin has provided market opportunities for other banks.
Jean-Marc Stenger, CEO of SG-Forge, said in an interview that they are negotiating with multiple banks on the use of their stablecoins, and are discussing cooperation or white-label technology licensing with about 10 banks so that these banks can issue their own stablecoins:
"Do I think other banks will issue their own stablecoins? The answer is yes. It's a lot of work, and I'm not sure it will happen quickly, but it will happen."
Not only in Europe, Visa is also actively promoting the development of stablecoins globally. In October, Visa launched a tokenization network for banks to issue stablecoins, and plans to conduct a pilot with BBVA in 2025. Cuy Sheffield, Visa's head of crypto, revealed that banks in Hong Kong, Singapore and Brazil have shown strong interest in stablecoins, and Visa is collaborating with multiple banks around the world.
Standard Chartered Bank is also actively participating, having been selected by the Hong Kong Monetary Authority as one of the first issuers of the Hong Kong dollar stablecoin, with plans to go live in 2025. Rene Michau, Standard Chartered Bank's global head of digital assets, said this initiative will further strengthen the role of blockchain in the payment field, and the bank hopes to launch a stablecoin in 2025.
Risks and Challenges of Stablecoin Issuance
Compared to deposit tokens being explored by large banks like JPMorgan Chase, stablecoins have a broader application prospect.
Deposit tokens can usually only be transferred between customers of the same bank, while stablecoins can be purchased and used by anyone with a crypto wallet. JPMorgan Chase believes that stablecoins and deposit tokens are not mutually exclusive, and expects bank-issued stablecoins to accelerate development and become mainstream within the next three years.
However, there are also risks in issuing stablecoins.
Research by the European Central Bank shows that if a large amount of retail deposits are converted into stablecoins, the liquidity coverage ratio of banks may be affected.
In addition, US regulators still need to clarify the acceptable types of reserves for banks to issue stablecoins, and whether stablecoin deposits are insured. Hilary Allen, a law professor at American University, warned that if banks issue both uninsured stablecoins and insured deposits at the same time, it may confuse consumers and cause panic in times of crisis.
Currently, many central banks are testing or launching central bank digital currencies (CBDCs), which may replace bank-issued stablecoins in some use cases, especially in the wholesale payment sector.
Faced with such a complex situation, Avtar Sehra, CEO of Libre Capital, said:
"Every bank is exploring some form of commercial bank digital currency, but ultimately they may be more inclined to use consortium coins."
