Trillion-Dollar Stablecoins Shock Traditional Payments, US Banking Industry Launches History's Largest Coordinated Counterattack
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Trillion-Dollar Stablecoins Shock Traditional Payments, US Banking Industry Launches History's Largest Coordinated Counterattack
A Wall Street-led offensive and defensive battle over digital currency.
Navigating Web3 tides with focused insightsBy Anna Irrera, Bloomberg
Compiled by Saoirse, Foresight News
For years, major banks have largely been bystanders to the development of stablecoins. Stablecoins have grown from a niche cryptocurrency category into a payment network handling trillions of dollars in transactions annually. Now, the banking industry plans to replicate the collaborative model used to create Zelle, hoping to build infrastructure together to prevent various digital dollars from continuing to erode their business territory.
Top banks including JPMorgan Chase, Bank of America, HSBC Holdings, Citigroup, and Wells Fargo recently jointly announced a plan to build an interoperable tokenized bank deposit network. Tokenized bank deposits are a digital form of funds held within the commercial banking system, which can be transferred via blockchain payment channels, while blockchain technology was originally introduced by the crypto industry.
The Zelle logo on a smartphone. Photographer: Tiffany Hagler-Geard / Bloomberg
This plan will be operated by The Clearing House (TCH for short, the U.S. clearing house association, commonly known as the New York Clearing House), representing the first large-scale collaborative action by the U.S. banking industry to address stablecoins. Stablecoins are generally pegged to the U.S. dollar, capable of handling payment and settlement business around the clock, with application scenarios continuously expanding.
The banking industry is now increasingly aware that the competitive threat posed by stablecoins is no longer just talk on paper. In the early days, stablecoins were mostly used only for cryptocurrency transactions, but nowadays more and more payment companies and financial institutions are choosing to use stablecoins, seeking lower-cost and faster channels for fund transfers. Data from analytics firm Artemis Analytics shows that stablecoin transaction volume surged 72% last year, reaching approximately $33 trillion; Bloomberg Intelligence predicts that by 2030, stablecoin payment flow could exceed $50 trillion.
The obvious reference model for this banking industry action is Zelle. More than a decade ago, major banks joined forces to create a peer-to-peer shared payment network to counter rapidly rising consumer payment applications like Venmo. The project took several years of preparation before landing, but now Zelle processes over $1 trillion in payments annually, regarded as one of the most successful cases of the banking industry defending against external competitors.
However, whether banks can replicate this success again is currently full of uncertainty. The market is iterating rapidly, and dozens of competing institutions need to reach unanimity on technical standards, governance rules, and commercial incentive mechanisms. Historically, a large number of consortium projects in the financial field have ultimately been hindered, with divergent demands from all parties slowing down the pace of decision-making and investment.
Alessandro Hatami, managing partner at fintech consulting firm Pacemakers.io and former head of digital payments at Lloyds Bank, stated: "It is these very banks that have continuously announced various blockchain projects to the outside world over the past decade. There is a competitive relationship between banks, and wanting to build shared infrastructure itself is fraught with difficulties."
During the Trump administration, the regulatory trend tended towards loosening, and Wall Street took the opportunity to vigorously promote tokenization arrangements. U.S. policymakers believe that various tokens pegged to the U.S. dollar can consolidate the global hegemony of the U.S. dollar while boosting demand for U.S. Treasuries.
The U.S. introduced the "GENIUS Act" last year, building a complete regulatory framework for stablecoins, equivalent to sounding the horn for stablecoins moving towards mainstream application. The focus of policy discussion subsequently shifted to supporting market regulations, and whether stablecoin issuers should be allowed to provide financial returns and reward benefits — once this policy is opened up, bank deposits will face serious diversion.
Nicole Sandler, Chief Ecosystem Officer at tokenized clearing startup Ubyx, said: "The competitive threat is now clearly visible and quantifiable. Banks are constantly discovering customers choosing stablecoins to transfer funds. This is completely different from the distant, abstract potential threats of the past."
Connecting Various Payment Channels
Major banks have continuously experimented with blockchain technology for years, both through independent research and development and joint exploration. Multiple large institutions such as JPMorgan Chase, Citigroup, and BNY Mellon have already launched self-developed blockchain payment systems, supporting customers in transferring funds around the clock.
Although these self-developed platforms possess some characteristics of stablecoins, they also combine the advantages of commercial bank funds, such as deposit interest and deposit insurance protection, but the transfer scope is mostly limited to between customers of the same bank. In contrast, with stablecoins, users can complete transfers to any entity globally without being restricted by the account-opening institution.
One of the core goals of The Clearing House is to achieve interoperability between different digital currency systems, thereby significantly expanding business coverage and transaction scale.
Debopama Sen, Head of Services Payments at Citigroup, pointed out: "Achieving system interoperability, building a scalable platform, and simplifying customer operations are crucial. Many of our large clients operate globally and work with more than one bank."
Blockchain-based currency forms, Source: Bloomberg
The Clearing House plans to connect a group of financial institutions that collectively manage trillions of dollars in deposits and serve tens of millions of customers; the scale and coverage breadth after completion will far exceed the current stablecoin market.
Christopher Ward, Head of Corporate Payments at Truist Financial, stated: "This is no different from the logic behind the U.S. promoting the construction of real-time payment systems back then. All parties jointly formulate unified rules to achieve widespread adoption. The current project follows the same line of thinking."
The Clearing House is deeply engaged in industry network operations and is skilled at balancing the demands of community banks, regional banks, multinational large banks, and foreign institutions in the U.S., making it very suitable to undertake the coordinating role. The project is planned to officially launch next year.
Elena Casal, Chief Customer Officer at The Clearing House, stated: "Building industry-shared infrastructure is in our genes. We already possess mature governance frameworks and regulatory compliance processes, which can help accelerate the project's implementation."
Elena Casal mentioned that market demand is mainly concentrated in the wholesale payment sector, especially corporate treasury management and liquidity scheduling. This network can also provide digital cash for tokenized securities clearing and settlement, empowering the development of tokenized capital markets. The Clearing House is selecting technical service providers, the network has reserved expansion capabilities, and can support stablecoin clearing business as needed in the future.
Crowded Track, Multiple Parties Competing
Although The Clearing House has a good foundation for success, the bank-related digital currency track is already very crowded nowadays, with many similar projects having started ten years ago. Multiple banks participating in multiple parallel projects simultaneously can instead easily cause industry fragmentation, making it difficult to form a combined force.
Last week, payment institution SWIFT revealed that more than 17 banks are preparing to pilot cross-border tokenized payments on its new distributed ledger. In addition, institutions such as Goldman Sachs, Deutsche Bank, Bank of America, and Banco Santander formed a consortium at the end of last year to develop stablecoin-like digital currencies.
Manish Kohli, Global Head of Payment Solutions at HSBC, analyzed that platforms relying on mature systems for transformation and upgrades have much higher odds of success than new projects built from scratch. Taking The Clearing House's current plan as an example: "The project relies on existing infrastructure, has a stable member group, clear U.S. domestic application scenarios, and much lower implementation risk." HSBC is simultaneously participating in multiple projects, including the SWIFT pilot, the UK "UK Tokenised Deposit Initiative", and the Hong Kong Project Ensemble.
Difficult Self-Transformation
The banking industry sits on huge asset scales and compliance qualifications, with significant advantages, but the inherent shortcoming is slow decision-making progress. Taking Zelle as an example, project research and development took several years; without pressure from competing products like Venmo, it would be difficult to truly grow and develop; even after technical development was completed and ready to go live, consortium members would even argue endlessly over the product name.
In addition, the transformation of old-school payment giants may not necessarily be smooth sailing. PayPal launched the stablecoin PYUSD in August 2023, but the penetration rate is extremely low, with a circulation scale of only $2.9 billion, negligible compared to the volume of top stablecoins: USDT issued by Tether has a circulation scale of about $184 billion, and USDC issued by Circle has reached a scale of $73 billion.
Mainstream stablecoins, Source: CoinGecko
From this point of view, top stablecoin issuers do not need to panic excessively for the time being. However, banks also do not need to rush to seize the first-mover advantage: many of the largest and most profitable corporate clients in the bank payment sector do not have an urgent need to use programmable dollars at present.
Marieke Flament, co-founder of digital currency consulting firm Currency of Power, talked: "Banks seem to act slowly, but once they make up their minds to promote a project, they can mobilize massive resources. But the development speed in the crypto field is extremely fast, and whether banks can keep up with the pace remains a major challenge."
Reporters Paige Smith, Olga Kharif, Yizhu Wang assisted in reporting
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