A group of prominent banks is embarking on an exploration to launch stablecoins backed by fiat currencies from the Group of Seven (G7) countries, including the US dollar, euro, and Japanese yen. This initiative involves BNP Paribas, Bank of America, Goldman Sachs, Deutsche Bank, and Citibank, who aim to create a 1:1 reserve-backed digital payment asset on public blockchains. The banks are also looking at whether this new offering could increase competition in the market while ensuring compliance with regulations and robust risk management practices.
A statement from the banks indicates that they have launched a project to explore this idea, with no clear timeline yet. This venture would likely compete against Tether’s USDt (USDT), which holds the current title for largest stablecoin by market capitalization.
The banking industry’s efforts are being facilitated by the recent passage of the GENIUS Act in the US, a bill to regulate payment stablecoins signed into law by President Donald Trump in July. While the GENIUS Act is technically law, it’s not expected to take effect for another 15 months, requiring time from the Treasury and Federal Reserve to finalize regulations.
Concerns have been raised about the potential impact of the GENIUS Act on financial stability, as some banks argue that loopholes within the bill could allow interest-bearing stablecoins. However, Multicoin Capital’s managing partner Tushar Jain believes customers will move their bank deposits into higher-yielding stablecoins, increasing competition between tech companies and traditional institutions.
In addition to Tether’s USDT, several other prominent stablecoins are in the mix, including USDC (USD), Dai (DAI), Ethena USDe (USDE), PayPal USD (PYUSD), and USD1, a coin released by World Liberty Financial, a company backed by former President Donald Trump.