- Major U.S. banks, including JPMorgan and Bank of America, are exploring a joint stablecoin project to compete with crypto-native issuers amid advancing legislation and growing political interest in digital assets.
- However, their success may be limited by regulatory constraints and global accessibility challenges compared to established decentralized stablecoins.
As the global stablecoin market surges past $248 billion, some of America’s largest banks are exploring a new frontier: launching a joint stablecoin initiative to challenge crypto-native issuers like Circle and Tether. According to a Wall Street Journal report published May 22, major financial institutions—including JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo—are in early discussions to co-create a bank-backed digital dollar, signaling a dramatic shift in how Wall Street views crypto competition.
The proposed stablecoin would likely be integrated with traditional banking payment systems and supported by infrastructure partners such as Early Warning Services, the operator of Zelle, and The Clearing House. But as banks wade into the stablecoin arena, they do so against a backdrop of political momentum, regulatory change, and a crypto market evolving faster than legacy institutions can adapt.
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Traditional Banks Playing Catch-Up in a Fast-Moving Mark
The timing of these discussions is not coincidental. Just two days prior to the report, the U.S. Senate advanced the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, a pivotal piece of legislation aimed at defining the regulatory framework for stablecoin issuance in the United States. The bill now heads to the Senate floor for debate.
This legislative movement is spurring traditional financial players into action. Having largely sat on the sidelines during the explosive rise of decentralized finance (DeFi) and crypto over the last decade, American banks are now grappling with the growing reality that blockchain-based payments and tokenized currencies may undercut their dominance in areas like transaction fees, cross-border payments, and account custody.
There’s also a political undertone. With the Trump family’s involvement in World Liberty Financial—a DeFi platform that recently announced plans to launch its own stablecoin—banks see a future where crypto could be more widely embraced under a potential second Trump presidency. This adds urgency to their efforts to innovate and remain competitive.
Could Bank-Backed Stablecoins Disrupt Crypto Issuers?
The threat is real, but it may be overstated—at least for now.
BitMEX founder Arthur Hayes suggested that the emergence of a U.S. bank-backed stablecoin could spell the beginning of the end for crypto-native issuers like Circle (USDC) or Tether (USDT). However, this perspective overlooks a crucial detail: accessibility.
Unlike USDC or USDT, which are available globally and require little more than a crypto wallet, a U.S. bank-issued stablecoin will almost certainly come with strings attached—namely, the need for a U.S. bank account. This introduces a layer of compliance and friction that could limit the token’s global appeal.
Moreover, crypto stablecoins have built a massive liquidity moat. As of May, stablecoin liquidity reached a record $220 billion, reflecting deep integration with DeFi platforms, centralized exchanges, and fintech apps worldwide. For banks just entering the space, replicating this kind of ecosystem will be no small feat.
Stablecoins Poised for $2 Trillion Market by 2028
Despite these hurdles, traditional banks are clearly betting on the long game. A recent study by U.S. Treasury researchers predicted that the global stablecoin market could explode to over $2 trillion by 2028—a more than eightfold increase from today’s levels.
This projection hinges on the increasing use of stablecoins for payments, remittances, and decentralized finance applications, especially in regions with unstable currencies or high transaction costs. Banks see this growth as both an opportunity and a threat. Their challenge now is to build trust, efficiency, and utility in a sector that was, until recently, dominated by decentralized alternatives.
The WSJ notes that the joint stablecoin initiative is still in conceptual stages and could hinge heavily on how the GENIUS Act and other regulatory frameworks evolve. But if successful, this collaboration could finally bridge the gap between traditional finance and the digital asset economy.
A Collision Course or a Convergence?
The prospect of a unified, bank-backed stablecoin marks a critical moment in the financial industry’s long dance with crypto. For years, legacy institutions have dismissed or downplayed the threat of digital currencies. Today, they’re not just taking it seriously—they’re preparing to compete on crypto’s home turf.
Whether this results in a new era of centralized stablecoin adoption or merely a fragmented alternative to existing crypto tokens remains to be seen. But one thing is clear: Wall Street no longer sees stablecoins as a passing trend—they see them as a battle for the future of money itself.