Major banks investigate G7 stablecoin
Ten major banks, including Bank of America, Deutsche Bank, Goldman Sachs, and UBS, are collaborating on the possible development of a stablecoin pegged to the currencies of the G7 nations. The initiative illustrates the growing interest of the traditional financial sector in digital assets.
The group, which includes Citi, MUFG, Barclays, TD Bank, Santander, and BNP Paribas, aims to examine the value of blockchain-based assets. Specifically, these are stablecoins that are backed 1:1 by real currencies.
The project is still in its early stages. The objective is to determine whether a new sector can capitalise on the benefits of digital assets while also promoting competition and ensuring compliance with regulations and best practices for risk management.
The growing interest in stablecoins is fueled by factors such as the rising price of cryptocurrencies and support from figures like President Donald Trump, who has advocated for the integration of blockchain technology into the financial system.
However, regulators and financial authorities have raised concerns that stablecoins could facilitate transactions outside regulated banking systems, potentially undermining the role of commercial banks in global payment flows. Andrew Bailey, governor of the Bank of England, for example, warned British banks about issuing their own stablecoins. Christine Lagarde, president of the European Central Bank, has also pointed to the potential risks that privately issued stablecoins pose to monetary policy and financial stability.
At present, stablecoins are mainly used for transferring money within crypto markets, which still make up a relatively small part of the wider financial landscape. A BCG report estimates that about 90% of stablecoin transactions are related to the exchange of cryptocurrencies, while only 6% are used for paying for goods and services. The El Salvador-based Tether dominates the market, accounting for a significant share of the $310 billion (€267 billion) in stablecoins currently in circulation.
Exploring alternatives
Despite these concerns and the dominance of existing players like Tether, other financial institutions are considering issuing their own stablecoins. Earlier this year, Société Générale became the first major bank to launch a dollar-backed stablecoin through its digital assets subsidiary. However, adoption has so far remained limited.
A consortium of nine European banks, including ING and UniCredit, plans to establish a new entity to launch a euro stablecoin.
Some bank executives believe that the tokenisation of traditional financial assets is more promising than stablecoins. The CEO of Citi suggested in July that tokenised deposits are likely to be more important than stablecoins. Although there are many projects involving tokenized assets, most are still in the pilot phase. According to industry leaders, progress is moving slower than expected.
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