Banks around the world are gearing up to compete with market leader Tether Holdings in the stablecoin sector, as the prospect of billion-dollar profits from digital currencies drives them to integrate blockchain technology into financial products, reports Bloomberg.
The implementation of the Markets in Crypto-Assets Regulation (MiCA) in Europe and Tether’s decision to halt the issuance of its stablecoin EURt have opened new opportunities for competitors. French banking giant Societe Generale, through its subsidiary SG-Forge, recently made a euro-backed stablecoin available to retail investors. Other banks, such as Oddo BHF SCA and Revolut, are also planning to launch euro-denominated stablecoins. Projects involving Deutsche Bank, like AllUnity, and Spanish bank BBVA intend to introduce their stablecoins in 2025.
Visa also launched a tokenization network in October, collaborating with BBVA on a pilot project in 2025 and negotiating with banks in Hong Kong, Singapore, and Brazil. “We are actively working with a range of banks at different stages of the process,” says Kai Sheffield, head of Visa’s cryptocurrency department.
For banks, there is a significant financial incentive to enter the stablecoin market. As Tether is expected to end 2024 with a net profit exceeding $10 billion, demonstrating the profitability of digital assets. However, the European Central Bank warns that transferring retail deposits into stablecoins could weaken banks' liquidity coverage ratios. Meanwhile, U.S. regulators must establish reserve and deposit insurance requirements for stablecoins to avoid customer confusion.
Despite the opportunities, not all banks are convinced of the necessity to issue stablecoins. Gibraltar-based crypto-friendly bank Xapo has decided against launching a stablecoin, citing Tether’s dominance. Instead, the bank allows customers to deposit stablecoins into savings accounts.
As banks intensify their efforts in the stablecoin space, they will need to balance consumer demand, financial stability, and regulatory requirements. With major players like Visa and JPMorgan driving innovation, the stablecoin market holds significant growth potential for the upcoming year.