Banks Fought Against Stablecoins. Now They Are Considering Launching Their Own. — WSJ

By Gina Heeb and Vicky Ge HuangBanks large and small have started to warm up to the idea of their own stablecoins, despite early doubts from some executives that there will be much demand for them.Some bank executives over the past year had shrugged off the need for stablecoins and the industry waged a lobbying battle against crypto firms that wanted to offer stablecoins that would act like bank deposits. Instead, banks banded together to launch a tokenized deposit system as an answer to the rapid changes in the world of payments.Stablecoins are digital tokens pegged to the U.S. dollar or other currencies, while tokenized deposits are just traditional money represented as digital tokens.But now a number of banks have started to consider whether there could be a need for both, even if only as a defensive play, as some executives worry stablecoins could encroach on their businesses. Big nonbank companies such as Visa, BlackRock, Google and DoorDash have moved to get involved in the stablecoin market, which has been dominated by Tether and Circle.JPMorgan Chase recently evaluated whether it could launch its own stablecoin, according to people familiar with the matter. Those conversations have been preliminary and there is no active product under way, another person said. The largest U.S. bank already has a tokenized deposit called JPM Coin and its own blockchain."While we have no plans to issue a stablecoin, depending on customer demand and the evolution of the regulatory landscape, we would of course evaluate all options in the future," a JPMorgan spokeswoman said.Many banks are focused on joint ventures, though some could end up both in consortia and with stablecoins of their own.A group of more than a dozen financial institutions including Bank of America, Wells Fargo and Santander has been moving forward on a stablecoin venture that would reach across the globe, according to people familiar with the matter.The banks have discussed plans for a stablecoin that would be focused on the commercial side of their businesses and cover the dollar, followed by the euro and eventually other Group of Seven currencies, according to some of the people, with use cases that could vary by region.Smaller banks are working on similar initiatives, too. On Tuesday, a consortium of state bankers associations unveiled their plans to launch a blockchain platform built for, owned and governed by banks. Inspired by the Federal Home Loan Bank model, the platform is meant for banks of all sizes. Currently, some 39 state bankers associations representing about 3,000 banks are involved in the effort.Called the BankChain Alliance, the tech platform would be used for treasury management, supply-chain finance and cash management. It is expected to launch in the first half of 2027 and support both tokenized deposits and stablecoins."That is definitely part of our vision in terms of making sure that we're providing the services and capabilities that banks would want to take advantage of," said Kathy Kraninger, interim chair at the BankChain Alliance and chief executive of the Florida Bankers Association.Crypto firm Anchorage Digital is seeing more than a dozen stablecoin projects in its pipeline, with a subset of those coming directly from banks and banks-led consortia, according to CEO Nathan McCauley.Banks have been in a heated battle with the crypto industry over whether stablecoins can offer rewards to holders. Banks have argued that yield could trigger deposit flight from banks and fought against it in the Clarity Act, a landmark measure intended to establish the first comprehensive regulatory framework for all digital assets.Major banks announced this year plans to launch a tokenized deposit network, The Wall Street Journal previously reported. Banks tend to favor tokenized deposits over stablecoins because they are simply traditional bank deposits represented as digital tokens on the blockchain.That means tokenized deposits retain the same credit-risk profile, regulatory expectations and accounting treatments, making it easier for banks to offer blockchain-based payments within an existing regulatory framework. They also keep deposits within the banking system.Proponents of stablecoins say they are designed to move seamlessly across different public blockchains like Ethereum and Solana. Tokenized deposits typically are issued on private blockchains or walled gardens where one bank's network isn't necessarily connected to that of another bank.Critics say there aren't strong use cases for stablecoins, which lack the type of insurance that bank deposits have, with some calling them a solution looking for a problem."If the desire is to have programmable money, then tokenized deposits seem to have the potential to solve that problem without requiring a whole new financial architecture," said Aaron Klein, a senior fellow at the Brookings Institution.More crypto firms are seeking to become banks themselves. Recently, World Liberty Financial, the Trump family's flagship crypto venture, said its trust company received preliminary conditional approval from the Office of the Comptroller of the Currency, or OCC, to become a bank. Upon final approval, World Liberty Trust will issue, redeem and safeguard USD1, the $4 billion dollar-backed stablecoin that World Liberty launched last year."It is becoming ordinary course to involve and integrate payment stablecoins, etc., in the business plans that we are now seeing presented to the OCC for consideration," Jonathan Gould, the head of the OCC, said at the Wyoming Blockchain Symposium in Jackson Hole, Wyo., last week.Write to Vicky Ge Huang at [email protected] and Gina Heeb at [email protected]