U.S. and EU Banks Accelerate Stablecoin Efforts Amid Growing Regulation and Demand

In Brief:

Banks in the U.S. and Europe are fast-tracking stablecoin issuance, driven by increasing regulatory clarity and market demand.

Major players like Societe Generale's SG-Forge and Visa are advancing euro and blockchain-based stablecoin solutions.

The upcoming MiCA regulation in the EU is set to reshape stablecoin operations, enhancing investor protection and reserve management.

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As demand for blockchain-based payment systems rises, banks in Europe and the U.S. are intensifying their efforts to issue stablecoins, seeking to rival crypto giants like Tether Holdings.

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In Europe, the imminent implementation of the Markets in Crypto-Assets (MiCA) regulation on December 30, 2024, provides a clear framework for stablecoin issuers, requiring licenses and proper reserve management.

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• Societe Generale's SG-Forge has launched a euro stablecoin for retail investors and is collaborating with 10 banks to scale its stablecoin issuance technology.
• Other European institutions, including Oddo BHF SCA and Revolut, are exploring euro stablecoin offerings, while AllUnity, backed by Deutsche Bank, plans to launch a euro stablecoin by 2025.

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Meanwhile, global payment leader Visa is working with banks like BBVA to develop blockchain-powered stablecoin solutions. Visa is also negotiating with institutions in Hong Kong, Singapore, and Brazil to expand these offerings.

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In the U.S., banks such as JPMorgan Chase are testing blockchain payment systems, with its JPM Coin being used for internal transfers. However, unlike traditional stablecoins, JPM Coin lacks open wallet accessibility, limiting its broader adoption.

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Market Opportunities and Challenges

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• The MiCA regulation marks a milestone for stablecoin regulation in Europe, creating opportunities for banks to compete with crypto-native companies like Circle and Tether.
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• USDC has already secured MiCA approval, enabling expanded use in Europe. Meanwhile, Tether has yet to announce plans for a euro stablecoin license, leaving room for new entrants.
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• The European Central Bank (ECB) raised concerns over the impact of stablecoins on traditional banks, noting that converting retail deposits to stablecoins could weaken banks' liquidity coverage.
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Simultaneously, Central Bank Digital Currencies (CBDCs) are being developed globally and could compete with bank-issued stablecoins in the future, especially for wholesale payments.

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