Some of the world’s largest banks and fintechs are rushing to launch their own stablecoins, aiming to grab a slice of a cross-border payments market they expect will be redrawn by cryptocurrencies.
Last month Bank of America signalled it was open to issuing its own coin, joining established payments providers such as Standard Chartered, PayPal, Revolut and Stripe in targeting a business dominated by cryptocurrency groups Tether and Circle.
Their enthusiasm has been fuelled by growing acceptance among regulators around the world that stablecoins, designed to hold a constant value of a dollar per coin, could become a more accepted part of the financial system.
That shift, after regulatory hostility to Meta’s Libra stablecoin six years ago, has been given further impetus by US President Donald Trump’s fervent embrace of cryptocurrencies.
“It’s about people selling shovels in the stablecoin gold rush,” said Simon Taylor, co-founder of fintech consultancy 11: FS, who likened it to FOMO, or fear of missing out.
“The other thing that’s driven it is there’s real volume,” he said. “Founders want to get a piece of it because they know they’re going to get stablecoin regulation and so it’s all of those things coming together.”
Although stablecoins have typically been used to shift money between differing cryptocurrencies, they are growing in popularity in emerging markets as an alternative to local banks for payments, particularly in commodities, agriculture and shipping.
They are a type of private digital cash that acts as a de facto reserve of a sovereign currency, overwhelmingly US dollars, and payments in digital coins allow companies and consumers to cheaply and instantly access hard currency outside the banking system.
There are about $210bn of stablecoins issued globally, with about $142bn printed by El Salvador-based Tether and $57bn by the US’s Circle, branded as USDT and USDC respectively.
Elon Musk’s SpaceX uses them to repatriate funds from selling Starlink satellites in Argentina and Nigeria, while ScaleAI offers its large workforce of overseas contractors the option of being paid in digital tokens.
Transaction volumes climbed to $710bn last month, compared with $521bn in the same period a year ago while the number of unique stablecoin addresses has risen to 35mn, up 50 per cent, over the same period, according to data from Visa.
Large banks are growing increasingly confident pushing into the industry as regulations emerge. US politicians are debating bills in Congress that set out standards for stablecoins, giving banks, companies and ordinary consumers more confidence to use the tokens.
“If they make that legal, we will go into that business,” commented Brian Moynihan, chief executive of Bank of America, on the Trump administration plans at the Economic Club of Washington last month.
The EU introduced rules at the start of the year that required stablecoin operators in the bloc to be compliant. The UK financial regulator is planning to consult the market this year.
Standard Chartered said last month it will lead a venture planning to launch a Hong Kong dollar-backed token, under new incoming stablecoin regulations in the territory.
Underscoring the momentum, last month US group Stripe closed its largest acquisition to date with the $1.1bn purchase of stablecoin platform Bridge.
“Stablecoins and the more modern chains are really interesting for the payments use case, and that makes up our business,” said co-founder and president John Collison. The $91.5bn financial technology company processed $1.4tn in payments last year.
PayPal — which already has a stablecoin named PYUSD that is pegged to the dollar — plans to roll out the payment option more widely in 2025, and expects take-up to be particularly strong among US businesses paying suppliers abroad.
“OK. I give up. Klarna and me will embrace crypto! More to come . . . Last large fintech in the world to embrace it. Someone had to be last. And that’s a milestone as well of some sort,” Sebastian Siemiatkowski, chief executive of ‘buy now, pay later’ lender Klarna, wrote on the X social media platform last month.
Even so, the new entrants face an uphill battle to establish themselves. PayPal has enacted just $163mn of transactions this month compared with just over $131bn at Tether, Visa data shows.
Last month there were about 122mn transactions that took place globally using stablecoins, Visa said. Yet an average 829mn transactions a day took place on the credit card provider’s own network.
Martin Mignot, a partner at Index Ventures and backer of Bridge — said stablecoins were “attractive” in markets that lack “great infrastructure or great liquidity and have a lot of currency risk”. However, their use cases were “not as obvious” in western markets, he added.
Analysts also warned that the market was unlikely to be able to sustain dozens of coins as users begin to scrutinise the quality of the companies issuing them.
11: FS’s Taylor pointed out that stablecoins were not cash, but only substitutes for it, and reflected the credit risk of the issuing company, as well as its ability to manage the operational risks of running a stablecoin.
“Essentially what the brand of the stablecoin tells you is that this is who the issuer is,” he said. “Therefore, because the issuer is that organisation, your credit risk is X or Y. That’s not something you do with the dollar.”
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