Driven by increasing regulatory clarity and market demand, banks across the United States and Europe are stepping up their efforts to issue stablecoins. The introduction of the European Union's Crypto Asset Market Regulation (MiCA) and growing global interest in blockchain-based payment solutions have prompted traditional financial institutions to compete with established crypto companies such as Tether Holdings.
Many European banks have begun deploying their own stablecoins to grab market share that could earn billions of dollars in profits each year. SG-Forge, the digital asset subsidiary of Societe Generale, has now opened its euro stablecoin to retail investors. Similarly, Frankfurt's Oddo BHF SCA and London's Revolut are also considering launching euro stablecoins, while AllUnity, another issuer backed by Deutsche Bank's asset management unit DWS, is also expected to launch its euro stablecoin in 2025.
Jean-Marc Stenger, CEO of SG-Forge, said that more banks will adopt bank-issued stablecoins. SG-Forge is currently in discussions with about ten banks as potential partners or users of SG-Forge's stablecoin issuance technology.
Similarly, global payment technology company Visa Inc. is working with banks such as BBVA to create stablecoin solutions using blockchain. Cuy Sheffield, head of cryptocurrency at Visa, said the company is currently in talks with institutions in Hong Kong, Singapore and Brazil.

In the United States, as the regulatory environment is being discussed, some banks such as JPMorgan Chase have begun testing blockchain-based payment systems. Although JPMorgan Chase has used its deposit token JPM Coin in internal transfers, it does not have the open connectivity unique to stablecoins, that is, it can be accessed through any crypto wallet.
Naveen Mallela, co-head of Kinexys, JPMorgan Chase’s digital asset unit, said he expects JPM Coin to gain more market acceptance in the next three years, noting that stablecoins and tokenized deposits can go hand in hand as different payment methods.

However, there are still some issues that could be problematic for U.S. banks. It’s unclear what types of reserves could back stablecoins and whether those deposits would qualify for federal insurance, issues that could cause some confusion during times of financial turmoil.
The MiCA regulation, which will come into force on December 30, 2024, is a major milestone for stablecoin issuers in Europe. MiCA ensures that stablecoin providers have the appropriate licenses to offer services in the EU and sets out some guidelines on reserve management and investor protection. Circle’s USDC has been approved under MiCA and can now be used more widely across the region. However, market leader Tether Holdings has not mentioned plans to obtain a license for its euro stablecoin. Experts say this could open up the possibility for banks and their competitors to enter the space.
Meanwhile, the European Central Bank has expressed concerns about the potential impact of stablecoins on the traditional banking sector, with a recent ECB study finding that converting retail deposits into stablecoins could erode banks’ liquidity coverage ratios.

While commercial banks are beginning to issue stablecoins, central banks are also actively developing CBDCs. These government-backed digital currencies could eventually compete with or replace bank-issued stablecoins in wholesale payment systems.
Avtar Sehra, CEO of Libre Capital, noted: "Everyone is exploring some form of commercial bank digital currency. But many may prefer consortium coins." Several banks are reportedly considering forming an alliance to create a shared blockchain-based token to achieve greater interoperability and efficiency. (CoinGape)