US and EU Banks Accelerate Stablecoin Plans Amid Regulatory Progress

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As a seasoned researcher who has closely followed the evolution of blockchain and digital currencies for over a decade, I find myself both intrigued and cautiously optimistic about the recent moves by European banks to enter the stablecoin market. The convergence of regulatory clarity and market demand is indeed a powerful catalyst for innovation, but it’s important to remember that this is still largely uncharted territory.

As a crypto investor, I’ve noticed an exciting development: Banks across the USA and Europe are aggressively working on launching their own stablecoins, driven by clearer regulations and growing market appetite. This could signal a significant shift in the financial landscape!

As a result of the European Union’s implementation of the Markets in Crypto-Assets Regulation (MiCA) and increasing worldwide curiosity in blockchain-driven payment methods, conventional financial organizations are now finding themselves in competition with well-established cryptocurrency companies like Tether Holdings.

European Banks Enter Stablecoin Market

Several European financial institutions are jumping into the market of stablecoins – digital currencies pegged to a stable asset like the Euro – as they aim to tap into the potentially lucrative profits estimated in the billions yearly. Recently, Societe Generale Forge (SG-Forge), based in France, made its Euro-linked stablecoin available for individual investors. Similarly, Oddo BHF SCA from Frankfurt and Revolut based in London are planning to introduce their own Euro stablecoins, while AllUnity, a consortium backed by Deutsche Bank’s asset management arm DWS, plans to launch its Euro stablecoin in 2025.

Jean-Marc Stenger, CEO of SG-Forge, has indicated that a growing number of banks are expected to adopt bank-issued stablecoins based on his statements. In other words, when asked about the matter, he replied affirmatively. At present, SG-Forge is engaged in talks with approximately ten banks who may potentially serve as partners or users of SG-Forge’s stablecoin issuing technology.

Likewise, just as Visa Inc., a worldwide leader in digital payments, collaborates with banks like BBVA to develop a stablecoin solution using blockchain technology, so too does Visa engage in discussions with financial institutions in Hong Kong, Singapore, and Brazil regarding this innovative project. This is according to Cuy Sheffield, the head of crypto at Visa.

US Banks Await Regulatory Green Light

In the U.S., banks are eager for legislative modifications allowing them to issue stablecoins, as the regulatory landscape evolves. Institutions like JPMorgan Chase are already experimenting with blockchain-based payment systems. While JPMorgan has utilized its deposit token, JPM Coin for internal transfers, it doesn’t have the same universal accessibility that open-source stablecoins offer, which can be accessed via any cryptocurrency wallet.

Naveen Mallela, a co-head of JP Morgan’s digital assets division Kinexys, predicts that digital assets will become more widely accepted in the upcoming three years. He emphasized that stablecoins and tokenized deposits could function concurrently as distinct forms of payment options.

Despite progress, there remain some challenging matters regarding US banks and stablecoins. Specifically, it’s unclear which reserve types can back stablecoins, and whether these deposits qualify for federal insurance. It’s crucial not to ignore these issues as they could potentially create confusion during financial upheavals, as experts warn.

MiCA Brings Stablecoin Regulatory Clarity in Europe

The enactment of MiCA marks a significant step for stablecoin issuers within Europe, as it is set to be implemented by December 30th, 2024. Essentially, MiCA mandates that stablecoin providers secure appropriate licenses to operate within the EU and establishes rules regarding reserve management and investor protection.

1/ MiCA is here! Starting Dec 30, 2024, the EU’s groundbreaking crypto regulation takes effect.

What does this mean for crypto providers, stablecoins like $USDT and $USDC, and investors?

Let’s break it down

— Fefe Demeny (@FefeDemeny) December 28, 2024

Circles USDC digital currency, which is tied to the U.S. dollar and complies with European Union regulations, has been given the green light under MiCA and can now be widely utilized across the region. In contrast, Tether Holdings, currently leading the market, have not disclosed any plans for acquiring a license for their Euro-pegged stablecoin. This potential absence could pave the way for banks and competitors to enter this specific market niche.

Currently, the European Central Bank has voiced worries over how stablecoins might affect conventional banking systems. A study conducted by the ECB suggested that if retail deposits were converted to stablecoins, it could lessen a bank’s ability to maintain its liquidity coverage ratio.

Central Banks and Consortium Coins

As private banks start to release stable digital coins, central banks are aggressively working on creating central bank digital currencies (CBDCs). These digitized versions of traditional money supported by the government may one day challenge or even replace privately issued stablecoins within large-scale financial transactions.

According to Avtar Sehra, CEO of Libre Capital, it seems that everyone is investigating some kind of digital currency offered by commercial banks. However, some might find themselves more drawn towards consortium coins, which are essentially shared cryptocurrencies created through collaborations between multiple banks for enhanced compatibility and efficiency. Reports indicate that several financial institutions are contemplating the formation of partnerships to develop such blockchain-based tokens.

Simultaneously, Ripple‘s new stablecoin, RLUSD, which launched on December 16, 2024, rapidly gained popularity in the worldwide cryptocurrency market. Notably, the RLUSD has recently been added to Independent Reserve, a licensed digital currency exchange based in Singapore.

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2024-12-28 20:32