Wall Street’s biggest financial institutions are moving to build a US dollar-backed stablecoin, seeking to protect their customer relationships as digital currencies threaten to divert hundreds of billions of dollars from traditional bank deposits.
Twenty-one major banks and financial companies, including Bank of America, Citi, Goldman Sachs and Wells Fargo, announced on 1 September that they intended to establish a company in the second half of 2026. The planned stablecoin would be launched in the first half of 2027 and designed to comply with both the GENIUS Act and MiCA.
The project began in October 2025 as an investigation by 10 banks into reserve-backed digital money. It has since expanded to include institutions from North America, Europe, Asia, Africa and the Middle East.
The proposed token could be used for wholesale and institutional transactions, international payments, digital-asset settlement and retail services where customers could benefit from faster or more efficient transfers.
The move follows a warning from Standard Chartered, which estimated in January that stablecoins could remove about $500bn from US bank deposits by the end of 2028.
Regional banks were considered particularly vulnerable because their business models rely heavily on the difference between the interest paid to depositors and the income generated from loans.
Traditional deposits provide banks with the funds required for lending and other balance-sheet activities. Stablecoins, by contrast, are fully backed digital tokens whose reserves are held in cash, bank deposits and short-term government securities. US Treasury securities account for most of the reserves supporting Tether and Circle’s tokens.
A dollar transferred from a conventional bank account to a stablecoin may retain the same practical value, but the move can change who owns the relationship with the customer, who benefits from the reserves and which payment system processes the transaction.
That is the risk highlighted by Standard Chartered. Even if the stablecoin is issued by a bank, moving money out of a traditional deposit and into a fully reserved token reduces the bank’s conventional funding base.
Issuing its own stablecoin could nevertheless allow a bank to retain other parts of the relationship, including customer distribution, compliance services, settlement operations and some of the income generated by reserve assets.
The strategy suggests banks are willing to accept some cannibalisation of their existing deposit business rather than allow crypto-native competitors to take control of the entire customer relationship.
A rapidly expanding market
The total stablecoin market is currently worth about $303.7bn, according to DefiLlama. Tether’s USDT accounts for more than 60% of that total.
Citi’s research has forecast a base case of $1.9tn in stablecoin issuance by 2030, with a more optimistic scenario reaching $4tn. Based on today’s market size, that would mean an additional $1.6tn to $3.7tn of issuance.
The bank’s base forecast also estimates annual stablecoin transaction activity at close to $100tn, assuming the tokens circulate at a velocity of 50 times. Its bullish projection puts annual activity nearer $200tn.
The banking consortium is therefore seeking access not only to the stablecoins already issued by Tether and Circle, but to a much larger future market in issuance and payments.
Citi, which produced one of the sector’s most ambitious growth forecasts, is also helping to create a business capable of competing for a share of that expansion. Its projection is being treated as a commercial opportunity rather than simply a market estimate.
The initiative does not mean banks are abandoning tokenised deposits in favour of stablecoins operating on public blockchains. Citi’s research anticipates that stablecoins, tokenised deposits, deposit tokens and central bank digital currencies will all exist alongside one another.
It also expects transactions involving bank-issued tokens to exceed stablecoin turnover by 2030, even while the total supply of stablecoins continues to grow.
The broader strategy is for banks to maintain exposure to every plausible form of digital dollar. The competitive field is already dividing according to currency, structure and issuer. Qivalis, a separate consortium of 37 institutions, is developing a euro-pegged stablecoin.
The GENIUS Act is due to take effect on whichever comes first: 18 months after its enactment in July 2025, which would be 18 January 2027, or 120 days after federal regulators complete the implementing rules.
The consortium’s target launch in the first half of 2027 falls close to that deadline. The legislation has provided existing stablecoin issuers with greater regulatory certainty while also creating a clear route for heavily regulated banks to enter the market.
For incumbent banks, a compliance milestone could therefore become a competitive opening.
Distribution remains the challenge
The performance of Societe Generale’s dollar-backed stablecoin offers a warning. The token had only $12.5m in circulation.
Regulatory credibility and institutional backing alone do not guarantee the activity needed to make a stablecoin successful. Issuers must also develop minting volume, secondary-market liquidity, exchange listings, wallet compatibility and demand from merchants.
Tether and Circle spent years building those distribution networks. A group of banks cannot reproduce them simply by announcing a new product.
In the most optimistic outcome, stablecoins could approach Citi’s $4tn forecast and bank-backed tokens could become one of several major forms of digital money used in payments, treasury management and settlement.
That scenario would turn the movement of deposits into a significant structural funding challenge for banks that failed to participate. The institutions involved in the consortium would instead gain settlement charges, custody relationships and reserve income from a market many times larger than the one that exists today.
The pessimistic outcome is that the banks create a compliant and well-capitalised stablecoin but fail to attract enough liquidity. That would repeat the pattern seen with Societe Generale’s token.
If stablecoins remain a niche product, pressure on bank deposits would be limited. The 21 institutions could then spend years and substantial capital developing infrastructure that crypto-native issuers and tokenised-deposit providers continue to outperform in terms of usage.
After warning that stablecoins could weaken part of their traditional business, banks are now attempting to ensure that, if dollars continue moving on programmable digital networks, some of the largest names in banking will control those networks.
Gino Matos is a law school graduate and journalist with six years of experience covering the crypto industry, with a particular focus on the Brazilian blockchain sector.
Liam Wright, also known as “Akiba”, is a reporter, podcast producer and Editor-in-Chief at CryptoSlate. He believes decentralised technology has the potential to make a significant impact.
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