A Bank of America logo is seen on the entrance to a Bank of America financial center in New York City, U.S., July 11, 2023. REUTERS/Brendan McDermid
PARIS/LONDON (Reuters) -Ten major banks including Bank of America, Deutsche Bank, Goldman Sachs and UBS are jointly exploring issuing a stablecoin, the latest sign of traditional finance seeking to get to grips with the growth of digital assets.
The group of lenders, which includes Citi, MUFG, Barclays, TD Bank, Santander and BNP Paribas, will work together to explore creating blockchain-based assets pegged to G7 currencies, the banks said in a statement on Friday.
The project, which is in its early stages, will explore whether there is value in issuing assets on public blockchains which are pegged 1:1 to real-world currencies - a type of cryptocurrency known as stablecoins.
"The objective of the initiative is to explore whether a new industry-wide offering could bring the benefits of digital assets and enhance competition across the market, while ensuring full compliance with regulatory requirements and best practice risk management," the banks said.
CRYPTO RALLY, TRUMP AID INTEREST IN STABLECOINS
Various banks and other financial institutions have announced plans to look at launching stablecoins, as soaring crypto prices and U.S. President Donald Trump's support for the sector has sparked a revival of interest in the idea of using blockchain in the mainstream financial system.
Regulators and financial stability authorities have expressed concern that stablecoins could facilitate the movement of funds outside regulated banking systems, potentially undermining the role of commercial banks in global payment flows.
Bank of England Governor Andrew Bailey has warned UK banks against issuing their own stablecoins, while the European Central Bank President Christine Lagarde said in June that privately issued stablecoins posed risks for monetary policy and financial stability.
So far stablecoins have been largely used for moving money between crypto markets, which remain a small part of wider financial markets. Nearly nine-tenths of stablecoin transactions are related to crypto trading while just 6% for actual payment of goods or services, BCG estimated in a report earlier this year.
The market is dominated by the El Salvador-based Tether, which accounts for $179 billion of the $310 billion worth of stablecoins in circulation, according to CoinGecko.
France's Societe Generale, which was not included in the list, became the first major bank to issue a dollar-backed stablecoin through its digital asset subsidiary earlier this year. The token has not been widely adopted, with just $30.6 million in circulation.
RIVAL CONSORTIUM OF BANKS LAUNCHING A EURO STABLECOIN
A separate consortium of nine European banks including heavyweights ING and UniCredit, said last month they were forming a new company to launch a euro-denominated stablecoin.
Some bank bosses say they see greater promise in the tokenisation of financial assets, in which digital representations of assets such as deposits, stocks and bonds are created and stored on a blockchain. Citi's CEO said in July that tokenised deposits were probably more important than a stablecoin.
Many such projects remain in the pilot phase and executives said last year that efforts to tokenise assets were moving more slowly than expected.
(Reporting by Elizabeth Howcroft and Tommy Reggiori Wilkes, Editing by Louise Heavens)
