Key Takeaways
- When major U.S. banks delivered quarterly results this week, executives were questioned about their stablecoin plans.
- Citi and Bank of America have all but acknowledged plans for bank-issued stablecoins.
- Meanwhile, JPMorgan and Morgan Stanley said they are looking into the technology, but haven’t decided the best way to adopt it yet.
Banks are actively exploring the adoption of stablecoins for payments. In earnings calls on Tuesday and Wednesday, executives at Citi and Bank of America (BoA) offered some of the industry’s strongest commitments to the technology yet.
Meanwhile, the leadership of JPMorgan and Morgan Stanley were also prompted to expand on their stablecoin plans when they presented to investors, but remained more tight-lipped about any potential rollout.
Big Bank Stablecoins Are Coming
The momentum behind bank-issued stablecoins has been building for years.
Recent interest follows the successful deployment of tokenized deposits, a closely related technology that was pioneered by JPMorgan, which launched JPM Coin in 2020.
While both rely on similar blockchain technology, stablecoins differ from tokenized deposits because they are mostly backed by treasuries rather than bank deposits.
Although there remains significant skepticism about bank-issued stablecoins, in the U.S. at least, major players appear to be moving ahead.
For Instance, in May, it was reported that a coalition of America’s largest banks had initiated early talks to develop a joint stablecoin.
Citi and Bank of America Stake a Flag in Stablecoins
In the first official acknowledgement that the bank is exploring the technology, on Tuesday, Citigroup CEO Jane Fraser said : “We are looking at the issuance of a Citi stablecoin.”
However, she suggested that tokenized deposits will take priority, noting that “we’re very active” in the space.
The following day, BofA CEO Brian Moynihan also fielded questions about the bank’s stablecoin plans.
“We will be there just like we were there when we moved from checks to Zelle,” Moynihan stated .
When asked to elaborate on different routes to adoption, he insisted there was space for the bank to issue its own coin, participate in a joint initiative, and embrace existing solutions.
This could lead to a “complex array” of stablecoins circulating, he acknowledged, but it will “hopefully not [be] complex to the customer,” he added.
JPMorgan and Morgan Stanley Still Looking for a Business Case
While Citi and Bank of America have all but confirmed that they intend to launch stablecoins, either individually or as part of a coalition, JPMorgan and Morgan Stanley are taking more of a wait-and-see approach for now.
“We are looking both at the landscape and the potential uses for our own client base,” Morgan Stanley CFO Sharon Yeshaya said on Wednesday.
But when it comes to the business case for banks, “it really is a little early to tell […] how stablecoins would necessarily play in,” she added.
Echoing Yeshaya’s sentiment, JPMorgan CEO Jamie Dimon said the bank is “going to be involved” in stablecoins. However, he remained uncertain about how banks could take advantage of the technology.
Yeshaya and Dimon’s comments tacitly acknowledge that while stablecoins may be profitable for Circle and Tether, the business model makes less sense for banks.
In an interview with CCN, Will Beeson, former Chief Product Officer at Standard Chartered’s tokenization venture, observed that every dollar banks invest in stablecoin reserves is one they have to remove from interest-earning bank deposits.
“On a pure net interest margin basis, it would seem to me like it would be less profitable than the existing model,” he said.
