JPMorgan, other major banks bet on Stablecoins

On May 21st Guiding and establishing national innovation for us Stablecoins (Genius) law Cleaned an important obstacle in the Senate and received the votes needed to proceed in the legislative process. Legislators voted to officially address the bill for debate and amendment and put it on a path to a final vote after the Memorial Day exit.

This is a major step for the proposed bill, as in its first vote, unsuccessful To get the majority it needed to move on. This caused the bill to stop when legislators were sent back to the board to make changes that could receive support from both parties.

However, the latest harvest of changes seemed enough to get the vote over the hump for this time, The Senate voted yes in a vote on 69-31And shortly after the bill advanced, the financial institutions wasted no time to jump on the Stablecoin band.

Large banks plan Stablecoin launch after the Senate Voice

Less than 24 hours after the bill advanced reported to jpmorgan chase (Nasdaq: JPM, Bank of America (Nasdaq: Bac), Citigroup (Nasdaq: c), Wells Fargo (Nasdaq: WFC), and other major commercial banks were in the very early stages of a conversation to merge to launch their own Stablecoin. It is suspected that the banks do this to compete with the crypto-in-born companies in terms of StableCoin products.

With a new administration in the White House, digital currency -related and adjacent business opportunities will have increased interest and Stablecoins Leads the fee. Although they have been around since about 2014, Stablecoins Got renewed popularity This year and shows up as a very profitable, relatively low risk product in the digital currency world. This is probably one of the most important reasons why both old and new players want to enter or increase their presence in the Stablecoin market.

Why banks are suddenly interested in Stablecoins

If a device launches a stablecoin in addition to being licensed and compatible, it must ensure that its stablecoins in circulation is 100% supported by cash or corresponding cash. Many StableCoin providers choose state taxes as their cash equivalents, which means that they will passively shave in the approximately 4% of the money they have stored in these T-Bills, thanks to the return on the T-billers. This may not sound like a lot, but if you work on a scale of several billion dollars, like some of the world’s largest Stablecoin suppliers, the passive income will be significant.

Until recently, only digital currency stalls were willing to venture into Stablecoins. Large banksAs those mentioned above, the pursuit saw as too risky, especially because it would mean they would work in unkind territory with unclear rulesWhich is usually not worth the risk in a very regulated industry such as banking and finance.

But Genius Act changes this. The Genius Act introduces extensive regulations for StableCoins that provides regulation guidance and monitoring for both those who want to issue Stablecoins and Stablecoin consumers, which effectively creates the StableCoin regulation that both digital assets and banks were looking for. Genius ACT gives these units trust, guidelines and a roadmap that allows them to do business legal and survivors.

Previously, the Top Use case for Stablecoins was to serve as a secure seaway for traders who want to avoid volatility. But with new Stablecoin legislation on the table, it looks like it is starting to change. Now StableCoin -issuers are looking to have their Stablecoins to be important infrastructures living in banking and financial institutions, mainly for Interbank residents, Payment paymentsRepo transactions and internal state operations. The StableCoin use case is investigated because StableCoin payments can usually be decided immediately at a much lower cost and can be facilitated around the clock, unlike their Tradfi alternatives, such as wire transfers and payments over the SWIFT network which has higher fees and fewer operating times.

Interestingly, this changes who the “customer” for Stablecoin is. With StableCoins as a safe sea, the large customer was digital asset exchange that needed Stablecoins for liquidity purposes in various commercial pairs. However, as a plumbing for the global financial system, the “customer” becomes banks, payment services and other financial institutions that must hold Stablecoins at hand to facilitate transactions or get the recipient in the transaction if they want to keep the balance in Stablecoin.

JPMorgan tried to make progress on this use case years ago with its JPM coin On its private blockchain called KINEXYS (formerly called Onyx), but it never really raised traction. Only JPMorgan clients could benefit from the JPM coin, which severely limited the product’s ability to grow. At that time, a lot of regulation related to digital assets and banks was unclear, so JPMorgan placed it as a decommissioning product rather than a crypto product. Product is still there and has been alleged Processed $ 2 billion in daily transactions in 2024, but it flies under the radar because it operates in JPMorgan’s Walled Garden.

But this is understandable because Stablecoins were “boring” at the time of the JPM coin’s launch and not so often talked about products if they were not algorithmic Stablecoins about to go bust. But now, with Genius Act on the table and the circle, the best Stablecoin supplier in the United States, making a series of features extending from announces that it would become public to Announces Circle Payments Network (CPN)A global payment system that runs on blockchain rails and discontinues payments with Stablecoins, banks are now rushing to offer a similar product.

Although there are risks, the financial benefits of using a Stablecoin-based payment rail are difficult to ignore. The two biggest benefits – faster settlement and lower costs – were not just marginal improvements; They are efficiency gains that can interfere with all banks working on the old rails. If a set of institutions moves money directly and cheaply, while the others are still waiting for management and pay fees to speed up, those who stick with the older system choose mainly inefficiency.

That is why we now see that the big banks are entering early conversations about launching their own Stablecoins and expanding their own networks. It is not about innovation as much as it is about survival; If they do not move, platforms such as Circle Payment’s network can be silently spun away at its market dominance.

Stablecoin -market will be crowded

Genius Act is not law yet, but the momentum is there, and the market is already reacting as if it is a clear deal. If Stablecoins really become plumbing for the financial system, players who move early will have an early advantage, while those who pull their feet will risk losing market shares for those who chose Stablecoin solutions.

However, I do not expect it to be completely smooth sailing for those who move early. Since Stablecoins are mainly interchangeable goods, with a digital dollar that works in the same way as another, the market is on track to reach a dilemma that we often see in commodity markets. With a handful of service providers in space, it does not matter if a bank uses USDC and Circle’s Payment Network or what the StableCoin conglomerate of large banks decides to create; Both will serve the same function.

This means that Stablecoin issuers and payment networks will have to offer more than quick solution and legislation. They will have to offer something extra, such as better integration with their existing systems, revenue sharing models or other benefits, to win business in what is forming to become an increasingly crowded, competitive market.

Watch: Richard Baker on Engineering a smarter financial world with blockchain

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