Traditional banks, including Societe Generale, Standard Chartered, and Revolut, are making moves to compete in the stablecoin space, challenging Tether’s long-standing dominance.
With Tether discontinuing its euro-backed stablecoin, EURt, financial institutions see a chance to capitalize on the market void and tap into the lucrative opportunities digital currencies offer.
Banks seize the stablecoin opportunity
Tether Holdings, the issuer of the widely popular USDT stablecoin, has long held the top spot in the global stablecoin market. However, the company recently announced it would cease operations of EURt, citing compliance challenges under Europe’s new Market in Crypto-Assets (MiCA) regulations. Launched in 2016, EURt failed to gain significant market traction, with its capitalization dwindling to just $37 million compared to USDT’s robust $138 billion.
With EURt out of the picture, banks such as Societe Generale-Forge (SG-Forge) have wasted no time stepping in. SG-Forge recently launched its Euro CoinVertible (EURCV), a euro-backed stablecoin that is now available to retail investors. Other major players like Oddo BHF, BBVA, and Revolut are exploring similar projects, while AllUnity has announced plans to roll out a euro-based stablecoin next year.
The MiCA regulatory framework has given banks a more straightforward pathway to issue stablecoins, creating a competitive environment that Tether now has to navigate. Industry insiders note that some banks are already exploring partnerships and licensing deals for existing stablecoin technologies to fast-track their entry into the market.
Global players join the stablecoin push
The stablecoin rush isn’t limited to Europe. U.S. banks are holding back due to the lack of regulatory clarity, but global players are charging ahead. Visa, for instance, has launched a tokenization platform designed to simplify stablecoin issuance. Banks like BBVA are piloting Visa’s solution, with institutions in Singapore, Brazil, and Hong Kong also showing interest.
Meanwhile, Standard Chartered has entered the scene by partnering with Animoca Brands and Hong Kong Telecommunications to issue stablecoins pegged to the Hong Kong dollar. JPMorgan Chase is exploring deposit tokens as an alternative to stablecoins, although these come with limitations that stablecoins can overcome by leveraging blockchain technology.
Challenges and competition
Despite growing interest, stablecoins pose challenges for banks. A European Central Bank report suggests that converting retail deposits into stablecoin reserves could weaken liquidity coverage, making banks vulnerable during financial stress. In the U.S., regulators must address concerns over acceptable reserves and whether stablecoin deposits will be insured.
Central Bank Digital Currencies (CBDCs) also present a competitive threat, particularly for use cases like wholesale payments. However, the potential profitability of stablecoins, demonstrated by Tether’s $10 billion in net profits, continues to drive banks toward this evolving market.