The banks are eager to issue stable coins, eyeing Tether's billions in profits.

The stable coin USDT, the "needle of stability" in the crypto world, is quietly disrupting the traditional financial industry. More and more banks are starting to get involved in the stable coin market. According to Bloomberg, banks such as Industrial Bank of France, Oddo BHF of Germany, Revolut of the UK, and even the Hong Kong Monetary Authority are all beginning to enter the stable coin market, hoping to get a share of the pie. Previously, the world's largest stable coin issuer Tether Holdings Ltd. projected that net profits would exceed $10 billion by 2024. Tether CEO Paolo Ardoino stated in an interview that the company has already invested more than half of its net profits this year. Naveen Mallela, Co-Head of Kinexys at JPMorgan's digital assets division, predicts that in the next three years, bank-issued stable coins will accelerate in development and become mainstream products. With the improvement of policy frameworks and technological advancements, stable coins are expected to become an integral part of the future financial markets. Financial institutions are actively exploring stable coin issuance. Faced with such a tempting opportunity, banks are not sitting still. In Europe, financial institutions are actively exploring the issuance of stable coins. Industrial Bank of France's subsidiary Forge has already introduced a euro-backed stable coin to retail investors. At the same time, banks like Oddo BHF SCA are also developing euro-denominated versions, and London-based Revolut is considering issuing its own stable coin version. One driving factor of this trend is the clarity brought by the European Commission's Markets in Crypto-Assets Regulation (MiCA). Additionally, Tether's decision to stop issuing its EURt stable coin has provided an opportunity for other banks in the market. CEO of SG-Forge, Jean-Marc Stenger, mentioned in an interview that they are currently in talks with multiple banks about using their stable coin, and are discussing collaborations with around 10 banks for white-label technology licensing to allow these banks to issue their own stable coins. Not only in Europe, Visa is also actively promoting the development of stable coins globally. Visa launched a tokenized network for banks to issue stable coins in October and plans to conduct a pilot with BBVA in 2025. Visa's head of cryptocurrency, Cuy Sheffield, revealed that banks from Hong Kong, Singapore, and Brazil have shown strong interest in stable coins, and Visa is partnering with numerous global banks. Standard Chartered Bank is also actively involved, being selected as one of the first issuers of the Hong Kong dollar stable coin by the Hong Kong Monetary Authority, planned to be launched in 2025. Global Head of Digital Assets at Standard Chartered Bank, Rene Michau, stated that this initiative will further strengthen the role of blockchain in the payment sector, with the bank hoping to launch stable coins in 2025. Risks and challenges of stable coin issuance Compared to the deposit tokens that large banks like JPMorgan are exploring, stable coins have a wider range of applications. Deposit tokens can typically only be transferred between customers of the same bank, while stable coins can be purchased and used by anyone with a crypto wallet. JPMorgan believes that stable coins and deposit tokens are not mutually exclusive, with bank-issued stable coins expected to accelerate in development and become mainstream in the next three years. However, issuing stable coins also comes with risks. Research from the European Central Bank shows that if a large amount of retail deposits convert to stable coins, banks' liquidity coverage ratios could be affected. Additionally, US regulatory agencies need to clarify the acceptable reserve types for bank-issued stable coins, as well as whether stable coin deposits are insured. Law professor at a US university, Hilary Allen, warns that if banks issue uninsured stable coins and insured deposits simultaneously, it could cause consumer confusion and potentially trigger panic in times of crisis. Currently, many central banks are testing or launching central bank digital currencies (CBDC), which may replace bank-issued stable coins in some use cases, especially in wholesale payment areas. Facing such a complex landscape, CEO of Libre Capital Avtar Sehra stated: "Every bank is exploring some form of commercial bank digital currency, but in the end, they may be more inclined to use a consortium coin." This article was reposted from "Wall Street See", written by Zhang Yaqi; GMTEight editor: Wang Qiujia.