The expansion of bank-issued stablecoins could make borrowing more expensive, according to a warning from Bank for International Settlements chief Pablo Hernández de Cos on August 28. As banks develop digital payment tokens, stablecoins are emerging as an awkward asset class that threatens traditional banking business models.
The stablecoin market now holds roughly $304 billion, including about $183 billion in Tether and $74 billion in USDC. Federal Reserve researchers have described these tokens as potential competitors to traditional transaction accounts.
From Crypto Infrastructure to Direct Competition
Stablecoins have evolved beyond their roots as cryptocurrency infrastructure. They are now used for payments, treasury management, cross-border settlement, merchant payouts, and institutional settlement—functions that directly compete with banks' most valuable product: the transaction account.
Banks are responding to this shift. A Federal Reserve survey in September 2025 found that roughly half of respondents were prioritizing growth in at least one stablecoin or digital-asset area over the following three years.
Different Models, Different Risks
Banks are developing distinct approaches to digital money. J.P. Morgan's JPM Coin represents a bank deposit on a blockchain. Société Générale-FORGE's CoinVertible is a MiCA-regulated stablecoin backed by segregated collateral. These represent different legal structures with different implications for bank funding.
Under the US GENIUS Act, payment stablecoins require at least one-to-one backing with eligible reserves, such as cash or short-dated Treasuries. The Treasury proposed implementation rules on August 17.
When a customer moves deposits into a bank-issued stablecoin, the bank converts a traditional funding source into a pool of segregated reserves it cannot lend against. The wider effect depends on where those reserves end up. Money deposited back into banks can still provide funding, though it may be more concentrated and quicker to leave during market stress.
If stablecoin adoption shifts funding away from bank deposits rather than recycling those funds back into the banking system, banks could face higher funding costs and potentially less capacity to extend credit.
Real-World Usage and Scale
Customer adoption is already underway. In July, Citi executed a dollar payment from London to Thailand over a US holiday weekend using its tokenized-deposit service. Western Union launched USDPT in May, with Anchorage Digital Bank issuing the stablecoin on Solana.
J.P. Morgan reports around $7 billion in daily activity across Kinexys products. CoinVertible reported €156.6 million of euro tokens and $12.55 million of dollar tokens outstanding on August 31.
The Case for Unified Infrastructure
As more banks enter the market, fragmentation poses a challenge. Separate coins could leave money scattered across smaller pools, with users forced to exchange one bank's token for another. Conversion at face value during market stress is not guaranteed.
Europe's Qivalis has assembled 37 banks across 15 countries around a planned euro stablecoin, targeting a launch in the second half of 2026 subject to regulatory authorization. This shared approach aims to create one deep, liquid euro instrument rather than dozens of thin, incompatible pools.
Banks could then compete through services surrounding that money, such as foreign exchange and corporate lending. Qivalis's launch will test whether cooperation can attract business beyond its founding banks and demonstrate whether customers will accept higher funding costs if the services justify the expense.
