Blockchain technology is reshaping the financial system, with traditional banks transitioning from resistors to participants.
A quiet financial revolution is accelerating globally. Since 2025, traditional financial institutions, from JPMorgan Chase and Citigroup in the United States to HSBC and Berenberg Bank in Europe, have announced plans or have already issued their own stablecoins.
Once conservative towards cryptocurrencies, traditional banks are now significant players in the stablecoin market. The monthly trading volume of stablecoins has surged to a trillion-dollar scale, accounting for 60% to 80% of the total cryptocurrency trading volume.
1. Strategic Value: A Trillion-Dollar Market Banks Cannot Miss
● The move of traditional banks into stablecoins is not a spur-of-the-moment decision but a strategic choice in the face of the digital economy era. According to U.S. Treasury Secretary Janet Yellen's forecast, the market size of stablecoins pegged to the U.S. dollar could reach $2 trillion or more by the end of 2028.
● This enormous market potential has attracted various financial institutions to accelerate their entry. The U.S. passed the GENIUS Act, establishing the first federal regulatory framework for payment stablecoins, requiring issuers to hold 100% liquid asset reserves and disclose reserve composition regularly.
● The clarification of regulations provides a compliance foundation for banks entering the stablecoin market. In addition to the U.S., the EU's Markets in Crypto-Assets Regulation (MiCA), effective from mid-2024, also offers a clear compliance path for stablecoin issuance.
Regions like Hong Kong, Singapore, and the UK have also introduced supportive policies, providing a "safe harbor" for traditional financial institutions to enter the market.
2. Competitive Pressure: The Race Between Banks and Crypto-Native Companies
As stablecoins like Tether (USDT) and Circle (USDC) dominate the market, traditional financial institutions face threats from crypto-native companies and emerging fintech firms.
● Tether and Circle hold as much as $166 billion in U.S. Treasury bonds, becoming significant players in the Treasury market. These crypto-native companies have eroded traditional banking business areas. The "currency substitution" effect of stablecoins is impacting banks' "deposit moats."
● In terms of returns, banks typically offer very low or even zero annual interest rates on demand deposits, while stablecoins can yield significantly higher returns through DeFi protocols. This return gap puts pressure on banks' core deposits.
● Functionally, stablecoins provide both payment and savings capabilities, offering a better user experience than traditional bank accounts.
● Using stablecoins for cross-border payments can achieve near real-time settlement, with costs as low as $0.00025 per transaction, while traditional cross-border payments usually take 3 to 5 business days and can cost up to 6.35% of the transaction amount.
3. Business Innovation: How Stablecoins Change the Banking Ecosystem
Stablecoins provide traditional commercial banks with a strategic entry point to participate in the digital currency ecosystem.
● Citibank predicts that the stablecoin market could reach $3.7 trillion by 2030, representing several times the current scale. By issuing or accessing compliant stablecoins, banks can gain four strategic advantages:
Attracting a New Generation of Customers. The younger generation of businesses is more inclined to use digital assets for managing cross-border funds, making stablecoins an important channel for banks to reach these high-growth customers.
Participating in Digital Ecosystem Development. By connecting stablecoins to crypto asset trading platforms, banks can provide a bridge for exchanging fiat and crypto assets, occupying a key position in the rapidly growing digital asset market.
Innovating Financial Products. Leveraging the programmability of stablecoins, banks can develop automated financial products driven by smart contracts, such as conditional payments and dynamic collateralized loans, enhancing product competitiveness.
Expanding Derivative Businesses like RWA with Stablecoins. Commercial banks can tokenize collateral assets such as credit assets, non-performing assets, and real estate, lowering investment thresholds and enhancing liquidity.
4. Cross-Border Payments: The Main Battlefield for Stablecoins
Cross-border payments are one of the most widely used applications of stablecoins and the business area where banks urgently need reform.
● Traditional cross-border payments rely on the SWIFT network and correspondent banking systems, facing issues such as cumbersome processes, high costs, and long durations. In contrast, cross-border payments based on stablecoins can achieve near real-time settlement and significantly reduce costs.
● The Remi stablecoin launched by Berenberg Bank in Portugal is a solution targeting this pain point. The Remi global stablecoin clearing system serves as an innovative infrastructure, integrating bank-level settlement capabilities while incorporating anti-money laundering/anti-terrorist financing and regulatory technology functions. This system enables instant, low-cost interbank transactions while meeting compliance requirements.
● In trade settlements along the "Belt and Road" countries, the renminbi stablecoin can play a unique role. By linking with offshore markets like Hong Kong, Chinese banks can establish a cross-border payment green channel based on offshore renminbi stablecoins, promoting the synergy of "trade flow + capital flow."
5. Small and Medium Banks: A Window of Opportunity for Differentiated Competition
For small and medium banks, the key to the stablecoin war is not "scale" but "speed."
● Small and medium banks need to build differentiated advantages through "quick first moves" within a short time window to avoid having customers and funds siphoned off by larger institutions. Small and medium banks have three inherent advantages in the stablecoin field: short decision-making radius, deep regional customer relationships, and flexible asset management.
● The short decision-making radius is evident as local rural commercial banks can move from board discussions on stablecoin pilot projects to technology departments proposing solutions and risk control approvals within a month. In contrast, state-owned banks' digital currency teams may take over three months just to decide "whether to participate in the sandbox," holding six meetings.
● Deep regional customer relationships mean that small and medium banks have long-term partnerships with local businesses, making it easier to gain trust and pilot participation when launching stablecoin-related services.
● Flexible asset management allows small and medium banks to issue stablecoins using "a trade finance + a factoring bill" as collateral, addressing financing difficulties for small enterprises while revitalizing their own assets.
6. Risk Challenges: Concerns for Banks Issuing Stablecoins
Despite the opportunities in the stablecoin market, traditional financial institutions face numerous challenges when entering.
● The complexity and cost of regulatory compliance are significant obstacles. Although regulations like the GENIUS Act and MiCA provide a framework, issuers must meet strict anti-money laundering and customer identity verification requirements and ensure transparency of reserve assets.
● AiCoin data shows that about 63% of illegal crypto transactions involve stablecoins, leading regulators to scrutinize stablecoins more closely, increasing compliance burdens for banks.
● The rapid expansion of the stablecoin market may pose risks to financial stability. Research from the Federal Reserve warns that if the stablecoin market experiences a "run" event similar to the 2022 TerraUSD collapse, issuers may be forced to sell U.S. Treasury bonds quickly, leading to market volatility. The collapse of TerraUSD resulted in a $45 billion loss in market value, highlighting the potential instability of stablecoins.
● Additionally, technological risks cannot be ignored. The blockchain infrastructure that stablecoins rely on requires robust security and risk resistance, while traditional financial institutions face significant investment demands for technological upgrades and cybersecurity.
In the next five years, the role of banks will undergo a fundamental transformation. Banks may no longer need as many branches but will integrate more deeply into customers' digital financial lives.
As observed by Berenberg Bank's Su Siyuan: "This banking innovation may provide opportunities for some mid-sized or emerging banks to become very excellent banks. While you may not compete with Industrial and Commercial Bank of China in the mortgage sector, you might excel in specific niche markets, such as the letter of credit business from Indonesia to the United States."
The boundaries of the financial world are being redefined, and stablecoins are the bridge in this transformation.
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