Stablecoin Wars: US Banks Take on Tether With Their Own Token

Based on available reports, Big US banks: are in talks to launch a bank-issued stablecoin project, according to a WSJ report and industry sources. Reports say, Early Warning Services, operator of Zelle, and The Clearing House, which runs one of the country’s main real-time payment networks, would be part of the consortium. This comes as Congress is close to finalizing rules for digital payment tokens.

GENIUS Act Means Regulatory Clarity for Stablecoins

The initiative coincides with the Senate moving forward with the GENIUS Act, a bipartisan bill that outlines oversight for both bank and non-bank issuers of stablecoins. The act includes reserve requirements, third-party audits and Bank Secrecy Act compliance, so US banks can finally enter the crypto space with clarity and confidence.

This bill could be the clean legal runway institutions have been waiting for as it’s a blueprint for stablecoin issuance that aligns with banking norms and Web3 infrastructure.

Traditional Finance Gets Tokenized Dollars

Stablecoins like USDT and USDC already underpin most of the crypto economy, with over $18 trillion in settlement volume in 2023 alone. But most of that volume flows through platforms and issuers outside of traditional banking structures.

The proposed bank-issued stablecoin project could change that. By using existing infrastructure like Zelle and FedNow, these banks could offer digital tokens redeemable 1:1 for US dollars, combining the trust of federally regulated banks with the speed of blockchain rails.

A model being discussed would make the stablecoin consortium-based but interoperable meaning other banks could join or access the network without being part of the original formation. This is different from previous siloed efforts like JPM Coin which is limited to JPMorgan’s clients.

A Response to Political and Competitive Pressures

Given that President Trump has been vocal about digital assets and Trump Media & Technology Group just launched its own stablecoin, this has banks scrambling for regulated alternatives.

The political winds are changing, Banks don’t want to be caught flat-footed if the administration makes digital dollars, friendly.

Additionally, fintechs like PayPal (which launched PYUSD in 2023) are pushing banks to modernize their payment capabilities to stay relevant.

Market Impact and Warning

Despite the excitement, regulatory risk remains. The Federal Reserve has previously told banks not to issue stablecoins without explicit supervisory approval. According to guidance issued in 2023, banks must have robust risk management procedures and get written permission before launching any digital currency product.

But the Federal Reserve and OCC have reportedly held private briefings on how traditional financial institutions can safely issue tokenized deposits or stablecoins under one umbrella. The GENIUS Act could be the vehicle to make that happen.

Some smaller banks are looking at separate stablecoin projects but analysts warn that without regulatory support, it will be limited adoption and eventual consolidation.

What’s Next?

If the consortium moves forward, we could see a bank-issued stablecoin project by early 2026 if the GENIUS Act passes and gets regulatory approval. The token could be integrated with consumer facing tools like Zelle or institutional payment networks operated by The Clearing House. This would put banks in direct competition with crypto-native offerings and central bank digital currency (CBDC) pilots globally.

For now, it’s all talk. But insiders close to the negotiations say momentum is building as legal certainty aligns with growing demand for faster, programmable money.

Conclusion: Stablecoins at the Crossroads of Policy and Innovation

The stablecoin conversation has gone from experimental to existential for banks. As lawmakers start to codify rules and competitors move forward, institutions that once dismissed digital tokens as a fad are now recalibrating. A bank-issued stablecoin project especially from a big consortium would not only validate digital assets but potentially redefine U.S. payments.

As the GENIUS Act moves through Congress and politics shift, everyone is watching to see if Wall Street can finally bridge the gap between traditional money and tokenized finance.

FAQs

What is a bank-issued stablecoin?

A bank-issued stablecoin is a digital token backed by fiat currency reserves, issued and managed by regulated financial institutions instead of crypto-native firms.

What is the GENIUS Act?

The GENIUS Act is a bipartisan U.S. Senate bill to create legal frameworks for stablecoin issuance; including reserve requirements and anti-money laundering controls.

Which banks are in the stablecoin project talks?

JPMorgan, Bank of America, Citigroup and Wells Fargo are in early stage discussions; along with Early Warning Services and The Clearing House.

Why are banks interested in stablecoins now?

New regulatory clarity, political support and competition from fintechs and crypto firms is driving banks to explore tokenized payment options.

When could a bank-issued stablecoin launch?

If talks progress and the GENIUS Act becomes law, a launch could be as early as 2026.

Glossary

Stablecoin: A digital currency pegged to a stable asset, typically fiat like the US dollar.

GENIUS Act: Proposed US legislation to regulate stablecoin issuance by banks and nonbanks.

Tokenized Payments: Financial transactions executed using blockchain-based representations of fiat currencies.

Zelle: US digital payments network run by major banks via Early Warning Services.

The Clearing House: US payments company owned by the largest commercial banks, running real-time payment infrastructure.

Sources

The Wall Street Journal

Cryptonews