Traditional banks tap into the billion-dollar stablecoin market to rival Tether’s dominance 

Traditional banks such as Societe Generale, Standard Chartered, and Revolut are now reaching for a slice of Tether’s dominance of the stablecoin market. The opportunity became especially apparent after Tether’s decision to discontinue its EURt stablecoin. 

For years, Tether Holdings has led the charge of stablecoins reshaping the global finance space. However, as traditional finance increasingly opens up to the crypto space, banks are also making the move to test the stablecoin issuance waters. Bloomberg reported that these banks will be looking to fill the chasm created as Tether Holdings discontinues its EURt stablecoin.

Tether launched the EURt stablecoin in 2016. However, unlike the firm’s leading product USDT, the EURt failed to meet expectations and struggled to gain traction after its launch. Its market capitalization declined to an almost irrelevant figure of $37M compared to USDT’s market cap of over $138B.

Tether Holdings announced in November that it will discontinue the EURt stablecoin in accordance with the new Market in Crypto-Assets (MiCA) regulations in Europe. 

All aboard the stablecoin train

Tether’s $10B in net profits has proven to be a major incentive for traditional banks, who are wasting no time in making their moves. Societe Generale-Forge (SG-Forge) has already launched a Euro-backed stablecoin (EURCV) and opened the product to retail investors. 

Oddo BHF, BBVA, and Revolut are exploring releasing their versions of euro-denominated stablecoins. AllUnity also plans to issue another euro-based stablecoin next year. 

MiCA has provided a clear regulatory framework for stablecoins and crypto assets in the EU, making it easy for companies and banks to issue their stablecoins. This clarity also created an allowance for competition in the stablecoin market, especially as Tether continues to drag its feet with meeting all the standards of the new European regulation. 

Jean-Marc Stenger, CEO of SG-FORGE, confirmed that multiple banks are in discussions to use its stablecoin technology either through partnerships or white-label deals. 

Banks in the US are lagging behind as there is no legislation in place that allows for the issuance of stablecoins. They are however expected to swarm the market once the legislation is passed. 

The global surge of stablecoins 

Traditional banks aren’t the only companies riding the stablecoin wave. Visa launched a tokenization network to ease the issuance of stablecoins. BBVA is among the banks piloting Visa’s technology, and it’s in discussions with many other banks as well. 

Cuy Sheffield, the head of crypto at Visa, confirmed in an interview with Bloomberg that they have received offers from banks in Singapore, Brazil and Hong Kong. 

“We are actively engaged with a number of banks across the world at various stages of the process,” he said. 

Standard Chartered partnered with Animoca Brands Ltd. and Hong Kong Telecommunications Ltd., and was selected as one of the first issuers of HKD-denominated stablecoins in an experimental program. 

JPMorgan Chase has been exploring deposit tokens which are similar to stablecoins but are tied to bank accounts. The deposit tokens have limitations that can be offset by the use of stablecoins, allowing banks to leverage blockchain technology to overcome some of the inherent challenges in traditional banking systems. 

However, the use of stablecoins comes with its own set of challenges for banks. A European Central Bank analysis showed that converting retail deposits into stablecoin reserves could weaken liquidity coverage ratios, compromising banks’ ability to meet short-term obligations during turbulent periods. 

US regulators would also need to clarify what counts as acceptable reserves and whether stablecoin deposits will be insured to avoid user panic.  

The rise of Central Bank Digital Currencies (CBDCs) is also an issue as it threatens bank-issued stablecoins for wholesale payments and other use cases.

Even with these hurdles, Tether is sitting on a $10B gold mine, and banks seem to believe the stablecoin headache is a problem worth having. 

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