Are Stablecoins the Future of Banking? Q2 Earnings Calls Expose Divisions
By Steve Cocheo, Senior Executive Editor at The Financial Brand
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Executive Summary
- Amid the usual questions about earnings, capital, expansion and acquisitions, earnings calls this quarter focused on institutions’ plans for stablecoins.
- JPMorgan Chase and Citigroup have taken a lead, launching deposit tokens for institutional payments that compete with stablecoins. For now, both are usable only within their own systems.
- Other institutions are moving cautiously. Bank of America says it has the tech chops, but its CEO says that institutional customers aren’t clamoring for stablecoin services yet.
As the House of Representatives wrangled over passage of S.1592, the GENIUS Act, analysts were asking major banks what their plans were for the new world of stablecoins that the legislation, signed by President Trump on July 18, is intended to create.
GENIUS stands for “Guiding and Establishing National Innovation for U.S. Stablecoins.”
Digital Asset Plans Include Bank Tokens to Compete with Stablecoins
Among the five major bank earnings briefings reviewed by The Financial Brand — including JPMorgan Chase, Bank of America, Citigroup, U.S. Bank and PNC — some have already taken the field, with payment tokens usable in the institutions’ own “walled gardens.” The tokens resemble stablecoins in function, and represent funds in bank deposits.
Other players spoke more conservatively, prompting an analyst to gently needle one CEO with his view that the banker’s attitude was coming across as “a little wait-and-see.”
A key issue is the issue of interoperability — how well a user of a stablecoin can negotiate a stablecoin for payment not only across borders but between multiple institutions.
Interest in this challenge prompted analyst Steven Alexopolous of TD Cowen to separately ask both Jamie Dimon, chairman and CEO at JPMorgan Chase, and Jane Fraser, CEO at Citigroup, if it wouldn’t make sense for major banks to establish a stablecoin consortium to build interoperability — something like a stablecoin equivalent to Zelle.
Speaking to Fraser, Alexopolous noted that Citi has its own Citi Token, which moved from pilot status to a live solution in several markets in October 2024.
The analyst said Citi was in the “pole position” in its own, established system, but pointed out that companies like Circle Payment Network, issuer of USD Coin (USDC), a stablecoin pegged to the U.S. dollar, can build a bigger network.
“They’ll connect everybody that uses different banks,” said Alexopolous. “If you got together with Bank of America and JPMorgan and others, you could very quickly create a network that can almost be impenetrable by these newer entrants.”
Fraser acknowledged that there were cases where it would be helpful to work with other banks, and added that Citi intended to do that when warranted. But she also said that there were services the bank could provide in this area without other banks.
“I think we have the killer app here,” said Fraser.
Alexopolous asked much the same question of Dimon during the Chase briefing. Dimon got cagey.
Dimon: That’s a great question and we’ll leave it remaining as a question.
Alexopolous: Without an answer.
Dimon: Well, Steven, you’re raising a very important point about interoperability of stablecoins and deposits and movement of money and what problem you’re trying to solve. You’re raising great points. You can assume we’re thinking about that.
Notably, Chase is part of the seven-bank consortium that owns Early Warning Services, which in turn owns and operates Zelle as well as Paze. In contrast, Citigroup is not part of the consortium.
A different analyst asked Brian Moynihan, Bank of America chair and CEO, whether banks would form a consortium or go it alone with stablecoins.
Moynihan thought the best answer was “all of the above.” He could see cases where individual bank’s applications of stablecoin concepts would make sense, but also situations where joint efforts might help.
“You need networks to make this all work,” said Moynihan. The BofA chief added that partnerships with stablecoin issuers was another strategy, one which the bank was already pursuing.
PNC’s William Demchak, chairman and CEO, didn’t specifically refer to a consortium, but said he expected to see development of an industry-led stablecoin, “and we would clearly be part of that.”
Read more: Stablecoin and AI Agents Will Reinvent Banking, According to a Crypto Pioneer
Deeper Dive: Looking at the Citi and Chase Token Projects
Citi Token Services for Cash can handle payment transactions into the multimillions for the bank’s institutional clients. Using distributed ledger technology — the tech used by the blockchain — Citi offers 24/7 transactions that can be programmed as “smart payments.” Token Services for Cash utilizes a private blockchain owned and managed by Citi. It has been especially designed to handle cross-border payments.
Fraser said during the Citi briefing that the service is live in four markets, with more to come. She said the bank has used it to process billions of dollars in payments since it launched.
“Digital assets are the next evolution in the broader digitization of payments, financing and liquidity,” Fraser told analysts. She also said the bank was considering issuing its own stablecoin. She sees considerable future for payments in this channel.
Currently, “about 88% of all stablecoin transactions are used to settle crypto trades,” according to Fraser. She said only 6% of stablecoin transactions are used for payments currently.
However, there is a high price for using this mechanism for payments.
“In a traditional offering, if you are moving from cash to stablecoin and back to cash, right now, you’re incurring as much as a 7% transaction cost,” said Fraser. “That’s just prohibitive.”
Fraser said that Citi Token Services can take things from cash to digital form and back without running up such high charges.
At Chase, a proof of concept launched in late June to provide JPMD, a U.S. dollar deposit token. It runs on Base, an Ethereum Layer 2 permissioned public blockchain network that exists within Coinbase. It is designed to help the bank’s institutional clients to move funds, also 24/7.
“We’re going to be involved in both J.P. Morgan Deposit coin (JPMD) and stablecoins to understand it, to be good at it,” said Dimon. “I think they’re real, but I don’t know why you’d want a stablecoin as opposed to just a payment.”
But Dimon said it was important to keep up with fintechs in this regard.
“These [fintech] guys are very smart. They’re trying to figure out a way to create bank accounts and get into payment systems and rewards programs,” said Dimon. “We have to be cognizant of that. The way to be cognizant is to be involved.”
Read more:
Others Have Mixed Feelings About Diving Right Into Stablecoins
Analyst Gerard Cassidy of RBC Capital Markets asked Brian Moynihan, Bank of America chair and CEO, about his bank’s thoughts on stablecoins. Moynihan said the bank had done a lot of work on the concept but was still trying to scope out the market for stablecoin-based payments.
“Look, the business cases for its incremental value are still to be proven, frankly,” said Moynihan.
Moynihan also said that the bank holds various blockchain-related patents, and could readily provide stablecoin services.
However, Moynihan said, “we aren’t seeing clients knocking on our door and saying, ‘Please give me this right now’.”
At U.S. Bank, Gunjan Kedia, president and CEO, said she didn’t expect stablecoins to be material to the bank’s payment systems business any time soon. In part this is because the company’s payments work is chiefly within the U.S. and much of it concerns cards. She said the bank is “quite ready to pilot our own stablecoin,” but didn’t see any immediate revenue impact on the bank from stablecoins.
PNC’s Demchak was skeptical about stablecoins.
“Despite a lot of hype,” he said, “there isn’t really a cost advantage or driving need to use stablecoin, at least in domestic commerce.” He essentially sees stablecoins as another payment tool, usage hanging on customer demand, but not a dramatic change.
