Stablecoins are now of interest to banks, but why?
Now JPMorgan could join the list of major players in the financial world that want to create their own stablecoin . There has already been talk of it for Bank of America and probably – following the approval of US rules on the sector – there will be many more. But why are so many groups interested in this possibility?
There is a question of vile money – even if it is much more complex than it might seem. And there is the signal of the superiority of a technology from which many had kept their distance, especially if institutional, due to continuous attacks by a certain political class that however no longer exists.
The situation is more complex than it might seem at first glance. And for those who want to understand what is really going on, it will probably be useful to analyze the strategic reasons for the arrival of so many big players as stablecoin issuers .
Yes, there is a lot of money at stake.
The most logical, simple and linear explanation is that of earnings. Tether and Circle accumulate frightening revenues, because they manage significant reserves that they then invest in US bonds and other safe and short-term securities .
It’s a little game that will be of interest to big banks too, with a but… banks can actually already do it with customer deposits . And so they certainly don’t need stablecoins to earn from customer deposits .
There must be, by necessity, something else that pushes these subjects to enter a market that for them is a net negative . In fact, the reserves of stablecoins, unlike bank deposits, must be maintained 1:1, they cannot be lent, re-invested, there is no fractional reserve.
Cannibalize or be cannibalized
The point – which many of our readers will find optimistic – is the inevitability of stablecoins , which are appreciated by the public, appreciated by payment managers (settlement is cheap and instantaneous, just to name one of the advantages) and therefore those who do not get on board this train will lose deposits anyway.
And it will lose them to the detriment of other companies in the financial sector that decide to jump into the fray . The decision is therefore always up to the companies that must decide whether to attack themselves, that is, whether or not to attack a technology that is no longer at the top but that others will attack sooner or later.
And this is where we must start to understand what is really happening in the world of deposits, stablecoins and why such important names continue to circulate that may or may not make their entrance into the stable world.
What changes for those who already issue them?
Let's talk about native crypto companies like Tether or Circle . They have a significant advantage, but not in terms of capital (150 billion and 60 respectively are "ridiculous" figures for large banks), but because they are already used in certain contexts.
Hypothesis A: Tether and Circle will continue to be relevant for the entire DeFi and crypto space that will continue to exist and indeed expand. The rest, the world of “official” payments, will be completely occupied by “bank” tokens.
Hypothesis B: Banks will not be credible enough and in addition to their services, they will not find hospitality in the crypto and payment world that already exists.
However, the writer believes that there is still room for companies like Tether or Circle to thrive in the future.
Yes, stablecoins are the future
It is not a question of fandom. It is undeniable, as confirmed by Piero Cipollone of the ECB , that the influence of stablecoins on the world of payments is strong, so much so as to force Europe to respond with a Digital Euro whose destinies are rather uncertain.
The battle will be played out here for the next few months and probably for the next few years. So much so that even some European institutions are moving in this direction. See Santander, Deutsche Bank and SG.
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