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Banks Move to Stablecoins as U.S. and Europe Set Clear Rules
After years of hesitation, banks on both sides of the Atlantic are accelerating plans to issue stablecoins—digital tokens pegged to traditional currencies—transforming a space once dominated by fintech start-ups and unregulated issuers.
The turning point came from two directions: the United States, where the GENIUS Act established a federal framework for dollar-backed stablecoins, and Europe, where the Markets in Crypto-Assets Regulation (MiCAR) now defines how digital tokens can be issued, backed, and supervised.
In March, FinTech Weekly reported that both banks and fintech firms were quietly preparing to enter the stablecoin market once regulatory clarity arrived. That prediction has now materialized, as traditional institutions begin positioning themselves to issue tokens that meet new compliance standards and capture market share in cross-border payments and digital settlements.
A Euro Stablecoin Consortium Takes Shape
On September 25, 2025, nine major European banks—ING, Banca Sella, KBC, Danske Bank, DekaBank, UniCredit, SEB, CaixaBank, and Raiffeisen Bank International—announced a new joint venture to launch a MiCAR-compliant, euro-denominated stablecoin.
The consortium has established a new company in the Netherlands and plans to seek authorization from the Dutch Central Bank as an e-money institution. The first issuance is targeted for the second half of 2026.
Each member bank will be able to offer its clients wallets, custody, and related services connected to the digital token, which is designed to enable instant, low-cost transactions, programmable payments, and 24/7 cross-border settlement.
Adding a Global Dimension: Citi Joins the European Effort
In early October 2025, Citigroup joined the European consortium—becoming the only non-European bank in the group. Citi described its participation as part of a broader effort to expand its blockchain capabilities and connect traditional finance with regulated digital money.
The addition of a major U.S. bank underlines how global the stablecoin race has become. Citi’s involvement also gives the consortium greater credibility in the international markets where it operates, from corporate cash management to foreign-exchange settlement.
According to people familiar with the effort, the euro stablecoin could eventually integrate with multiple blockchains, allowing interoperability with other MiCAR-compliant assets and enabling programmable use cases such as automated invoicing, supply-chain finance, and digital securities settlement.
U.S. Banks Explore a Multi-Currency Stablecoin
Only weeks after the European announcement, a separate group of ten banks—including Bank of America, Goldman Sachs, Deutsche Bank, UBS, Citi, MUFG, Barclays, TD Bank, Santander, and BNP Paribas— confirmed that they were exploring the issuance of stablecoins pegged to G7 currencies.
The initiative, still in its early stages, is examining whether banks can jointly create assets on public blockchains while maintaining full regulatory compliance and robust risk controls. The participants have framed the exploration as a response to rising demand for digital settlement assets that combine the reliability of deposits with blockchain efficiency.
This new wave of collaboration follows the U.S. regulatory reforms that have given traditional institutions confidence to re-enter the digital-asset conversation. The GENIUS Act’s reserve and audit rules have turned stablecoin issuance from a legal gray area into a regulated business opportunity.
A Shift in Competitive Pressure
Until now, the global stablecoin market—estimated at $310 billion—has been dominated by Tether and Circle, both private issuers of dollar-pegged tokens. Euro-denominated stablecoins represent less than $1 billion in circulation.
European policymakers worry that such imbalance leaves the region dependent on dollar-based digital liquidity. A Deutsche Bank report warned that emerging markets were already using dollar stablecoins as substitutes for local deposits, creating what it called a “monetary dilemma”: either adopt these instruments or risk exclusion from fast-settlement ecosystems.
For Europe’s banks, launching a euro token is not only about innovation—it is a response to that geopolitical and monetary pressure. As one senior strategist put it during the consortium’s announcement, the goal is to “fill the need for a trusted, regulated solution for on-chain payments and settlement” that keeps value within the euro system.
Regulatory Divergence: ECB Caution vs. Market Demand
Despite bank enthusiasm, Europe’s central bankers remain cautious. The European Central Bank (ECB) continues to warn that privately issued stablecoins could undermine monetary policy transmission and financial stability. President Christine Lagarde repeated in June that the euro area would be better served by a central-bank digital currency (CBDC) rather than multiple commercial tokens.
Some commercial banks, however, view the digital euro as a potential competitor that could draw deposits away from the private sector. Their stablecoin initiative is therefore both a pre-emptive measure and a signal: that the private banking system intends to play a central role in digital currency issuance rather than cede the space entirely to central banks.
Tokenization: The Quiet Challenger
For all the attention surrounding stablecoins, some experts believe the real transformation in finance will come from tokenization rather than from stablecoins themselves. Ed Butchart, a veteran financial markets strategist and former head of emerging markets strategy at Merrill Lynch, argues that the enthusiasm around stablecoins overlooks key risks and structural weaknesses.
Stablecoins, he notes, resemble money-market funds built for the blockchain—useful for fast transfers and settlement but potentially destabilizing for traditional finance. In a recent analysis, Butchart said their growth could concentrate demand for short-term U.S. government debt, amplifying dependence on U.S. monetary conditions and increasing exposure to “geoeconomic risks.”
According to his research, the rise of dollar-backed stablecoins, which now represent nearly all tokens in circulation, could intensify global reliance on the U.S. financial system at a time when many countries seek to diversify away from it. That reliance may also create new vulnerabilities for commercial banks and money-market funds if deposits migrate toward tokenized instruments that earn rewards or bypass traditional intermediaries.
Instead, Butchart envisions the next stage of digital finance emerging through tokenized bank deposits—digital representations of existing deposits held within regulated banks. These instruments, recorded on unified ledgers, could combine many of the efficiencies of stablecoins with the safeguards of traditional banking. He sees potential for these structures to evolve into broader tokenization of real-world assets, from bonds and equities to real estate and funds.
This line of thinking has gained quiet momentum among financial institutions exploring distributed-ledger settlement systems. If stablecoins offer the first bridge between fiat and digital money, tokenized deposits may be the infrastructure that ultimately carries most of the traffic.
Why Stablecoins Matter Now
Stablecoins have evolved from a niche trading instrument into an increasingly important financial infrastructure layer. The reason is practical: they enable continuous settlement, programmable transfers, and lower costs than traditional cross-border systems.
As of 2025, industry research suggests that up to $50 trillion in annual payments could eventually move through stablecoins by 2030. In consumer terms, stablecoins account for about 1% of global digital payments, a figure that could rise to 25% once regulated issuance scales.
The GENIUS Act in the U.S. and MiCAR in Europe have given banks and fintech firms confidence to act. Both frameworks require strict reserve management, anti-money-laundering controls, and transparency standards—transforming stablecoins into instruments that can operate within mainstream finance rather than outside it.
Fintech’s Role and the Convergence of Infrastructure
Fintech companies remain pivotal in this transformation. Many provide the blockchain infrastructure, custody, and data systems that banks rely on to issue or manage tokens. Others develop programmability tools that allow businesses to embed payments directly into software workflows.
By joining regulated banking networks, fintech firms gain access to customer deposits and compliance protections. Banks, in turn, gain technology and agility they often lack internally. This symbiosis reflects what FinTech Weekly highlighted earlier this year: that the future of digital money depends on partnerships between traditional finance and fintech infrastructure providers.
A Broader Realignment of Money
The simultaneous emergence of the European consortium and the U.S. G7 stablecoin project shows how currency competition is moving onto digital rails. Washington aims to maintain dollar leadership by regulating rather than restricting private stablecoins. Europe seeks autonomy by launching its own.
The convergence of banks, fintechs, and regulators suggests that stablecoins are becoming the bridge between public oversight and private innovation. They may not replace existing money, but they are redefining how value circulates and settles globally.
Outlook
The rush to issue stablecoins marks a profound structural shift. For banks, it offers new revenue and relevance in an era when payments are becoming software-driven. For fintech firms, it opens the path to integrate financial infrastructure into blockchain networks. For policymakers, it is a test of how far regulation can accommodate innovation without losing control.
The coming year will determine whether these new tokens become trusted components of the financial system or remain parallel instruments for niche use. What is clear is that the world’s largest financial institutions now view stablecoin issuance as a strategic priority—not an experiment.
