The Last Look…
Posted by Colin Lambert. Last updated: October 21, 2025
In the northern hemisphere it is very much the end of what many term the “stablecoin summer”, but it is clear that things are only just getting going in this field and where we stand now is unlikely to be where we land in a year or two’s time…perhaps.
The last couple of weeks have seen multiple announcements/reports of bank consortia planning their own stablecoins in, respectively, US dollars, euros and yen. This has been taken in some quarters as a signal that the current stablecoin providers are under pressure and that their businesses are under threat as the real “big dogs” start to inhabit their patch, but is it?
The first problem for this argument is that all that has been announced or reported are projects aimed at exploring the idea – none of them currently exist. This may not be an issue if the banks can get things moving quickly, but a collective of banks (we need a better name than consortium – answers to the usual address) moving quickly is not a familiar concept, so for now, all is theory rather than reality.
A second factor is the cost – it is still more expensive to use stablecoins thanks to on-off ramps and all the associated parties needing to take their piece of the pie in fees terms.
A third issue is whether the bank-backed stablecoins could, in turn, be disrupted by central bank digital currencies? Given the unlikelihood of major CBDCs launching in the next three-to-five years, I would argue not, and I heard from several people who feel the existing stablecoin providers will not suffer, most arguing that the banks, like central banks, have too many hoops to jump through to get something off the ground.
That may be the case, but another argument of those who see the status quo in this space remaining – that this “financial infrastructure revolution” as one put it to me means the banks will be irrelevant, is, I feel, missing a big point, because it is an argument born in the crypto world that is itself irrelevant here.
Noting that some of the stablecoin providers probably look better financially at the moment than some regional banks thanks to the latest concerns over a few local US banks, there is an important factor in that the stablecoin market is very different to crypto. In the latter, the vast majority of early adopters saw the banks as part of what can only be described as “the man” and were keen to get away from the existing infrastructure. The problem for stablecoin providers is that the very market they want to penetrate – real money and large investment firms – are very happy with the banks, indeed they are looking for a familiar infrastructure and faces to deliver it.
Another factor is the resilience of various providers and transparency around their stablecoins. Something I was told last week at the Full FX London conference resonates with me – stablecoins are quasi-currency pegs, and we all know what can happen there. Indeed, during the mini-meltdown in crypto markets on October 10, it was clear that some stablecoins trading at 1:1, were, through simple triangulation, trading some way away from parity.
A final factor is likely to be if not trust, then confidence, in providers. We all have cause to moan at banks, the same as we do any other providers, but there is nothing quite like financial panic to test a system out. The banking system was tested in 2008, it failed to a degree because it needed bailing out, but how many of us would be confident that the world’s governments would bail out a stablecoin provider? Several probably would not, although in the US it might depend upon whether or not The Don is invested.
Faced with a choice between a group of institutions that is heavily regulated as well as transparently strong financially, and what is effectively a very successful start-up that is well-financed but perhaps not as transparent in balance sheet, reserve and governance terms, the large investors who are truly “institutional” will make only one choice
The challenge for existing stablecoin providers is they are one-trick ponies compared to the banks (and it is interesting the moves being made by Ripple in particular to change that) and as such, there is not the political capital in rescuing them.
On a more positive note, when firms like BlackRock change the terms of one of their major funds to position it as a reserve for stablecoin issuers, the industry has some significant clout behind it. Again, however, if they are disenfranchised, would this not just be a matter of BlackRock tweaking its fund again, and working with firms it knows and understands – the banks – to ensure it remains relevant?
The ultimate challenge for anyone in the stablecoin business, however, is in what the product is actually changing. Crypto can claim (dubiously perhaps) it is delivering freedoms across borders, tokenisation more generally is about making holdings and collateral more efficient, but stablecoins are about one of the more mundane aspects of our business – payments. A field that is largely dominated at institutional level by…?
People want a degree of certainty in their financial dealings, and that often means dealing with strength and reducing counterparty risk. For all the challenges in the past, the major banks are a good counterparty risk to have, especially if it can be spread around a little. This trust took decades to build and required the banks being at the centre of the social and economic systems in developed countries – stablecoin firms are nowhere near that.
In answer, therefore, to the question posed at the top, are the current stablecoin providers under pressure, I would have to say ‘yes’. It may not happen now – and it does depend upon the various consortia getting something done in reasonably quick time – but you have to feel that faced with a choice between a group of institutions that is heavily regulated as well as transparently strong financially, and what is effectively a very successful start-up that is well-financed but perhaps not as transparent in balance sheet, reserve and governance terms, the large investors who are truly “institutional” will make only one choice.
