A group of US banks have announced that they intend to launch their own stablecoin, called USDF, in a move they hope will tackle concerns about the reserves behind nonbank issued equivalents.
US banks plan to launch USD backed stablecoin
The group – which is made up of institutions backed by the Federal Deposit Insurance Corp. (FDIC), one of the industry’s key regulators – said the coin “addresses the consumer protection and regulatory concerns of nonbank issued stablecoins,” according to an announcement Wednesday.
The five founding community bank members are New York Community Bank (NYCB), NBH Bank, FirstBank, Sterling National Bank, and Synovus Bank.
Figure Technologies, which founded the Provenance Blockchain, and community bank group JAM FINTOP are also consortium founders promoting the adoption of the stablecoin that uses Provenance.
The key advantages of the solution are enabling low-cost, real-time interbank payments, which can also use the programmability of blockchain.
To participate in the consortium, member banks have to be FDIC insured, have at least $1 billion in assets, possess a satisfactory credit rating, and have staff to deal with Bank Secrecy Act and AML compliance. Depending on a bank’s assets, membership costs between $20,000 and $50,000.
“As a form of digital currency created and administered by regulated US banks within the USDF Consortium, USDF will enable wide use of an on-chain, real time payments system that satisfies important principles of safety and soundness, compliance with anti-money laundering standards, and financial stability,” said Andrew Kaplan, NYCB’s Chief Digital and Banking as a Service Officer.
USDF was first mentioned in September 2021, but at that point, the banks pointedly avoided the use of the term stablecoin. Since then, the President’s Working Group published a report on stablecoins calling for regulated solutions.
However, it seems there is still a bit of a gray area in terms of regulation. The consortium says it has a proactive regulatory strategy and has met with the Fed, OCC and FDIC. It says it will be responsive to new regulatory guidance.
USDF will be a bank-minted alternative to USDT and Circle’s USD coin (USDC), which account for the lion’s share of the $170 billion stablecoin market. USDT has a market cap of $79 billion and a 24-hour trading volume of $56.5 billion, according to CoinGecko. USDC has a market cap of $44.5 billion with a trading volume of just under $3 billion.
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