Does a Big Bank Stablecoin Threaten Circle’s USDC?

With a group of top U.S. banks reportedly considering a joint stablecoin, it’s worth asking what such a token would mean for USDC, the U.S.-licensed stablecoin from Circle, and the world’s second largest stablecoin by market cap.

As the Wall Street Journal reported late last week, companies co-owned by JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and other large banks are considering launching a stablecoin, reportedly “intended to fend off escalating competition from the cryptocurrency industry.”

These companies include Zelle operator Early Warning Services, and real-time payment network The Clearing House.

Circle, which is currently headquartered in New York, continues to position itself as the “most licensed stablecoin
company in the world.” Indeed, in the U.S. the stablecoin issuer holds money transmitter licenses in 46 states, plus a notoriously difficult to obtain BitLicense in New York.

This makes Circle certainly a more obvious contender as the dominant stablecoin in the United States, versus leading stablecoin issuer Tether, which isn’t based in the U.S. and can’t boast the same level of compliance there (or the EU for that matter).

USDC’s market capitalization currently stands at about $61.6 billion, while Tether’s USDT leads the stablecoin pack at $152.7 billion.

The news that a consortium of the largest U.S. banks is exploring issuing its own stablecoin comes as Congress inches closer to regulatory clarity on stablecoins, suggesting other financial institutions will eventually follow suit, once legislation is passed.

Playing Defense

Some industry commentators see the move from the big banks as not so much a threat to Circle, but more like playing catch-up, given the regulatory shift since President Trump took office.

“The banks’ stablecoin play feels less like innovation and more like a defensive scramble to reclaim territory they’ve already ceded,” said Todd Ruoff, CEO of AI Infrastructure provider Autonomys in an email to The Defiant:

While suggesting that banks probably could build a “technically superior” stablecoin, Ruoff said that they would have to “embrace what made stablecoins revolutionary in the first place.”

Sid Powell, CEO of institutional lending platform Maple Finance, also expressed the sentiment that the move is more validation of a crypto-native model, but focused less on the retail use of stablecoins and more on potential institutional use.

“The idea of big banks entering the stablecoin market is less of a threat to Circle and more of a validation of the model USDC helped prove,” said Powell in comments to The Defiant. “If anything, this move could widen the stablecoin market rather than cannibalize it.”

Maple’s CEO and co-founder noted that a bank-issued stablecoin would likely be used to make TradFi rails, like bank transfers, more efficient:

In terms of stablecoins for cross-border transactions, just last week, Circle launched the mainnet of its payments network, CPN. The protocol uses USDC for settlement and is poised to compete with the currently dominant international interbank communication technology, SWIFT.

First Mover

Commenting to The Defiant on the big bank stablecoin news, Luke Youngblood, founder of DeFi lending protocol Moonwell, acknowledged Circle’s infrastructure developments, like CPN.

“Circle has spent many years building not just a US-regulated stablecoin, but the infrastructure necessary for banks, custodians, broker-dealers, and exchanges to integrate stablecoin infrastructure into their existing traditional finance systems,” said Youngblood.

He also argued that U.S. banks — which were effectively prevented from working with crypto firms or offering crypto-related services for years under the previous administration — are at a clear disadvantage, given how far Circle has pushed forward, both in terms of compliance and technology. Youngblood told The Defiant:

Stablecoin Users

Details on the potential design of the reported stablecoin from the bank consortium — such as whether or not it would be available to regular clients directly, or would be reserved for interbank transactions only — remain to be seen, and will likely depend on what’s in the final version of a stablecoin bill, which Trump has said he wants passed into law before the summer recess.

In terms of consumer interactions with stablecoins, banks have reportedly been concerned about yield-bearing stablecoins in particular, as they could compete with traditional deposits, like savings accounts.

Last month, the Department of the Treasury released a report looking at the stablecoin market and the impact of both non-yield-bearing and yield-bearing stables on bank deposits. The report concluded that if allowed to flourish in the U.S., yield-bearing stablecoins could indeed lead to the “potential rotation from traditional deposits into stablecoins, which may offer more usability or competitive rates.”

Notably, the latest versions of both the Senate’s and the House’s stablecoin bills exclude yield-bearing stablecoins, and it remains unclear how these products will be regulated in the U.S. The Senate’s GENIUS Act states that stablecoins that let holders earn a yield could be considered securities, whereas the bill explicitly seeks to regulate “payment stablecoins” specifically.

“Circle’s existential risk comes down to whether or not banks can resist their institutional habits long enough to build something that actually serves the crypto ecosystem,” Autonomys’ Ruoff said, concluding: