New competition is being welcomed by Tether as its stablecoin dominance is expected to be challenged by traditional banks preparing to enter the market.
A joint stablecoin initiative is reportedly being developed by several of the largest banks in the United States, including JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo, according to a May 23 report by the Wall Street Journal.
The development was confirmed by Sam Kazemian, founder of Frax Finance, indicating that discussions among major banks may have progressed beyond mere speculation.
A significant shift has been marked by this move, as established institutions are seen competing directly with crypto-native players. It also reflects a clear change in the perception of stablecoins by traditional financial firms, now viewed as a strategic necessity within the global economic system.
Significant traction has been gained by stablecoins owing to their role in delivering dollar-backed liquidity within the cryptocurrency market. They are utilized by traders to hedge against market volatility and are also relied upon by users in emerging economies for access to dollar-denominated assets.
The increasing functionality of these tokens, along with heightened legislative focus in the United States, has led to their being prioritized by financial institutions aiming to maintain a competitive edge.
Greg Waisman, the Chief Operating Officer at Mercuryo, was quoted by CryptoSlate as having stated:
The prospect of a consortium of leading US banks entering the cryptocurrency market with a joint stablecoin demonstrates how crypto native products may now be driving the evolution of financial markets. Stablecoins are a valuable source of liquidity in the digital token space supporting a variety of different projects and protocols.
Stablecoin Market Faces Shake-Up Amid Traditional Bank Entry
The stablecoin market, currently valued at $245.9 billion, is predominantly controlled by two major players—Tether’s USDT and Circle’s USDC—whose combined market share accounts for 87%.
However, this dominance could be challenged by the entry of major banks, as their extensive financial infrastructure and regulatory leverage are expected to be brought into play.
A brief yet pointed response was shared on social media by Paolo Ardoino, the CEO of Tether, following the announcement.
Welcome player 2.
Confidence in Tether’s market leadership was conveyed through his remark, implying that the advancements made by crypto-native firms over the past decade are only now being approached by traditional banks.
USDT, issued by Tether, continues to be traded more than any other stablecoin globally, with its market capitalization exceeding $150 billion. It has been widely utilized for cross-border transactions, remittance services, and digital commerce, particularly in areas where access to the US dollar is restricted.
At the same time, a more skeptical stance was expressed by BitMEX co-founder Arthur Hayes, who indicated that the stablecoin initiative launched by the banks might present serious challenges for Circle. He stated:
Bye bye Circle. Thanks for playing.
It was implied by Hayes’ comment that Circle could face difficulties in contending with the emerging layer of competition introduced by these traditional financial institutions.
This development has been accompanied by strategic evaluations at Circle, with options such as a potential public listing or acquisition by entities like Coinbase or Ripple currently being explored.
