Big Banks Can Find Safety in Numbers on a Stablecoin
Working together could shield them individually from the reputational risk of any coin they issue being used to fund crime or terror.
Tether became hugely profitable by pocketing the interest paid on its reserves.
Photographer: Justin Tallis/AFP/Getty Images
Banks are contemplating a role for themselves in stablecoins if pending US legislation helps take cryptocurrencies and their gateway products mainstream. Companies owned by Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. have had discussed jointly issued coins, according to the Wall Street Journal. European lenders such as Banco Santander SA are also potentially interested in such projects.
It makes sense for banks to be involved in products that could compete directly with their own payment services and deposits. It’s also sensible for them to work together to shield them individually from the reputational risk of any coin they issue being used to fund crime or terror. They still need better rules and defenses around that possibility as well as confidence that the technology will be reliable.