Traditional Banks Enter Stablecoin Market to Challenge Tether $10B Dominance

Societe Generale, Standard Chartered, and Revolut are entering the stablecoin space to rival Tether, capitalizing on regulatory clarity and Tether exit from the euro-backed stablecoin market.

Traditional banks are making their move into the $138 billion stablecoin market, seeking to challenge Tether’s dominance. Financial giants like Societe Generale, Standard Chartered, and Revolut have announced plans to issue euro-denominated stablecoins, stepping into the void left by Tether’s recent decision to discontinue its EURt stablecoin.

Tether’s Exit Creates New Opportunities

Tether Holdings, which has been at the forefront of stablecoin innovation, launched the EURt stablecoin in 2016. However, the product struggled to gain traction, with its market capitalization dwindling to $37 million compared to the $138 billion for USDT.

Tether cited new Market in Crypto-Assets (MiCA) regulations in Europe as the reason for discontinuing EURt. This decision has opened the door for traditional financial institutions to enter the stablecoin market, offering them a chance to explore new revenue streams in the burgeoning digital finance sector.

Banks Launch Euro-Backed Stablecoins

Societe Generale-Forge (SG-Forge) has already introduced a Euro-backed stablecoin (EURCV), accessible to retail investors. Other banks like Oddo BHF, BBVA, and Revolut are in the process of developing their own stablecoins, while AllUnity has announced plans to launch a euro-based stablecoin in 2025.

MiCA regulations have provided a clear framework for issuing crypto assets in Europe, giving banks the confidence to invest in blockchain-based financial products. Jean-Marc Stenger, CEO of SG-Forge, revealed that multiple banks are in talks to adopt SG-Forge’s stablecoin technology through partnerships or white-label agreements.

Global Stablecoin Expansion

The race to issue stablecoins isn’t limited to Europe. Visa has launched a tokenization network aimed at simplifying stablecoin issuance, with BBVA among the early adopters. Standard Chartered has partnered with Animoca Brands and Hong Kong Telecommunications Ltd. to issue HKD-backed stablecoins in an experimental program.

Meanwhile, JPMorgan Chase is developing deposit tokens—blockchain-based assets tied to bank accounts—as an alternative to traditional stablecoins. Although these deposit tokens have limitations, they demonstrate the growing interest in leveraging blockchain to modernize banking systems.

Challenges Facing Bank-Issued Stablecoins

While stablecoins offer numerous benefits, they also come with challenges. A European Central Bank report warns that converting retail deposits into stablecoin reserves could weaken banks’ liquidity coverage ratios, making it harder to meet short-term financial obligations.

In the US, regulatory uncertainty remains a significant barrier. Banks are waiting for clear guidelines on acceptable reserves and insurance for stablecoin deposits to prevent potential market panic.

Additionally, the rise of Central Bank Digital Currencies (CBDCs) poses a competitive threat to bank-issued stablecoins, particularly in wholesale payments.

Stablecoin Market’s Lucrative Appeal

Despite the risks, Tether’s $10 billion profit margin underscores the potential rewards. Traditional banks believe that entering the stablecoin market is a worthwhile endeavor, even if it requires navigating regulatory and operational hurdles.

As stablecoins continue to reshape global finance, the involvement of traditional banks could drive further innovation and adoption, ultimately redefining the landscape of digital assets.

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