Stablecoins move hundreds of billions of dollars every month, often faster and cheaper than card networks or wire transfers. What began as a tool for crypto traders is quickly becoming a mainstream payment rail, one that can help the banking sector cut costs, reach new customers, and defend its role in payments.

Read more: How the GENIUS Act Creates a Built-In Advantage for Banks and Deposit Tokens

At this point, banks have no choice but to get in on the action. The only question is how. Should they rely on third-party issuers like USDC and USDT, or issue a stablecoin of their own? History shows this decision will have lasting consequences. When banks surrendered payments infrastructure to card networks decades ago, they lost control over pricing, branding, and customer experience — costs that still weigh on them today.

Banks Can’t Afford to Outsource Stablecoins

Every banker understands how the card era unfolded. In the 1960s and 1970s, as electronic payments gained momentum, banks created “neutral” card networks that would help payments infrastructure scale in a standardized and secure manner. 

The tradeoff was outsourcing control. 

This story is an excerpt from the Bits + Bips newsletter.

Pricing power shifted to Visa and Mastercard, each of which eventually became their own publicly-traded entities, and whose debit and credit card interchange fees together totaled $172 billion in 2023. For comparison, JPMorgan Chase, the largest bank in the world by market capitalization, made $18 billion from its payments business in 2024. Branding also migrated from the bank to the network’s logo. Even customer relationships became mediated by third-party rules and dispute systems.

Stablecoins risk creating the same dependency. Today’s leading issuers decide how their tokens evolve, what fees to charge, and which compliance standards to apply. They are also in the process of building their own proprietary networks, such as Circle (Arc) and Stripe (Tempo), which will capture transaction fees and other forms of revenue. Banks that adopt them inherit those choices instead of shaping them. The results are either commoditized infrastructure — meaning payments that look and feel the same everywhere, with little room for differentiation — or having a critical vulnerability lurking in its payments business. 

Banks Should Retake the Reins

Issuing a proprietary stablecoin gives banks the chance to flip the equation. Instead of relying on outside providers, they can design payment rails that reflect their own priorities and their customers’ needs. For e-commerce businesses or import-export companies, that means faster settlement, lower fees, and user experiences that strengthen the bank’s brand rather than someone else’s.

A bank-issued stablecoin can also embed compliance and risk controls directly into the bank’s platform. Transactions can be aligned with existing KYC and AML frameworks, and reserves can be reported in ways regulators already recognize. For banks, that turns regulatory alignment from a liability into a competitive advantage.

Read more: Custodia Has a Patent for Bank Stablecoins: Can It Box Out Big Banks?

Most importantly, a purpose-built stablecoin creates room for innovation. Customers could send payments that settle in milliseconds rather than days, cover network fees with the same token they are spending, and receive loyalty rewards directly in their wallets. Again, these functionalities already exist elsewhere in the blockchain sector, but their benefits only accrue to third parties like Circle. Merchants could issue programmable refunds or conditional payments without relying on intermediaries. Each of these improvements creates a visible difference in the customer experience that third-party solutions can’t match.

Critically, issuing a branded stablecoin does not require banks to become a stablecoin creator themselves, which can be expensive and regulatorily burdensome. Instead, banks can simply partner with an existing stablecoin issuer (of which there are multitudes), borrowing their tech stack and regulatory licenses to quickly bring a custom stablecoin to market. They can even partner up with infrastructure firms to launch their own blockchains and fully control the rails. PayPal effectively leveraged this strategy to beat other mainstream brands to market, partnering with stablecoin issuer PAXOS to launch its custom PYUSD stablecoin. 

Importance of Interoperability

To be clear, banks issuing their own proprietary stablecoins does not mean that they will need to operate in siloes. 

Bank-issued stablecoins won’t operate with the same kind of political and jurisdictional neutrality as stablecoins created by firms like Tether and Circle (which serve global liquidity markets), but it is still possible for banks to devise standards and communication protocols so that a theoretical JPM Coin could be honored by a merchant or customer who banks at Wells Fargo, and vice versa. After all, these institutions were able to work together to form Zelle. Integration will naturally be further developed in the future.

First Movers Move Fast

In payments, being early matters. The first banks to launch their own stablecoin will set the standard for speed, cost, and user experience. Customers will come to expect instant settlement, seamless wallets, and real-time rewards. And, crucially, they will associate those advantages with the institutions that delivered them first.

Read more: GENIUS Act Passes: Who Are the Winners, Losers, and What Comes Next?

Brand identity is also at stake. A bank-issued stablecoin isn’t just infrastructure, it’s a visible product in the hands of customers. The bank’s logo becomes the symbol of faster payments and smarter tools, reinforcing loyalty at a time when digital competitors are pulling deposits away.

For corporate clients, early movers will become the default choice for programmable treasury and cross-border settlement. Once suppliers, CFOs, and finance teams integrate with a bank’s token, switching costs will be high. That network effect will compound over time, much as card networks did in the last era.

The window will not stay open forever. Once customers and businesses are accustomed to using a third-party stablecoin (or another bank’s), the chance to lead will be gone.