Major Financial Institutions to Enter Stablecoin Market

Guillaume Poncin of Alchemy predicts that the passage of the Genius Act will soon attract major financial institutions to the stablecoin business.

The U.S. Senate has passed the Genius Act, providing much-needed regulatory clarity for stablecoins. Major financial institutions are anticipated to develop their own stablecoins following this legislation. In an interview with crypto.news, Guillaume Poncin, CTO of Alchemy, noted that Alchemy is collaborating with Visa, Coinbase, Stripe, and Robinhood on stablecoin issuance.

Previously, major banks hesitated to enter the stablecoin arena due to unclear regulations, a situation now rectified by the new bill. Poncin expects that every bank will eventually issue its own stablecoins and operate their own blockchains.

Advantages for Banks and Clients

Question: What are the main advantages for banks issuing stablecoins?

Guillaume Poncin: By offering their own stablecoins, banks can capitalize on reserve floats, generating significant annual revenue from treasury yields. They will also maintain control over customer relationships and transaction processes, avoiding dependence on third-party issuers.

For clients, bank-issued stablecoins enable instant settlement, 24/7 accessibility, and programmable money, all backed by the trust and protections that come with traditional banking.

Implications for Major Stablecoin Issuers

Question: What does this mean for stablecoin issuers like Circle and Tether?

GP: Circle and Tether have already established their platforms for crypto and international transfers. Banks will likely explore different opportunities such as corporate treasury and regulated institutional flows. Owning a stablecoin could offer them additional asset control along with revenue generation.

Given the industry’s growth, there is ample space for specialized players. Circle’s upcoming IPO further indicates traditional finance’s acceptance of stablecoins as a legitimate infrastructure. Alchemy supports both existing issuers and banks venturing into this realm.

Differences in Approaches to Minting and Compliance

Question: How do Circle and Tether differ in their approaches?

GP: Circle employs a highly regulated approach with transparency and regular attestations, making USDC favorable for institutional use. Tether prioritizes accessibility and ease of use across various markets. While Circle is more cautious with technical changes, Tether is more open to multi-chain solutions; both have pros and cons for different clients.

Network Preferences for Banks

Question: Will banks prefer layer-1 or layer-2 networks?

GP: It varies by use case. For large B2B transactions, banks may opt for Layer 1 for enhanced security, while Layer 2 is more suited for retail applications offering lower transaction costs.

This trend is beneficial for Ethereum as Layer 2 solutions still rely on its security. The rise of specialized Layer 2s tailored for various functions opens new opportunities for banks.

Interoperability Across Bank Blockchains

Question: How will interoperability function between bank blockchains?

GP: Interoperability presents challenges but is achievable. We’re seeing emerging solutions with cross-chain messaging protocols and atomic swaps. Unlike traditional banking’s correspondent systems, blockchain interoperability can be immediate and trustless.

A future model may see major banking chains linked via established protocols, enhancing efficiency in transactions while maintaining quick settlements.

Alchemy’s Role in Blockchain Integration for Banks

Question: What role does Alchemy play in this space?

GP: Alchemy acts as the backbone, making blockchain technology accessible without requiring banks to become experts. We provide the infrastructure, including node management, APIs, and developer tools for various blockchain applications.

After the repeal of SAB 121, interest from major global banks surged. They are now focused on fast-tracking their blockchain integration, and our goal is to facilitate that transition seamlessly.

Read more: “It’s not if — it’s when” — how Amazon, Walmart, and Ant Group plan to leverage stablecoins.