U.S. Banks Reveal Plans to Create Stablecoin

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A coalition of FDIC-insured financial institutions called the “USDF Consortium” has been created with the goal to enter the cryptocurrency arena with their own stablecoin offering. Stablecoins are cryptocurrencies that are created to replicate the stable value of fiat currencies such as the U.S. dollar but in the form of a digital currency.

The group’s mission statement is to “build a network of banks to further the adoption and interoperability of a bank-minted stablecoin, which will facilitate the compliant transfer of value on the blockchain, removing friction in the financial system and unlocking the financial opportunities that blockchain and digital transactions can provide to a greater network of users.”

Founding members of the USDF Consortium include New York Community Bank (NYCB), NBH Bank, FirstBank, Sterling National Bank, Synovus Bank, Figure Technologies, Inc. and JAM FINTOP.

The Consortium will offer the USDF, which will be a bank-minted alternative to non-bank-issued stablecoins such as Tether’s USDT or Circle’s USDC. The USDF will be minted exclusively by U.S. banks, and plans to address the consumer protection and regulatory concerns regarding non-bank issued stablecoins. The new stablecoin offering will be launched on the Provenance blockchain, which is a public blockchain with its own DeFi ecosystem.

While the USDF offering states that the institutions minting the stablecoin are FDIC-insured, the Consortium’s statements do not indicate whether or not the reserves backing USDF will be insured for now. Still, the USDF and the insurance of the FDIC behind the banks minting the asset can certainly be considered a step above digital asset providers such as Tether in terms of security, which still shows reluctance when asked to show proof of its reserve backings. USDF will be redeemable on a 1:1 basis for cash from a Consortium member bank, providing a more secure option for digital asset transactions and falling in-line with FDIC Chairman Jelena McWilliams’ statements and requests regarding the stablecoin industry.