Banks Eye G7 Stablecoins: Wall Street Explores USD, Euro, Yen on Public Blockchains

Introduction

A consortium of major banks—including Bank of America, Goldman Sachs, Deutsche Bank, Citi, and led by BNP Paribas—announced a project to explore issuing 1:1 reserve-backed stablecoins on public blockchains, pegged to G7 currencies such as the U.S. dollar, euro, and Japanese yen. The goal is to assess whether bank-issued stablecoins can deliver the benefits of digital assets—faster settlement, programmability, and new financial products—while maintaining regulatory compliance and robust risk management.

In the U.S., the timing aligns with the recently enacted GENIUS Act—signed by President Donald Trump—which creates a federal framework for payment stablecoins but won’t take effect for roughly 15 months pending Treasury and Federal Reserve rulemaking. While many in crypto welcomed the law, banks have urged regulators to close perceived loopholes around interest-bearing stablecoins, citing financial stability risks. Industry voices are split: Multicoin’s Tushar Jain expects deposits to migrate to higher-yield stablecoins, while Circle’s Dante Disparte argues the law’s language limits Big Tech or banks from dominating the market.

If launched, G7-linked bank stablecoins would compete with leading private issuers, especially Tether’s USDT (the market leader), as well as USDC, DAI, Ethena USDe, PayPal USD (PYUSD), and USD1. The banks’ initiative underscores intensifying competition to define the future of digital dollars and other fiat-pegged assets, balancing compliance-first models with open, public blockchain rails. 

Background

A consortium of leading global banks is exploring the issuance of reserve-backed stablecoins linked to major G7 currencies, including the U.S. dollar (USD), euro (EUR), and Japanese yen (JPY). In a statement referenced by BNP Paribas, participating institutions—including Bank of America, Goldman Sachs, Deutsche Bank, and Citi—said they aim to assess whether a 1:1 reserve-backed digital money model on public blockchains can deliver faster settlement, programmability, and new financial products while meeting regulatory and risk management standards.

This initiative would operate alongside, and potentially compete with, existing private stablecoins like Tether’s USDT and Circle’s USDC. It also highlights how traditional finance is testing compliance-first digital money rails on open networks.

What is a G7-Pegged, Reserve-Backed Stablecoin?

A stablecoin is a digital asset designed to maintain a stable value, typically by being pegged 1:1 to a fiat currency and backed by liquid reserves such as cash, Treasury bills, or short-term government securities.

A G7 peg means aligning tokens to currencies from the Group of Seven—United States, Canada, United Kingdom, France, Germany, Italy, and Japan—anchoring the instrument to globally significant reserve and trade currencies.

“Reserve-backed” and “1:1” indicate each token is redeemable for an equivalent unit of the underlying fiat currency, with verifiable reserves held by the issuer or custodian. Market trust hinges on frequent disclosures and third-party attestations.

Issuing on public blockchains enables transparent settlement, composability with other applications, and global interoperability. It also raises important compliance questions about KYC/AML, sanctions screening, and identity on open networks.

If advanced beyond exploration, bank-issued G7 stablecoins could serve wholesale payments, cross-border settlement, intraday liquidity optimization, and programmable finance. They may complement, not replace, central bank efforts like CBDC pilots and regulated liability networks. Crucially, these would be liabilities of commercial banks, not central banks.

Why Banks Are Interested Now: Regulation and Market Dynamics

In the U.S., the GENIUS Act—signed into law by President Donald Trump—creates a federal framework for payment stablecoins. However, the law won’t take effect for roughly 15 months, pending rulemaking by the Treasury and Federal Reserve.

The competitive landscape is crowded. Tether’s USDT leads by market capitalization, followed by USDC. Other notable tokens include DAI, Ethena USDe, PayPal USD (PYUSD), and USD1. Any bank-issued stablecoin will need to compete on transparency, liquidity, redemption reliability, and regulatory clarity. 

Banks are also weighing potential deposit flight. Some institutions urge policymakers to address perceived loopholes around interest-bearing stablecoins, arguing they could pull deposits into higher-yield digital money and introduce stability risks. Industry voices disagree: some foresee deposit competition intensifying, while others say the GENIUS Act includes guardrails limiting dominance by Big Tech or any single player. 

Key Benefits and Design Considerations

Faster, programmable settlement is a primary benefit. On-chain transfers can finalize quickly, enabling real-time invoicing, conditional payments, and automated workflows in supply-chain finance.

Interoperability with public chains allows integration into DeFi rails, tokenized deposits, and multi-bank networks. This enhances reach and composability compared with closed, siloed infrastructures.

Transparency and attestations are essential. Market acceptance often hinges on robust, frequent reserve reporting and third-party validation. While banks already operate under strict oversight, on-chain markets value timely, granular disclosures.

Compliance controls must be embedded. KYC/AML, the travel rule, sanctions screening, and list-based controls can be implemented via permissioned interfaces, whitelists/blacklists, or token standards designed with compliance hooks.

Cross-border FX and liquidity management add complexity. Multi-currency issuance requires credible market-making, tight spreads, reliable redemption, and liquidity coverage across time zones.

Stablecoins vs. CBDCs vs. Tokenized Deposits

Stablecoins are privately issued or bank-issued tokens pegged to fiat and backed by reserves. They offer programmability and interoperability on public chains.

CBDCs are sovereign digital currencies issued by central banks, either retail or wholesale. They tend to move slowly due to policy, privacy, and infrastructure design considerations but carry the strongest sovereign backing.

Tokenized deposits are digital representations of commercial bank deposits on distributed ledgers, typically in permissioned settings. They carry bank credit risk and usually are not freely transferable on public chains.

These models can coexist. Bank-issued G7 stablecoins could bridge public-chain utility with the supervision and compliance that regulators and institutions prefer.

What Comes Next

The banking group has not provided a go-live timeline. Expect internal design studies on chain selection, token standards, reserve composition, and compliance architecture.

Pilot programs are likely to start with limited counterparties and clearly defined use cases, such as cross-border corporate payments or intragroup liquidity management. Feedback from regulators will shape scope and rollout.

Jurisdiction matters. In the U.S., GENIUS Act rulemaking will clarify reserve and supervision standards. In the EU, MiCA provides a framework for e-money tokens and asset-referenced tokens. In Japan, legal reforms allow certain stablecoin structures via trust arrangements or bank issuance—potentially informing a JPY model.

If successful, bank-issued G7 stablecoins could demonstrate whether compliance-first digital money can match the liquidity and utility of private incumbents while providing stronger assurances on reserves, redemption, and oversight. The results will influence wholesale payments, cross-border transfers, on-chain finance, and how traditional finance connects to open blockchain ecosystems.