October 20th, 2025

Four stablecoin developments bankers should know about

Welcome to the latest edition of The Stablecoin Banker, a periodic newsletter to help the banking community stay on top of the most relevant stories in the stablecoin industry. We highlight top stories that are relevant to banks, with our insights and commentary to draw out the most important conclusions.

If you find this content useful, please feel free to forward it to your friends and colleagues. They can also subscribe directly. If you’re interested in stablecoin services for your bank, feel free to reach out to us at Omnia.

In This Issue

• De novo crypto bank gets federal charters in 4 months
• The trust charter frenzy and vertical integration of banking
• Ripple and Coinbase go after commercial banking clients
• Tokenized deposits help banks build 24x7 accounting

Plus, tidbits you may have missed in our Coupon Clippings section.

The Wolf is in the Henhouse

The Office of the Comptroller of the Currency granted preliminary conditional approval to Erebor Bank on October 15. The online-only digital asset friendly bank received approval just four months after filing its application. Erebor is backed by Peter Thiel and Palmer Luckey.

Erebor will operate as a full-service depository institution offering traditional lending and deposit products alongside digital asset services. The bank targets technology companies in crypto, AI and defense, plus payment service providers, investment funds, trading firms, and HNWs. Notably, Erebor received explicit approval to hold approximately $1 million in non-asset backed virtual currency on its balance sheet for operational purposes such as transaction fees under the “incidental powers” clause of US banking code.

The bank requires a minimum 12% Tier 1 Leverage ratio during its first three years of operation and will be subject to FDIC insurance requirements. Comptroller Gould emphasized that the approval demonstrates the OCC "does not impose blanket barriers to banks that want to engage in digital asset activities" and that digital asset banking activities "have a place in the federal banking system if conducted in a safe and sound manner." [Sources: OCC Letter, Application, Banking Dive]

My Take:

Erebor’s speed of execution exposes the cost of caution. Erebor went from nothing to conditional approval in less than eight months, and they’re coming after the most profitable banking segment: commercial and HNW. This is nothing short of a watershed moment. After 4+ years of regulatory antagonism towards digital assets banking activities, we’re seeing a 180-degree turn. The lightning fast turnaround on this application includes precedent-setting regulatory rulemaking. In an extraordinary move, the OCC adjudicated an open permissibility question within the charter decision rather than through an interpretive or no-objection letter. All of this signals willingness to permit novel banking activities on a business-friendly timeline.

For existing banks, this creates an uncomfortable competitive reality because heretofore digital asset products have been relegated to lower forms of non-depository regulatory structures such as money transmitters or trust charters. Erebor is now building directly in the depository banking arena, and offering traditional deposit and lending services with FDIC insurance, leveraging digital assets. The wolf is now in the henhouse.

Traditional banks aren’t used to executing at this speed. For any banks hesitating to engage in digital assets due to perceived regulatory risks, this approval should serve both as a relief and accelerator. For any bank that specializes in commercial or HNW, take notice that at least one hungry, well-funded, startup bank is now pursuing your customers.

And, more are coming: NuBank - the wildly successful digital bank with 95M active customers - has submitted a charter application to the OCC that also anticipates providing some digital asset services for retail users are coming.

Stablecoin Issuers Are Building Their Own Banks

Following passage of the GENIUS Act in July 2025, major technology and financial firms are racing to secure national trust bank charters from the OCC for stablecoin operations. In October, Stripe's Bridge subsidiary and Sony Bank's Connectia Trust both filed, following earlier applicants Circle, Ripple, Paxos, and BitGo. The applications generally seek permission to issue stablecoins, manage the stablecoin reserves, and provide digital asset custody. Some applicants like Ripple and existing trust charter-holder Anchorage Digital are pursuing Federal Reserve master accounts, which would allow direct custody of stablecoin reserves at the Fed and access to payment rails without intermediary banks. Banking trade groups have urged the OCC to pause approvals, warning that stablecoins could drain trillions in deposits from community banks as the market grows from $300 billion toward US Department of Treasury estimates of $6 trillion. [Sources: Coindesk, Decrypt OCC]

My Take:

The trust charter gold rush reveals the endgame: stablecoin issuers are becoming federally-regulated financial institutions that won't need traditional banks. With Fed master accounts in play, these companies are building infrastructure to bypass correspondent banking entirely. Their vertical integration with payments networks and global distribution enable them to take payments share from traditional banks that hesitate to invest in the space. Now that trust charters are in play, blockchain companies can upgrade from their prior MTL licensing strategy into a clean structure with federal preemption.

The real strategic prize, however, is the Federal Reserve master account. Ripple's dual application strategy—trust charter plus Fed master account—would allow it to custody RLUSD reserves directly at the Fed and access payment rails without correspondent banks. If successful, this eliminates bank intermediation entirely. Issuers with master accounts would earn interest on reserves from the Fed rather than have to deal with the complexity of managing a US Treasury portfolio.

Some may recall the sagas of Custodia or The Narrow Bank. In both cases, applicants sought to put up to 100% of their assets on deposit at the fed. Only after lawsuits forcing the Fed to make a decision did the Fed reject both applications on similar grounds of monetary policy disintermediation and financial stability risk. The Fed worried that such strategies would hinder its ability to affect the monetary base through levers that grow or contract credit creation through fractional-reserve banking. They also feared that the applicants might cause instability in the banking system by positioning their products as safer than traditional banks.

Owing to the Fed’s independence (though the Trump administration seems to be forcing that question), it remains a bit of a wildcard in my mind. While I happen to think the monetary disintermediation assertion is bunk because the Fed exercises monetary policy in many ways other than through the banking system, I won’t be surprised if they use these arguments to slow or stop master account applications.

This doesn’t obviate the value of the trust charter for stablecoin issuers, but would keep them reliant on traditional banks for the time being. The winds have clearly shifted in favor of more competition within the banking space, removing barriers to non-bank applicants and use cases. In the meantime, these companies will continue to compete with banks for business, offering vertically integrated services through clean and modern user interfaces. Rather than hope what remains of the dam will hold, banks ought to get on offense now—offering stablecoin services to customers before federally-chartered competitors capture those relationships.

Stablecoins Come for Commercial Customers

Ripple announced a $1 billion acquisition of GTreasury, a treasury management system used by over 1,000 businesses, adding to its 2025 acquisitions of Hidden Road ($1.25B) and Rail ($200M). Coinbase launched Coinbase Business, a platform that allows companies to send/receive USDC payments with 4.1% APY on balances, payment links, API integrations, and connections to QuickBooks and Xero for compliance. [Sources: CoinDesk, Ripple]

My Take:

Stablecoin providers are not waiting for banks and treasury management providers to proactively adopt stablecoins. Ripple’s approach is to bring stablecoins to corporates by buying distribution. Treasurers using GTreasury will increasingly see recommendations for settlements using RLUSD instead of wires and 24/7 global payments through Rail's infrastructure. Coinbase Business is working to attract commercial accounts away from their incumbent banks. By offering 4.1% APY on working capital, instant global settlement across many blockchains, built-in banking integrations for fiat payments, and native accounting system integration, they've built a complete alternative to commercial bank accounts.

Bankers should take note that with these solutions, businesses can fully decouple from depository banking while gaining higher yields, more liquidity, and more ancillary services. These products will only grow more full featured with time. As asset tokenization continues, these providers will unlock more sophisticated treasury yield management. As stablecoin payment networks grow and standards for remittance advice and reversibility take hold, it will be easy to shift from fiat payment methods to stablecoin-backed payments.

Whereas industry insiders might talk about stablecoins, wallets, and blockchains, real users think about ease, speed, cost, and return. Commercial-grade products that offer these benefits with stablecoins are now reaching production scale, and providers like Ripple and Coinbase are finding ways to get in front of the users with benefits rather than implementation details.

Commercial accounts are banks' most profitable relationships. When treasury management software starts recommending stablecoin settlement over wire transfers—and the bank can't offer a competitive alternative—the account won't disappear immediately. It will erode invisibly, one transaction at a time, until the customer realizes they no longer need the bank.

Banks Build Blockchain Rails for Cross-Border

Major global banks are deploying tokenized deposits for payment infrastructure modernization. Citigroup CEO Jane Fraser declared during Q3 earnings “there's an overfocus on stablecoin at the moment. Most of this is going to get solved by tokenized deposit capabilities.” The Citi Token Services network now links over 250 banks across 40+ markets. BNY Mellon is testing tokenized deposits to upgrade its $2.5 trillion daily payment infrastructure, while HSBC has launched live cross-border tokenized deposit services between Hong Kong, Singapore, the UK, and Luxembourg. [Sources: CoinDesk (Citi), CoinDesk (BNY), PYMNTS (HSBC)]

My Take:

The benefits to banks of tokenized deposits are fairly obvious: a dollar that leaves the bank for a stablecoin is in theory a dollar of deposit the bank loses. There’s also an added benefit in the potential for the bank to extend its deposit reach to services “off-platform”. If a bank allows its tokenized deposits to move outside the wallets of customers, then it can effectively capture deposit NIM without onboarding holders. Therefore, it’s unsurprising to see banks trying to shift the narrative from stablecoins to tokenized deposits.

One of the biggest challenges with deposit tokens is that they expose the holder to counterparty liability to a bank. In some instances, a user may not want this exposure, such as for deposits in excess of the FDIC limit. However, cross-border settlement, where we’re seeing most announcements, is defined by interbank liability trading. Cross-border settlements move through a series of nostro/vostro accounts that create a daisychain of bank-to-bank liabilities. Therefore, a technology that makes that process faster or cheaper, without changing the fundamental structure, is a natural fit.

In the case of HSBC and Citi, it seems to me that what’s really happening is even a more downscoped version of this. In both cases, I believe the flows that are actually happening are more like an inter-company transfer. For HSBC, they are using tokenized deposits to move funds between regional HSBC branches. For Citi, while they claim 250 banks in 40 markets, I suspect that what’s actually happening is movement of funds on the Citi correspondent balance sheet for those banks (again, those hilariously-named nostro/vostro accounts). If I am right, this means that no one yet has established a true inter-bank deposit token transfer.

This raises an interesting question: If all you are doing is moving money on a balance sheet, or between balance sheets of two companies, why bother with blockchains? I think the answer is simply that blockchains allow banks to leapfrog their patchwork legacy banking systems. In the past two weeks I’ve had multiple conversations with banks looking at stablecoins or deposit tokens for the simple use case of actually enabling 24x7 interbank transfers because their cores cannot accomplish this simple database entry.

Coming back to the bigger picture, tokenized deposits still have a ways to go if their current application is to paper over legacy tech on a bank’s balance sheet. But, I don’t doubt that it will happen in the use cases where counterparties already knowingly accept bank liability in the normal course of a transaction. This is a subset of use cases, and hence why I also believe that the future will see tokenized deposits and stablecoins co-existing.

Coupon Clippings

Paxos's $300 Trillion Minting Error

Paxos accidentally minted $300 trillion in PayPal's PYUSD stablecoin on October 15 during an internal transfer before burning all excess tokens within 30 minutes. The error temporarily caused Aave to freeze PYUSD markets and briefly disrupted the stablecoin's peg, though Paxos stated there was no security breach and customer funds remained safe. This incident will circulate in every bank risk committee as evidence that blockchain technology is too immature for serious financial infrastructure. I suspect Paxos had not implemented realtime reserve balance checks in their stablecoin smart contract, and that such controls will become part of the standard implementation for issuers. But, let’s not forget Citi’s $900 million accidental payment to Revlon, or Citi’s accidental crediting of $80 trillion to a customer account. Errors will happen. One advantage of blockchain's transparency is how quickly errors can be discovered and fixed. [Full Story]

North Dakota's Roughrider Coin Launches in 2026

The Bank of North Dakota will launch the Roughrider coin, a USD-backed stablecoin, to North Dakota banks and credit unions in 2026. The Bank is the only bank owned by a US state, and primarily offers corresponded services to its 80+ community banks in the state. The stablecoin will initially focus on bank-to-bank transactions to streamline money movement and reduce settlement times. North Dakota's approach represents tokenization as a leapfrog strategy: instead of upgrading decades-old correspondent banking infrastructure, they're using blockchain to modernize payment rails entirely. I’ve heard at least 5 banks contemplating a digital asset correspondent strategy, so I expect to see more news like this in the near future. [Full Story]

What Do We Want? Stablecoin Yield!

Stand With Crypto orchestrated 250,000 letters to U.S. Senators calling for protection of stablecoin yields under the GENIUS Act. While the Act prohibits payment of interest to coinholders, it doesn’t explicitly prohibit the use of reserve asset yield to fund rewards programs such as the one offered by Coinbase, the company that originally created Stand With Crypto. The banking industry in August began urging lawmakers to amend the bill to prevent these rewards programs, and Stand With Crypto enlisted consumers to take the opposing viewpoint in letters to their Congressional representatives. I still believe that blocking yield is like nailing jello to a wall because of the infinite number of ways rewards programs can be structured. I’d recommend banks to expect yield sharing to continue in some form, and apply their efforts to thinking about how their business model and customer experience need to evolve. [Full Story]

Coinbase-Samsung Partnership Reaches 75M Galaxy Users

Coinbase partnered with Samsung to integrate crypto functionality into Samsung Wallet, giving 75 million U.S. Galaxy device owners access to Coinbase One. The partnership allows users to access crypto directly through the pre-installed Samsung Wallet app. While this partnership is mostly about crypto, it opens Coinbase’s stablecoin products up to 75 million more users.  Coinbase already offers pay-with-crypto merchant services, and has a partnership with Shopify to offer consumer retail payments. With access to Samsung Wallet, Coinbase has one more piece in place to offer domestic retail payments at scale. [Full Story]