October 31st, 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

• Western Union announces Solana stablecoin, transforming global cash off-ramps
• Money 2020: Stablecoins for the win
• The Fed proposes ‘skinny master accounts’ to enable non-bank access
• Crypto’s IBM moment: Coinbase becomes banks’ go-to crypto partner

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

Horses to Tokens: Western Union’s Stablecoin Makeover

Western Union announced plans to launch USDPT (U.S. Dollar Payment Token), a dollar-backed stablecoin built on Solana and issued by Anchorage Digital Bank, with an expected H1 2026 launch. The stated objectives are to reduce costs, accelerate settlement times, and bypass traditional correspondent banking systems. The company also filed a trademark for "WUUSD" covering cryptocurrency wallet software, stablecoin payment processing, trading, and exchange services. Beyond the stablecoin itself, Western Union unveiled a Digital Asset Network designed to transform its 400,000+ retail locations worldwide into cash off-ramps for digital assets. [Sources: PYMTS, The Block, WSJ]

My Take

If nothing else, WU got a nice market bump on its stablecoin news, making back over half of their YTD price slump. Since it was Money 2020 week, I’m unsurprised by the rush to get this news out, and the seeming lack of internal coordination to present a cohesive story across USDPT and WUUSD.

The two key takeaways here are their stated strategy and the potential to drive a step function advancement in cross-border stablecoin payments. On the first point, CEO Devin McGranahan was explicit about the motivation: Western Union wants to "own the economics linked to stablecoins." While I am generally skeptical of stablecoin issuance as a business, I am optimistic for Western. Most issuers end up paying out most of their reserve yield to incentivize distribution.

WU is different: they already have fiat access points, money movement licenses, and proven use cases with strong pricing power relative to most financial services. The market cap for a payments-focused stablecoin will be low due to high turnover, but enabling better payments experiences means lower operational costs and higher pricing. If the company is astute, owning the economics should not mean reserve yield, but rather payments revenue and margin.

On the point of sophistication, let me turn to the second takeaway. I am happy that they came out the gate (ha ha 🐎) with a plan to open the network for “wallets and wallet providers” to access cash off-ramps. Having spent a lot of time with the stablecoin payment network providers, I’ve learned that they still struggle with a lack of cost-efficient local liquidity to convert a USD stablecoin into local fiat to complete a payment. This is exacerbated by stablecoin-based payments typically only flowing in one direction. Western’s balance sheet and presumably more balanced payment flow will help third party networks access more corridors more efficiently.

We’ll see exactly how this product works and who can use it, but I see a very bullish case here for both WU and the industry in general, including banks who are prepared to integrate with the stablecoin payments networks.

Stablecoins Take Center Stage: Money 2020's Regulatory Victory Lap

Money 2020 in Las Vegas featured prominent stablecoin discussions across regulatory, banking, and fintech stakeholders. OCC Comptroller Jonathan Gould stated in a fireside chat that digital asset activities are "fundamentally parts of or incidental to the business of banking" and expressed his preference for seeing these activities conducted within the regulated banking system rather than outside it. Gould highlighted the OCC's new responsibilities for federal payment stablecoin regulation under recent congressional legislation, with regulatory frameworks due by July 2026. Fiserv received a Diamond Award for "democratizing stablecoin access" through its infrastructure serving 10,000 financial institution clients. In a panel discussion on stablecoins and cross-border payments, Texas Capital Bank's Nancy McDonnell, head of treasury solutions, positioned stablecoins as "the next offering that we have to present to our clients”. The panel explored stablecoin use in foreign exchange and projected stablecoin payment volumes could reach $1 trillion annually by 2030. Western Union's announcement of its USDPT stablecoin launch for H1 2026 was among several major stablecoin-related announcements during the conference. [Sources: Fintech Futures, Businesswire, Morningstar]

My Take

The regulatory stoplight has turned from red to green on digital assets. Gould's comments—following the Erebor provisional charter approval—make this unambiguous. Banks now have explicit permission to pursue stablecoin strategies.

But here's what the conference buzz doesn't capture: regulatory clarity doesn't equal implementation clarity. Across dozens of recent conversations with banks, credit unions, and financial services providers, I consistently hear the same challenges: confusion about the business case for stablecoins, challenges selecting vendors, and lack of playbooks to follow. The market fragmentation means there's no clear "industry standard" path forward, despite what polished conference presentations suggest.

This gap between regulatory permission and operational execution is where competitive advantage will be won or lost. Banks waiting for a definitive playbook will watch competitors build that playbook through experimentation. The institutions moving now—even imperfectly—are learning what works, building vendor relationships, and positioning themselves as stablecoin-capable before it becomes table stakes.

The conference celebrated progress, and that progress is real. Now comes the hard part: building businesses that justify the celebration.

Fed's Skinny Accounts Could Strengthen Bank-Issuer Partnerships

Federal Reserve Governor Christopher Waller proposed creating a specialized "payment account" to provide streamlined access to Fed payment rails for payments innovators. Waller described these "skinny master accounts" as offering basic Fed payment services to legally eligible institutions that currently rely on third-party banks with full master accounts. The payment accounts would provide access to Fed payment rails without interest on balances, would not include daylight overdraft privileges or discount window access, and would feature a faster approval process than standard master accounts. Waller emphasized that "payments innovation moves fast, and the Federal Reserve needs to keep up," though he clarified the proposal remains a prototype concept requiring stakeholder input before implementation. [Sources: Steptoe, ABA, FRB]

My Take:

Skinny accounts unbundle Fed access from banking relationships, which should worry any bank making money on payment flows. But for stablecoin services, this separation might be exactly what conservative banks need.

This isn't narrow banking—it's the Fed formalizing what has been happening informally for years. Non-bank payment companies currently access Fed infrastructure through banking partners. Skinny accounts eliminate that intermediary, letting qualified institutions handle their own Fedwire access. For banks processing significant payment volume, this represents direct competitive threat. Payment flows that currently generate fee income and customer data will bypass banks entirely.

But stablecoin issuers present a different calculus. Banks have been reluctant to fully embrace issuer relationships because the operational reality is messy: mint and burn transactions create AML compliance burdens, real-time redemption demands stress liquidity management, and the regulatory ambiguity around crypto activities makes risk committees nervous. The payment processing piece—the part skinny accounts would handle—is precisely the part many banks would prefer not to own.

Skinny accounts let banks cherry-pick the relationship. Issuers can self-serve their Fed payment access for minting and burning with their counterparties, while banks focus purely on what they do well: reserve custody. Holding issuer deposits is stable, predictable balance sheet business. It doesn't require building specialized stablecoin payment operations. The skinny account limitations—no interest on balances, balance caps, no discount window access—mean issuers still need banks for reserve custody and emergency liquidity. Banks get the deposit relationship without the operational complexity.

This creates a path for conservative institutions to participate in stablecoin growth without taking on issuer operational risk. The irony is that payment disintermediation—typically a threat—becomes a feature for banks that want stablecoin exposure without stablecoin infrastructure. Banks that recognize this can position for high-quality reserve relationships rather than competing to process volatile payment flows they don't want anyway.

Is Coinbase Crypto’s IBM?

Citi and Coinbase announced a collaboration to integrate digital asset payment capabilities into Citi's institutional client services, initially focusing on fiat on/off-ramps and exploring "fiat to onchain stablecoin payout methods" leveraging Citi's presence in 94 markets. In parallel, Apollo Global Management partnered with Coinbase Asset Management to develop stablecoin credit strategies—including over-collateralized lending, corporate direct lending to stablecoin issuers and fintechs, and tokenized credit products. Meanwhile, Mastercard entered late-stage talks to acquire crypto infrastructure provider Zero Hash for up to $2 billion, positioning the payments giant to compete directly in stablecoin settlement infrastructure after reportedly losing a bidding war with Coinbase for rival firm BVNK. [Sources: Citi, Coinbase, Coindesk]

My Take:

The crypto industry spent a decade arguing that decentralization would free finance from centralized intermediaries—and now the largest banks are routing their digital asset strategy through a single crypto exchange that actively competes for their own customers. Coinbase appears in nearly every major bank partnership announcement: Citi, Apollo, PNC, JPMorgan. They're becoming the IBM of digital assets—the safe, enterprise-approved choice that every bank picks because every other bank picked it.

Meanwhile, Mastercard's reported $2 billion bid for Zero Hash reveals the payment giants' struggle to compete. They're acquiring rather than building, trying to catch up to Coinbase's multi-year head start in bank-grade custody, compliance infrastructure, and institutional relationships. Banks’ predilection for Coinbase - which actively competes for those banks’ own customers - is a statement on the competitive pressure, how little their own blockchain investments have yielded, and how few choices large banks have.

Here's the strategic opportunity for community and regional banks: you have far more choices. While JPMorgan and Citi are locked into Coinbase relationships by scale requirements and risk committees demanding "nobody gets fired for choosing IBM," smaller institutions can work with emerging infrastructure providers who don't compete for retail deposits. These partnerships offer better economics, more flexible integration, and vendors who see banks as partners rather than distribution channels for their own competing products. The irony is that being smaller creates strategic flexibility that megabanks have already surrendered.

Coupon Clippings

Japan's Yen Stablecoin Could Unlock Tokenized FX Markets

Japan's three largest banks—Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho—plan to jointly launch yen-pegged stablecoins for their 300,000+ corporate clients. The stablecoin will initially be used for cross-border payments by Mitsubishi Corporation, with broader rollout planned across the banks' extensive business networks. Bank-issued JPY and USD stablecoins arriving alongside CFTC blessing for stablecoin derivatives collateral creates intriguing timing for tokenized FX markets. The JPY-USD forex market trades over $1 trillion daily with massive derivatives volume, yet tokenized FX hasn't developed at scale despite years of blockchain experimentation. It seems that having major bank-issued stablecoins in both currencies available as derivatives collateral could provide the institutional infrastructure that this market has been missing. [Full Story]

Stripe's $5B Bet on Payments Infrastructure

Tempo, the payments-focused Layer 1 blockchain incubated by Stripe and crypto investor Paradigm, raised $500 million in a Series A led by Thrive Capital and Greenoaks at a $5 billion valuation. The network already counts OpenAI, Shopify, Visa, Anthropic, and Deutsche Bank as design partners and positions itself as optimized for "high-scale, real-world financial applications" rather than trading. This represents one of the largest blockchain fundraises in recent years—exceeding the $350-400 million that Aptos raised in 2022 (now a $2.2Bn valuation). The blockchain graveyard is littered with well-funded Layer 1s that failed to materialize deca-billion-dollar valuations. For the Series A investors to get their desired returns, Tempo would need to become a top 5 blockchain, among Solana, Ripple, and Ethereum, despite being primarily a single-use chain. Assuming that Tempo will compete on fees with other chains, they will need a LOT of payments volume to satisfy investors (by comparison, Solana is processing over 26bn transactions/year, and Visa did 10x that in 2024). [Full Story]

Tokenized Stocks on Kraken Passes $5B Volume

Kraken's tokenized equities platform hit $5B in trading volume since July—proof that tokenization demand is real when regulations allow it. While U.S. regulatory restrictions keep this offshore for now, the infrastructure lesson is critical for banks: tokenization capabilities are fungible across asset classes. Banks building stablecoin infrastructure today are simultaneously building the foundation for tokenized securities lending, custody, and collateral management tomorrow. The institutions treating stablecoins as a standalone project rather than infrastructure investment are missing the strategic point. [Full Story]

Zero-Fee Stablecoin Swaps Threaten Issuer Lock-In

Institutional crypto liquidity provider B2C2 launched PENNY, a platform enabling instant, zero-fee swaps between major stablecoins (USDT, USDC, PYUSD, RLUSD, USDG, and AUSD) across Ethereum, Tron, Solana, and Layer-2 networks. The service targets banks, merchant acquirers, exchanges, and stablecoin infrastructure firms, processing swaps through B2C2's institutional trading infrastructure that handles roughly $1 billion in daily stablecoin volume. Settlement happens on-chain with no counterparty risk, operating 24/7 with continuous liquidity. This development signals the infrastructure layer beneath stablecoins is rapidly commoditizing—if B2C2 can offer zero-fee, instant swaps at institutional scale, it makes less sense to align a product or business with a specific stablecoin. The companies that have inked partnerships with Circle may regret exclusivity clauses when their competitors readily swap between USDC and a token like USDG that shares reserve yield with the distribution partner. [Full Story]