September 22nd, 2025

Four stablecoin developments bankers should know about

Happy autumnal equinox!

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

• Zelle considers launching a stablecoin
• On-chain stablecoin dogfight drives issuers to zero fee
• Google prioritizes stablecoins in agentic commerce standards
• NASDAQ seeks approval to trade tokenized securities

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

ZelleCoin: Could it Win the Stablecoin Wars?

Early Warning Services (EWS), the consortium owned by major US banks that operates Zelle, is reportedly exploring the development of its own stablecoin for payments use cases. Zelle currently processes over $1 trillion annually and facilitated 2 billion transactions in the first half of 2025, providing EWS with immediate distribution reach across millions of U.S. banking customers. [Yahoo]

Our Take:

Despite the non-committal, early-stage nature of this announcement, this represents one of the more practical and impactful ways for banks to compete in stablecoins and drive domestic adoption. While I remain skeptical of individual banks issuing stablecoins, a mutualized entity like EWS offers a compelling alternative to the fragmented approach we've seen from other institutions.

I’ve long believed that the best path for banks to compete against Circle/Tether dominance would be through a neutral third party industry utility. Pre-IPO, mutually-owned Visa or Mastercard would have been great companies to do this for the banks (as independent companies, incentives may be too misaligned for them to serve the role). Mutualized entities like The Clearinghouse or EWS makes sense in a number of ways.

EWS is uniquely positioned to succeed where individual bank efforts have struggled. First, they already have distribution access through their owner banks, provided those institutions deploy the necessary interfaces to support a Zelle stablecoin. Second, the existing settlement infrastructure between EWS and member banks can probably be reused for minting and redemption. Third, if they can retain Zelle branding on the coin, they’ll avoid fragmentation of each bank trying to brand the coin and retain economics.

The problem is that EWS has no merchant adoption strategy (assuming we’re talking about the holy grail of retail payments). EWS member banks represent some of the largest merchant acquirers in the country. A clever strategy would involve simultaneously enabling stablecoin payments in Zelle, with tap-and-pay / pay-by-Zelle at merchant POS and e-commerce locations, pushed by the acquiring banks. Or, an easier first step would be to partner with Shopify or Stripe as an intermediate merchant-servicing layer that can move faster than the acquiring banks. However, EWS member banks also represent the largest card issuing banks as well, which spells trouble because they have so much to lose from interchange disintermediation.

However they approach the problem, a Zelle payments coin likely will shift payments flows - and their economic benefits - between member banks in complex ways that favors some disproportionately, causing tensions. Card network conflicts are inevitable as acquiring banks potentially redirect volume away from traditional rails. Lastly, stablecoins lack established frameworks for consumer benefits and fraud protection, requiring new product designs.

Putting aside the tensions between big and smaller banks over EWS, and waving our hands at the complexities outlined, I am actually quite excited to see where this goes. There’s a potential to see the birth of a new mutualized-issuance model that has the scale distribution to succeed.

A New Front in the Stablecoin Wars

Hyperliquid, a decentralized perpetual futures exchange, announced a governance vote to award the coveted USDH stablecoin ticker to a stablecoin issuer. The platform launched in 2023 and processed $360 billion of trades in August, generating $106 million in fees (all of which are recycled to support the community). Today, it hosts $5.6 billion in USDC—representing 8% of total USDC circulation. Eight major stablecoin issuers submitted competitive proposals to unseat USDC, offering 95-100% yield sharing back to the Hyperliquid ecosystem. Notable proposals included Paxos partnering with PayPal to offer $20 million in incentives plus free on/off-ramps, and traditional finance giants like State Street and VanEck backing Agora's bid. The competition reflects the ongoing shift in stablecoin economics, where platforms with distribution power can now demand value from issuers. [Full Stories: LinkedIn, Galaxy]

Our Take:

This isn’t just about crypto gambling degenerates. It’s a window into the future of stablecoin issuer economics, the power of consumer monopsony, and the threat to traditional financial services business models.

The USDH competition perfectly illustrates how quickly established financial hierarchies can be disrupted when users gain a coordinating mechanism. The market clearing price for yield sharing from a stablecoin issuer has gone from zero to 100% in just a few short years. This is one reason why I am skeptical of stablecoin issuance as a business outside of select few situations.

This isn't just about stablecoins; it's a preview of what happens when platforms emerge that coordinate user interests. By dramatically reducing switching costs for users and product launch cost/timelines, blockchains have shifted power from producers to consumers. These consumers are increasingly savvy in how they understand the value that they contribute to a network effect. With decentralized protocols, users can easily act as a monopsony, coordinating opinion via decentralized voting that gets implemented directly in the protocol operating code. Realizing that Circle and Hyperliquid competitor Coinbase have been generating approximately $200 million per year of interest income from USDC on Hyperliquid, the community pushed back. They acted as a single buyer of stablecoins, and have won tantalizing concessions from issuers.

For banks and financial companies one final point is relevant: don’t confuse friction with loyalty. In the Hyperliquid story, we see the power of technology to eliminate the substantial friction that makes it hard to coordinate consumer behavior. This hasn’t hit banks yet, but it will. By enabling companies without licenses to easily offer powerful bank-like experiences (often without needing any licenses), stablecoins reduce the friction of building fintech apps. These apps plug into blockchain payments networks and yield protocols that benefit from user-driven network effects, and will increasingly pass those benefits through to consumers. So, it’s not that these apps will coordinate people against banks, but rather that the network effects benefits will draw users away from banks.

Fortunately, those benefits can also accrue to banks that embrace this new technology and are willing to think critically and creatively about how their business plans need to evolve over the next 5, 10 or 15 years.

Google Elevates Stablecoins to First-Class  Status in Agentic Payments

Google launched the Agent Payments Protocol (AP2), establishing stablecoins as a first-class payment method alongside cards for AI-driven commerce. PayPal participated in the announcement, and saw its stock price climb 4.7%. Developed with Coinbase, Ethereum Foundation, and 60+ partners, the protocol enables AI agents to autonomously execute transactions using both traditional payments and cryptocurrencies through the x402 HTTP standard. Programmatic payments open the door to novel capabilities such as AI-negotiated prices and live payment method comparison to maximize consumer value. This development legitimizes stablecoins in mainstream commerce. [Google]

Our Take:

Everyone I know in the US questions the value of stablecoins for domestic payments. As a replacement for existing rails, I agree there is minimal or negative value. But, for programmatic payments, I am growing increasingly excited. Note that I said “programmatic payments” rather than “agentic payments” because the benefits I am about to describe don’t require an autonomous AI agent; they can be realized by us humans as well.

The AP2 protocol is an open-source standard, which is important because it helps coordinate merchants and PSPs without asking them to integrate with a single centralized provider. AP2 models the full commerce flow, making shopping faster and more full-featured. The new protocol representations for shopping intent, cart offer, and funds availability make it possible for merchants to negotiate offers and incentives at checkout. Merchants can selectively offer cash discounts for shoppers holding stablecoins. An AI agent can simultaneously negotiate with multiple merchants because it possesses verifiable proof of the owner’s intent and ability to pay.

The announcement isn’t all about stablecoins, but it strongly supports them. It speaks volumes that Google has included stablecoins alongside traditional cards in the first release. For the first time, we’re seeing “digital cash” promoted by major payments companies. I suspect that agentic payments will reduce human friction and thus increase transactional velocity and reduce average purchase size. Both of these trends preference stablecoins because of their favorable economics compared to cards.

The question is, where will users get their stablecoins? Today, the answer is fintechs and crypto companies - many of whom participated in the development of the standard - and not banks. At least, not until the banks catch up in the stablecoin economy.

The Future of Stock Trading: NASDAQ Seeks SEC Approval for Tokenized Securities

NASDAQ is formally seeking SEC approval to enable trading of tokenized equity securities alongside traditional shares, with identical rights, execution rules, and clearing through existing DTC infrastructure. The proposal would allow participants to select tokenized settlement on a trade-by-trade basis while maintaining all existing market protections. Industry experts project the first tokenized equity trades could begin as early as late 2026, pending regulatory approval and completion of DTC's tokenized settlement infrastructure. [Full Story: Proskaur, Filing]

Our Take:

I am very excited about tokenized assets in general. Critics question why we need tokenized equities when US equity market access has never been broader. I see three key reasons:

First, rapid settlement that eliminates the headaches caused by next-day settlement.

Second, streamlining cross-border access to US equities trading.

Third, tokenization creates opportunities for bank product innovation. Securities lending, currently requiring complex custodial arrangements and filings, could become as simple as the borrower depositing tokenized stock collateral with the bank directly as a custodian and lender. Real-time liquidation capability and 24x7 markets dramatically improve both risk management and customer experience. In the long run, banks could combine this capability with cards or on-chain funding markets to create entirely new revenue streams while meeting demand for 24x7 liquidity that stablecoins and real-time payments are driving.

With that said, the Nasdaq proposal is only a step in this direction. At it’s core, it simply enables Nasdaq to trade tokenized and non-tokenized equities side by side. The clearing and settlement infrastructure would still be handled by the DTCC, which would also control the underlying wallets holding the tokens, and remain on next-day settlement. You’d be right to ask “what exactly does this change?”. As far as I can tell, it doesn’t change much - yet. Elevating any kind of token to first-class status on a national exchange needs to be done with minimal disruption or risk, and so I hope that this is just one step forward in a journey that would eventually support third-party tokenized stocks and flexible deposit/withdrawal from the clearing and settlement agent - two capabilities that could unlock the second and third benefits I identified.

Coupon Clippings

MoonPay Acquires Meso Network

Crypto on-ramp provider MoonPay has acquired crypto payments startup Meso Network. Add this to the list of emergent stablecoin-powered payments networks (Stripe/Bridge, Conduit, Sphere, Rail/Ripple, BVNK and more). Rather than needing to own the entire fiat flow, these modern networks leverage stablecoin composability to connect disparate providers in each country - an on-ramp in the sender’s country to an off-ramp in the recipient’s country. Since stablecoins are bearer instruments, the on-ramp and off-ramp providers can be completely independent of each other, and thus easier to mix, match, and combine by the network provider. This reduces network defensibility and means that we don’t need one giant network to achieve network effects: banks that can connect to multiple networks will gain maximum coverage. [Bloomberg]

First Bank-Issued stable going live?

St. Cloud Financial Credit Union, a $400 million Minnesota institution, plans to launch "Cloud Dollar" (CLDUSD) in Q4 2025, claiming to be the first U.S. credit union to issue a stablecoin. This is a great proof-of-concept, but given that the coin is launched by a small institution on a proprietary blockchain with minimal distribution, it probably won’t see much adoption. However, since the token is connected to the CU’s core, we’ll get to see a regulated depository institution address issues of regulatory capital, liquidity management, and compliance related to stablecoin access. [Coindesk]

Solana: the blockchain of the financial future?

Solana’s community-approved Alpenglow upgrade will overhaul its consensus engine to cut transaction finality from 12.8 seconds to 150 milliseconds, boosting speed, resilience, and reliability as the network advances toward its vision of becoming “an on-chain Nasdaq”. Recent announcements for payments-focused corporate blockchains all referenced complaints about blockchain speed and dedicated payments bandwidth. Solana is upping its game by targeting a 90% reduction in transaction settlement time, increasing bandwidth from 40,000 transactions per second, and deploying these changes to its already substantial ecosystem of stablecoins and payments use cases. [Sherwood]

Tether Launches U.S.-Compliant Stablecoin USAT

Tether announced a new U.S.-regulated stablecoin, USAT, aimed at businesses and institutions. Former White House crypto advisor Bo Hines joins as CEO of USAT, signaling its push into the American market and deeper regulatory engagement. Tether is seeking to extend its global dominance in stablecoins ($171 billion outstanding vs Circle’s $74 billion) by making a push into the US after years spent avoiding the jurisdiction. USAT could be interesting for banks because of the global Tether distribution network. [Tether]

Figure Interest Soars

Figure Technologies IPOed at a $4.66 billion valuation amid surging investor demand for crypto stocks. It has since traded up to $9.6 billion, at a cool 128 times earnings and 25 times revenue. Figure has built a blockchain solution for consumer loans, including HELOCs that fund in 10 days versus an industry average of 42 days. Much of this advancement is due to off-chain automation, and probably selection bias for borrowers with an average FICO score of 750. But, their ability to maintain immutable records on the blockchain makes it easier for loans to trade which can contribute to faster funding and lower rates.  [Yahoo]