September 8th, 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

• The US banking lobby continues its fight to narrow allowed stablecoin issuance activities
• Circle continues to grow its distribution, positioning itself as the coin of choice across all stablecoin payments networks
• Card network stablecoin settlement continues to grow
• Google reminds us that they, too, have a blockchain

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

Banking Lobby (Continues To) Fight Back

The banking industry has been mounting a campaign to revise the GENIUS Act to address two loopholes. First, they argue that the GENIUS Act leaves open a loophole for stablecoin distributors like crypto exchanges to pay “rewards” to holders of stablecoins on their platform. Coinbase pays 4.1% rewards to USDC holders on Coinbase, and Kraken pays up to 4% to holders of USDG. The lobby’s underlying fear, which motivated the no-yield provision in the Act, is that yield could trigger deposit outflows comparable to the 1980s money market fund boom, forcing banks to raise funding costs and reduce lending.

Second, they worry that section 16(d) creates unfair regulatory arbitrage by allowing stablecoin issuer subsidiaries of depository institutions to conduct cross-state money transmission. This provision would apply to uninsured depository institutions. [Full Stories: CoinDesk, Coin Telegraph, FT, ABA, BPI]

Our Take:

Let’s first address the detailed policy questions around 16(d). The GENIUS Act provision preempts state regulatory authority with respect to whether foreign entities can engage in monetary transmission locally. The preemption is restricted to stablecoin issuers regulated in their home state, and so it seems somewhat benign on the surface because it grants state stablecoin issuers powers that are automatically granted to federally-licensed issuers. However, since these issuers would be subsidiaries of depository banks, its unclear whether they could become a conduit for deposit gathering into an uninsured depository institution. If so, that would make the preemption quite a bit more powerful, removing discretion from state regulators, many of whom operate under laws that require depository institutions to carry deposit insurance. I tend to agree with the banking lobby on their argument for the benefit of the digital assets industry. The US’s dual-banking system is the reason that digital assets was able to exist for the past 4 years when the federal government did everything in its power to stop it. It makes sense to avoid setting a precedent for federal override of that system in good times, because if the pendulum swings back, we’ll want the states to remain a safe harbor.

Now on to yield. Starting in the late 1970s, banks made the same argument against money market funds: that they unfairly compete as shadow banks under lighter regulation and they create systemic “run risk”. Since then MMF assets grew to $7.4 trillion, representing 40% of US deposits. Yet, interest rate spreads for consumer loans issued by banks remained steady, bank net interest margins remained steady, and there weren’t any runs on MMFs (true: the federal government backstopped MMFs once in 2008). During this time, deposit growth for the most part met or exceeded GDP growth. Meanwhile, during that time, nearly 3,000 banks failed. So, it seems that banks were able to protect their business models and consumers were unharmed by high lending rates.

I will entertain the argument that the future may not be like the past. With faster payments systems, the disruption potential of a yield-bearing stablecoin grows compared to the 1980s when it took days to swap deposits for money market funds. But, I still don’t think we should stop these developments as the bank lobby suggests, and I do think stablecoins should pay yield directly to their holders.

I hold this belief because of the fundamental truth that stablecoins are an evolution of money, and the first real evolution roughly since the creation of the Fed wire network. Stables offer a far better set of capabilities with fewer tradeoffs than other kinds of money, and will bring immense value to consumers and businesses.

It will also bring creative destruction, and I empathize for banks. Disruptive change is hardest when it comes quickly, but when a system has time to adapt, it will emerge stronger and more resilient. The global economic system’s adaptation to a new form of money will take time, and institutions that think constructively rather than defensively will discover new business models for the next generation of banking.

Circle’s Ongoing Effort to Build Global Distribution

Circle continued to roll out more tradfi partnerships, announcing a collaboration with Finastra to provide USDC for cross-border payments and an arrangement to support USDC in FIS’s Money Movement Hub alongside FedNow and RTP. FIS’s head of corporate strategy said “stablecoin is just yet another real-time payment rail”. Both partnerships position stablecoins as practical solutions to reduce correspondent banking costs and settlement times while maintaining existing compliance frameworks. FIS claims to be in talks with major banks planning their own deposit tokens, and is investigating tokenization on permissioned blockchains. [Full Stories: Circle/Finastra, FIS]

Our Take:

Circle (and Tether) understand the power of distribution and network effects - their early start and wide adoption in defi is what has enabled them to largely retain their yield in a rising rate environment in the face of many other stablecoins with yield sharing features. Maintaining a much wider distribution than their competitors is absolutely critical to their business model. Circle has an incredible early-mover advantage: it’s the only major provider with both US GENIUS Act and European MiCA compliant tokens, has the credibility of a public company, and has cash to burn. For traditional conservative financial institutions that need to deliver a stablecoin strategy to their boards and investors, partnering with Circle is practically the only option today.

For now, the rate at which Circle seems to be winning key distribution points in tradfi cuts against the blockchain ethos of decentralization. While some crypto-maxis take this philosophy to an extreme, it’s helpful to remember the risks of centralizing on one provider. For many, cooperative interbank schemes turned into predatory card networks, everything stores turned into antagonists of local businesses, and “don’t be evil” search engines turned into a surveillance state. Centralization unlocks scale network benefits for members at the cost of empowering the provider with distribution advantages that investors inevitably demand the company leverage to extract outsized rents from the market.

I don’t mean to sound alarmist, and I don’t think that this outcome is a foregone conclusion. First, there’s still a healthy ecosystem of blockchain and stablecoin innovation, and with permissionless chains, that will always remain a possibility. Second, as I discussed in the last edition of The Stablecoin Banker, Circle now must defend itself against large payments companies (Stripe and blockchain-cum-payments-network Ripple) who might get enough network adoption to move participants to a competing stablecoin.

The more that the industry aligns with a single stablecoin or centralized chain, the opportunity that drives builders to think different diminishes in the face of intense industry lock-in. Furthermore, distribution advantage consolidates in the network, which shifts pricing power away from the members (banks in our case). The challenge is to build stablecoin-powered products that deliver user value while seeking to advantage upstart players so as to maintain competition between the networks that can transact value.

Why not announce a multi-stablecoin payments solution? Or, one that takes advantage of on-chain compliance tooling rather than proprietary data exchanges? I think the reason is that most people still just think that “stablecoin is just yet another real-time payment rail”. This sounds great, but is a limited perspective that makes it all too easy to shoehorn this new technology into a traditional systems, pick one provider, and call it a day. Stablecoins-for-payments is the first step in my mind, and the most boring. The opportunities for mixing and matching different token types in autonomous programs (what we blockchain people call “composability”) is what enables completely novel products and goes beyond “faster, cheaper”.

To bring these opportunities to life, we need traditional institutions to be ready to engage with multiple issuers, chains, etc. This is why I advocate for banks that are considering stablecoins to strive for optionality by acquiring or building flexible systems that can utilize primitives with concentrated adoption while still leaving open the possibility to more easily trial creative options as well.

Stablecoin Utility in Card Network Settlement

The use of stablecoins in card networks continues to grow. Mastercard enabled stablecoin settlement for acquirers across Eastern Europe, Middle East and Africa, while Rain secured $58 million in Series B funding to advance its enterprise stablecoin payment platform that partners with Visa. These developments highlight the card networks' strategic embrace of stablecoins as settlement rails, moving beyond pilot programs to operational deployment across multiple regions and enterprise use cases. [Full Stories: Mastercard, Stable Dash]

Our Take:

Somewhat surprisingly and unsurprisingly at the same time, cards and card networks are emerging as one of the major examples of stablecoin adoption. Far from being a threat to the card networks, stablecoins are helping them close the timing gap from card auth to settlement which simplifies the entire value chain from program manager to merchant.

Rain saw this potential and built out two unique capabilities. First, multi-jurisdictional card issuance that eliminates individual banking relationships in each country. Second, direct stablecoin settlement from program manager to card network. This creates immediate operational advantages—better capital efficiency through more frequent settlement, increased reliability by avoiding legacy correspondent banking rails, and dramatically faster time-to-market with single BIN sponsorship across multiple locations. This powers digital-only fintechs that want to expand across multiple geographies as quickly as possible.

To their credit, Visa and Mastercard have been working with stablecoins far longer than most people realize. Stablecoins for interbank settlement makes complete sense for their participants because it unlocks more regular and predictable settlement, which in turn drives down members’ collateral requirements with the network. Instead of holding collateral to secure 3-5 days of payment volume with the network, an issuing bank that settles daily with stablecoins can hold 1-2 days of collateral that can be redeployed at higher rates.

Banks that bone up on stablecoin capabilities can unlock trapped collateral and earn more on their assets.

Google (Re)Joins the Blockchain Frenzy

A LinkedIn post from Rich Widmann, Head of Web3 Strategy at Google, drew refreshed attention to Google’s own Layer 1 blockchain, the Google Cloud Universal Ledger (GCUL). Widmann drew comparisons to recently announced chains from Stripe and Circle that described GCUL’s role in payments and finance and hinted at leveraging “Google-scale network effects” for billions of users and institutional partners. [Full Story: LinkedIn]

Our Take:

Google originally announced GCUL in March 2025, but this well-timed post effectively leveraged the fervor around corporate-sponsored payments blockchains to earn them a second bite at the apple. As with many other recent similar announcements, GCUL is still light on details, so we’re left to speculate.

GCUL is being positioned as “neutral infrastructure” that avoids the competitive issues inherent in Stripe’s Tempo and Circle’s Arc chains, but lacks inherent distribution advantage that is relevant to the financial use case it’s trying to attract. The nod to “Google-scale network effects” is exciting, but achieving this outcome would require massive cross-org coordination that only happens for Sundar Pichai or Thomas Kurian #1 priority projects. I think their plates are probably full with monopoly lawsuits and AI. Yet, GCUL is well-positioned to natively plug into Google Cloud services, blurring the lines between web2 and web3 development, creating a compelling opportunity to broaden developer access.

Coupon Clippings

Retail Stablecoin Transactions Set New Record

According to Visa, stablecoin retail transfers (transactions under $250) hit a record $5.8 billion in August 2025, with year-to-date volumes already exceeding all of 2024. Survey data in Nigeria, India, Pakistan and Indonesia shows that reduced fees and faster transactions are in the top 3 reasons users adopt stablecoins. Don’t write these results off if you are sitting in the US: Nigeria and India both offer faster, more ubiquitous, and cheaper payments networks than in the US, yet users still adopt stablecoins for payments. [Full Story: Coindesk]

US Government to Publish GDP Data on Chain

The U.S. Commerce Department will publish official GDP data and other statistics on nine public blockchains. This is interesting because it enables on-chain products built around these data. Now, developers can build prediction and hedging markets based on economic data or inflation-linked products, without requiring users to trust their data sources. In the same way that on-chain representations of off-chain assets created a $270Bn stablecoin market, trusted on-chain data unlocks new financial products. [Full Stories: Crypto briefing]

Crypto Wallet MetaMask Launches Stablecoin

MetaMask announced its proprietary stablecoin, mUSD, issued via Stripe’s Bridge. With millions of active users (30M as of early 2024), Metamask can capture issuance yield and use it to subsidize products to attract users. Contrast MetaMask with PayPal’s pyUSD to think about likely adoption: whereas PayPal has 400M+ users, it’s core product is not crypto or stablecoin-native. MetaMask is the exact opposite, notably driving trading volume to on-chain markets, where it could incentivize adoption more easily than PayPal. [Full Story: PYMNTS]

Omnia is a provider of stablecoin infrastructure for banks that want to capture growing demand for stablecoins. If you’re interested in learning more about us, please get in touch.

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