To The Moon

Wall Street is transitioning from a passive observer to a coordinated counterforce, as a full-scale digital currency battle led by the banking sector is now underway. To combat the ongoing encroachment of stablecoins on the payments landscape, leading institutions including JPMorgan Chase (JPM.US), Bank of America (BAC.US), HSBC Holdings PLC (HSBC.US), Citigroup (C.US), and Wells Fargo (WFC.US) have decided to abandon their solo efforts. Instead, they are collaborating to build an interoperable tokenized deposit network, with a core strategic aim to replicate the successful path of Zelle. This initiative will be coordinated and operated by The Clearing House (TCH), marking the first large-scale coordinated action by the US banking industry against crypto assets.

This shift is not accidental; the changing industry landscape clearly points to one fact: traditional financial giants have realized that relying solely on proprietary systems cannot stem the tide of digital dollars. They must rebuild competitive barriers by jointly developing shared infrastructure. The urgency of the threat has been quantified by data, with the explosive growth in stablecoin transaction volumes putting the banking world on high alert. Last year, stablecoin transaction volume surged to $33 trillion, a year-on-year increase of 72%. Their use cases have expanded from initial cryptocurrency trading to fund transfers for various payment enterprises and financial institutions. Predictions indicate that by 2030, stablecoin payment flows could surpass the $50 trillion mark.

The Banking Sector's Current Challenge

In contrast, while institutions like Bank of New York Mellon (BK.US) have launched their own blockchain payment systems supporting 24/7 transfers and offering interest-bearing deposit advantages, their transfer scope remains limited to their own clients. They cannot achieve the barrier-free, global transfer between any entities that stablecoins offer. Data analysis shows that this lack of cross-institution interoperability is causing traditional banks to gradually lose control over capital flows when facing low-cost, high-speed stablecoin payment networks.

Learning from the Zelle Playbook

Historical experience shows that Zelle is the banking industry's most successful case of combating external competitors, but it also foreshadows the execution challenges facing the current alliance. Over a decade ago, major banks joined forces to create Zelle to counter the rapid rise of Venmo. It took years of preparation to finally launch, and now the project processes over $1 trillion in payments annually. However, replicating this miracle is not easy, as market iteration speed is far faster than it was then. Dozens of competing institutions must achieve a high degree of consensus on technical standards, governance rules, and commercial incentive mechanisms. Past alliance projects in finance have often stalled or progressed slowly due to diverging interests among parties.

Internal Hurdles and Policy Shifts

Alessandro Hatami, partner at Pacemakers.io and former digital payments head at Lloyds Bank, points out that these very banks have over the past decade frequently announced various blockchain projects with few seeing the light of day. Their competitive relationships make building shared infrastructure extremely difficult, with technical coordination and profit distribution being primary challenges. A shift in the policy environment has provided a critical window for the banking industry's counterattack. The trend towards more lenient regulation during the Trump administration has directly accelerated Wall Street's tokenization plans. US policymakers believe that dollar-pegged tokens can help solidify the dollar's global dominance and boost demand for US Treasury bonds. The GENIUS Act passed last year further established a comprehensive regulatory framework for stablecoins, sounding the horn for their mainstream adoption. However, the focus of policy debate has quickly shifted to whether to allow stablecoin issuers to offer yield-bearing products. If this restriction is lifted, bank deposits could face severe diversion risks.

The Quantifiable Threat and Strategic Response

Nicole Sandler, Chief Ecosystem Officer at Ubyx, emphasizes that the competitive threat is now clearly visible and quantifiable. Banks are witnessing a significant shift of clients to stablecoin channels for fund transfers, a stark contrast to the distant, abstract potential threats of the past. This is forcing institutions to take substantive action to retain core deposit resources. The Clearing House's project aims to achieve interoperability between different digital currency systems, thereby significantly expanding business coverage. The project is planned for official launch next year, targeting the integration of financial institutions managing trillions in deposits and serving tens of millions of clients. Its scale and breadth are intended to far exceed the current stablecoin market.

Building for Scale and Global Needs

Debopama Sen, Head of Payments for Service Businesses at Citigroup, notes that for large clients operating globally, simplifying operations and achieving interoperability between different bank systems is crucial. Christopher Ward, Head of Enterprise Payments at Truist Financial, states that this follows the same logic as when the US promoted the development of a real-time payments system: achieving widespread adoption through jointly established unified rules. Elena Casal, Chief Client Officer at TCH, emphasizes that building industry-shared infrastructure is in its DNA, and a mature governance framework will accelerate project implementation. Market demand is primarily concentrated in wholesale payments, corporate treasury management, and liquidity scheduling. The future network will also reserve expansion capabilities to support stablecoin clearing operations.

A Crowded and Fragmented Arena

Despite TCH having a foundation for success, the field is already crowded, with multiple players competing simultaneously, increasing the risk of industry fragmentation. SWIFT revealed last week that over 17 banks are preparing to pilot cross-border tokenized payments on its new distributed ledger. Institutions like Goldman Sachs, Deutsche Bank, Bank of America, and Spain's Santander also formed an alliance late last year to research stablecoin-like currencies. Manish Kohli, Global Head of Payments Solutions at HSBC, analyzes that platforms built by transforming mature systems have a higher chance of success. The TCH project, with its stable membership base and clear US domestic use cases, faces relatively lower implementation risks. HSBC itself is also participating in the UK's tokenized deposit initiative and Hong Kong's Ensemble project.

The Uphill Battle for Incumbents

However, the transformation path for established payment giants remains difficult. The PYUSD launched by PayPal in August 2023 has a circulation of only $2.9 billion, a negligible volume compared to the $184 billion USDT issued by Tether and the $73 billion USDC issued by Circle. Marieke Flament, co-founder of Currency of Power, points out that while banks have been slow to act, their resource mobilization capabilities are extremely strong. Whether they can keep pace with the rapid development of the crypto field remains the greatest challenge.