Major banks explore issuing stablecoin pegged to G7 currencies

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The project, which is in its early stages, will explore whether there is value in issuing assets on public blockchains which are pegged 1:1 to real-world currencies - a type of cryptocurrency known as stablecoins.

"The objective of the initiative is to explore whether a new industry-wide offering could bring the benefits of digital assets and enhance competition across the market, while ensuring full compliance with regulatory requirements and best practice risk management," the banks said.

CRYPTO RALLY, TRUMP AID INTEREST IN STABLECOINS

Various banks and other financial institutions have announced plans to look at launching stablecoins, as soaring crypto prices and U.S. President Donald Trump's support for the sector has sparked a revival of interest in the idea of using blockchain in the mainstream financial system.

Regulators and financial stability authorities have expressed concern that stablecoins could facilitate the movement of funds outside regulated banking systems, potentially undermining the role of commercial banks in global payment flows.

Bank of England Governor Andrew Bailey has warned UK banks against issuing their own stablecoins, while the European Central Bank President Christine Lagarde said in June that privately issued stablecoins posed risks for monetary policy and financial stability.

So far stablecoins have been largely used for moving money between crypto markets, which remain a small part of wider financial markets. Nearly nine-tenths of stablecoin transactions are related to crypto trading while just 6% for actual payment of goods or services, BCG estimated in a report earlier this year.

The market is dominated by the El Salvador-based Tether, which accounts for $179 billion of the $310 billion worth of stablecoins in circulation, according to CoinGecko.

RIVAL CONSORTIUM OF BANKS LAUNCHING A EURO STABLECOIN

Some bank bosses say they see greater promise in the tokenisation of financial assets, in which digital representations of assets such as deposits, stocks and bonds are created and stored on a blockchain. Citi's CEO said in July that tokenised deposits were probably more important than a stablecoin.

Many such projects remain in the pilot phase and executives said last year that efforts to tokenise assets were moving more slowly than expected.

Reporting by Elizabeth Howcroft and Tommy Reggiori Wilkes, Editing by Louise Heavens

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