Fifth-Largest U.S. Bank Joins Stablecoin Race With Stellar Partnership

TLDR

• U.S. Bank, America’s fifth-largest commercial bank with $671 billion in assets, is testing custom stablecoin issuance on the Stellar blockchain network
• The pilot program runs in partnership with PwC and the Stellar Development Foundation to explore bank-grade programmable money on public blockchains
• Stellar was chosen for its built-in features allowing asset freezing and transaction reversal, meeting regulatory requirements like KYC and compliance needs
• U.S. Bank formed a digital assets division last month focused on stablecoin issuance, cryptocurrency custody, asset tokenization, and digital money movement
• Cross-border stablecoin payments could reach $1 trillion in annual volume by the decade’s end according to Keyrock projections

U.S. Bank announced Tuesday it has begun testing custom stablecoin issuance using the Stellar blockchain. The Minneapolis-based institution ranks as the fifth-largest commercial bank in the United States.

The bank is working with PwC and the Stellar Development Foundation on this pilot program. The test aims to determine if traditional banks can safely issue programmable money on public blockchain networks.

U.S. Bank manages $671 billion in assets as of September 30, according to Federal Reserve data. The institution joins other major banks like Bank of America and Citi exploring stablecoins backed by U.S. dollars and Treasury securities.

Mike Villano serves as U.S. Bank’s senior vice president of enterprise innovation and head of digital assets. He explained that Stellar’s platform offers specific features needed for banking operations.

Technical Features Drive Platform Selection

The Stellar network provides built-in capabilities to freeze assets and reverse transactions at its base operating layer. These functions align with regulatory requirements that banks must follow.

Banks need to maintain Know-Your-Customer protections for their clients. They also require the ability to clawback transactions when necessary.

Stellar’s blockchain has maintained 99.99% uptime over the past decade. Financial firms including Taurus, Franklin Templeton, WisdomTree, and Circle already use the network.

Digital Assets Division Launch

U.S. Bank established a dedicated digital assets division last month. The new unit focuses on generating revenue from emerging digital products and services.

The division’s scope covers stablecoin issuance, cryptocurrency custody, and asset tokenization. It also handles digital money movement operations.

Dominic Venturo is chief digital officer at U.S. Bancorp. He stated clients increasingly want to understand how digital assets can help them move money safely.

Clients also seek information about storing deposits and using tokenized assets. The bank identified multiple potential use cases for these technologies.

Stablecoin Market Context

Stablecoins are cryptocurrencies with prices pegged to fiat currencies like the U.S. dollar. They are gaining adoption as tools for faster and cheaper cross-border payments.

Financial institutions and global businesses are exploring how to embed stablecoins into their operations. Companies see potential for reducing treasury management costs.

Keyrock projects cross-border stablecoin payments could hit $1 trillion in annual volume by 2030. This represents growth in institutional adoption of digital payment rails.

Tether’s USDT and Circle’s USDC currently rank as the two largest USD-pegged stablecoins. These established players dominate the existing stablecoin market.

The Stellar network’s native token XLM traded at $0.25 on Tuesday. The token decreased approximately 2.9% that day in line with broader crypto market declines.

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