A group of regional banks has launched a consortium to spur the development of the bank-minted stablecoin USDF to compete with non-bank-issued stablecoins and meet rising consumer demand.
USDF will be exclusively minted by U.S. banks and be redeemable on a 1-to-1 basis for cash from a consortium member bank. Founding bank members include New York Community Bank, Hicksville, N.Y.; NBH Bank, Greenwood Village, Colo.; FirstBank, Nashville, Tenn.; Sterling National Bank, Pearl River, N.Y., and Synovus Bank, Columbus, Ga. Other founding members include fintechs Figure Technologies, Inc., and JAM FINTOP.
USDF is intended to address the regulatory and consumer protection concerns non-bank issued stablecoins pose and offer a safer option for blockchain transactions. Because USDF is on a public blockchain, customers will be able to conduct peer-to-peer and business-to-business money transfers. Also, banks and their customers can use USDF for capital call financing along with invoices and supply chain finance.
The stablecoin market is a growing presence in finance: the Fitch ratings agency estimates that stablecoin assets increased by approximately 450 percent to $156 billion in 2021. Consumers are demanding more access to blockchain applications for payments and other transactions. “This will solve a critical need to move funds on blockchain, and it does so in a way that can scale, adheres to regulatory standards, and is acceptable to all users from large institutional investors to retail customers,” said Andrew Kaplan, NYCB’s chief digital and banking as a service officer.
Valerie Kramer, chief digital officer at the Greenwood Village, Colo.-based NBH Bank, said the stablecoin “aligns with our focus on building out a comprehensive digital financial ecosystem to provide greater access to credit, FDIC-insured depository and treasury management solutions, and integrated financial information, all while lowering transaction costs for small and medium-sized businesses.”