Advancements in Stablecoin Models by Traditional Financial Institutions

The landscape for stablecoins is evolving as traditional financial institutions in the US, Europe, and Asia make strides into this innovative sector, fueled by decreasing regulatory uncertainties. Companies such as PayPal, Mastercard, and Visa are launching their own stablecoins or integrating stablecoin-related settlements into their payment infrastructures. The transformation extends beyond corporations, as major banks band together to examine new stablecoin models.

Key Takeaways

Traditional financial institutions, including leading banks, are increasingly investing in stablecoin development.
The GENIUS Act is a significant driver in the US stablecoin movement, shaping the launch and operation of several new stablecoin projects.
Europe is working to establish its own euro-based stablecoins as a response to the dominance of US dollar-pegged stablecoins.
Asia’s stablecoin development is influenced by region-specific regulations, with countries like Japan and Hong Kong taking decisive steps.
The regulatory landscape is shifting to favor centrally managed stablecoins, enhancing their credibility and integration into existing financial systems.

How TradFi banks are advancing new stablecoin models

The excitement around stablecoins surged following the signing of the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act by US President Donald Trump on July 18, which encouraged various entities to explore different models for stablecoins.

The GENIUS Act: A Catalyst for the US Stablecoin Movement

Before the GENIUS Act, stablecoin operations in the US primarily relied on New York’s trust charter system. For instance, in August 2023, PayPal issued PayPal USD in collaboration with Paxos, which is licensed by the New York State Department of Financial Services. Similarly, Fiserv, based in Wisconsin, announced the launch of FIUSD in June 2025, planning to integrate it into banking systems by year-end, utilizing Paxos and Circle infrastructure. Following the passage of GENIUS, Fiserv broadened its strategy by collaborating with the Bank of North Dakota on the “Roughrider Coin” pilot project.

US dollar stablecoins recorded $1.5 trillion in monthly transactions in October 2025. Source: Visa/Allium

Mastercard became part of Paxos’ Global Dollar Network in June 2025, enhancing its stability and settling across various payment systems with support for PYUSD, USDC, and FIUSD. Visa began its USDC settlement on the Ethereum network in 2021, extending it to Solana by 2023, which enabled companies like Worldpay to settle payments directly in stablecoins.

Custodial banks have also sought to secure stablecoin holdings. For example, BNY Mellon is now safeguarding stablecoins issued by Ripple and Société Générale. Meanwhile, JPMorgan is piloting its own deposit token, JPMD, on Base, presenting it as an alternative for cash settlements for institutional clients. Retail giants such as Walmart and Amazon are also reportedly exploring their own branded stablecoins, while Western Union is working on USDPT on Solana for cross-border remittances.

The GENIUS Act is set to take effect after a transition period of 18 months or 120 days post-final rules issuance.

The Euro Stablecoin Landscape: MiCA and Market Challenges

Despite some progress, euro stablecoins represent a modest fraction of the global stablecoin market, primarily dominated by dollar-pegged USDC and USDT. This dominance was established before the GENIUS Act, and with US-based TradFi firms moving into the stablecoin space, it may continue to grow. European Central Bank's payments advisor, Jürgen Schaaf, cautioned that failing to respond strategically could jeopardize European monetary sovereignty and financial stability.

The Markets in Crypto-Assets (MiCA) regulation went into effect for stablecoins in mid-2024, providing a framework for banks and regulated financial firms in Europe to issue euro-denominated stablecoins. This regulatory clarity has spurred compliant stablecoin initiatives across the continent.

Euro stablecoins total about $680 million in market value, compared with roughly $305 billion for US dollar stablecoins. Source: CoinMarketCap

In France, Société Générale’s digital asset arm, SG-Forge, has introduced EURCV and USDCV, with custody services by BNY Mellon. Germany's AllUnity has launched the EURAU stablecoin, with plans for multi-blockchain expansion. A collaborative project is underway among nine European banks, including ING and Deutsche Bank, aimed at creating a shared euro stablecoin, expected to launch in 2026, promoting financial independence from US-based infrastructure.

Asia's Diverse Stablecoin Initiatives

In Asia, the development of stablecoins is largely influenced by regional regulations rather than a unified framework like MiCA. Japan has set up one of the earliest stablecoin frameworks among major economies, with changes to the Payment Services Act that took effect in June 2023, establishing a legal category for "issuer-backed" stablecoins. These must be fully redeemable at par and can only be issued by licensed banks, trust companies, or money transmitters.

Stablecoin depegs still cast a long shadow over the industry. Source: Nansen

Japan's major banks, such as Mitsubishi UFJ and Mizuho, are working together to launch a yen-backed stablecoin by the end of the fiscal year, with the Financial Service Agency approving Mitsubishi's stablecoin issuance.

Hong Kong's stablecoin regulations began in August, but not without caution from the Hong Kong Monetary Authority, which has indicated many applicants may not get approved. Chinese tech companies are also seeking permits, yet multiple reports suggest they have paused their initiatives amid governmental pressure. A collaborative venture between Standard Chartered Hong Kong, Hong Kong Telecom, and Animoca Brands aims to create a Hong Kong dollar-backed stablecoin upon receiving the necessary licensing.

Shifting Perceptions of Stablecoins

The discussion surrounding stablecoins intensified following the collapse of Terra’s UST in 2022, highlighting the inherent risks of algorithmic peg mechanisms. New regulations define stablecoins primarily as tokens fully backed by cash or liquid short-term assets, effectively barring algorithmic stablecoins from licensed issuance, although they still exist within decentralized finance.

As clarity in regulation increases, traditional financial entities are entering the stablecoin market, focusing on centrally managed coins and bank-issued deposit tokens. These innovations are being integrated into existing payment networks and settlement systems, reinforcing stablecoins as essential components in consumer payments, institutional transactions, and cross-border payments.

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