Bank of America Considers Stablecoin Launch

The announcement has already made an impact on the markets, but not on the value of the existing stablecoins, as those are tied to the value of the dollar, as will the new one. Experts claim that with the change in legislation and Bank of America leading by example, the stablecoin market may grow even further.

The state of the Stablecoin Market

The Stablecoin market has been on the rise for a few years now, as it provides a service that combines the features of crypto and the stability of the fiat money exchange rate. By the end of 2024, it was a $200 billion dollar market, with dozens of stablecoins to choose from. Experts claim that it could double in size by the end of 2025.

The biggest stablecoins out there are Tether and USD Coin, both based on the value of the US dollar. These coins operate as any other cryptocurrency, but the value on a USD Coin Exchange doesn't fluctuate based on market forces.

What Did Bank of America Propose?

Bank of America, through its CEO Brian Moynihan, proclaimed that it plans to venture into the world of stablecoins by launching its own. The Bank sees this market as a great opportunity to showcase its services in a new and high-tech venture such as crypto.

The Bank has also come out with a set of complaints that slow down this new venture. Simply put, they believe it's overregulated and lacks legal quality when it comes to stablecoins.

"It's pretty clear that there's going to be a stablecoin, which is going to be fully dollar-backed," Moynihan said, referring to ongoing legislative efforts on Capitol Hill. "If they make that legal, we will go into that business."

Moynihan also expressed an opinion on the legislation Bank of America would like to see put forward.

"If the rules come in and make it a real thing that you can actually do business with," he said, "you'll find that the banking system will come in hard on the transactional side of it."

Bank of America

Bank of America is the second largest bank in the country, behind only J.P Morgan. It has $3.26 trillion in total assets. The bank operates thousands of branches and ATMs and works in 35 countries. It was founded in 1904 when Amadeo Giannini founded the Bank of Italy in San Francisco.

A major milestone in the bank's development was its merger with NationsBank in 1998. In 2008, it acquired Merrill Lynch, which improved the investment side of its operations. The decision to venture into stablecoins means a lot because it comes from a bank that's such a pillar of the national financial sector.

Legal Issues

Lawmakers have debated for years on the legal framework for issuing stablecoins. The goal was to establish a set of rules that the issues of stablecoin would have to follow. That would limit who can issue stablecoin and help traditional businesses get in on the game.

However, Trump's administration has come up with a plan to produce that legislation within the first 100 days. This was further confirmed by Senate Banking Committee Chairman Tim Scott (R-SC). It's this regulation that the Bank of America is waiting for before they actually come out with the Bank of America Coin.

The Competitors

The biggest competitors Bank of America coin will face are the major stablecoins that dominate the market. They'll also have to compete against stablecoins created by other banks. The biggest one of these came from JP Morgan itself. It created its coin in 2020, even with the lack of regulations.

PayPal also created a stablecoin in 2023, working to get into the same market. The goal of this coin is to offer market stability while providing a tool for cross-border transfers and payments between individuals and financial institutions. This is what the Bank of America Coin will strive to do but with a little bit of lag.

Did Bank of America Wait Too long?

The competitors we mentioned came up with their coins before the legislators came out with the legal framework. They believed that the innovative nature of the industry moved too quickly for government bureaucracy and went into it head first.

It's too early to say if Bank of America waited this long before creating a coin. The bank will put its reputation and vast resources behind the project, and that may still be enough to find a market for its stablecoin.

Changing Crypto Markets

Crypto markets are changing rapidly and in the direction of mainstream and wide acceptance. This is noticeable in the ways traditional financial institutions are treating crypto. It's now widely used by banks and insurance companies as well as governments and pension funds.

Stablecoins have become especially widely used, even surpassing traditional debit cards in terms of the number and volume of transactions for a while. Many have also called for governmental bodies to set up their own stablecoin and put their weight behind them. With the Trump administration's openness towards crypto and blockchain, this trend will probably continue.

Concerns

While the Democrats had a majority in the US Congress, they've had concerns about traditional banks going into the stablecoin market. Most of these were about the privacy that using stablecoins provides – and, therefore, the ability to use them for illegal activity. The lawmakers were hesitant to use traditional banking institutions to provide such a service.

Crypto insiders also had their own set of concerns when it came to the very concept of stablecoins. They believe that the main attraction of blockchain-based currencies is the fact that they aren't connected to the work of any traditional finance institutions. Therefore, stablecoins defeat the purpose.

Opportunities

Bank of America and other stablecoin providers, however, believe that the opportunities provided by stablecoins outweigh the potential concerns. The biggest of these is that they serve as a hedge against the volatility of cryptocurrency. Even though cryptos are on the rise in the long run, there have been dips that have affected many investors.

The stablecoin can also be used as a bridge between crypto and fiat transactions. It allows traders to move in and out of positions without returning to traditional banking. Bank of America is looking to find its space among the market of tech-savvy investors.

To Sum Up

Bank of America plans to issue its own stablecoin. The bank has waited for the proper legal framework to be put into place before doing so, and chances are that the new administration in the White House will push it through soon. It's not the first traditional bank to do so, however, as many have even without the laws regulating it.

A new stablecoin will be tied to the value of the US dollar and, therefore, serve as a hedge against volatility. It can also be used to facilitate transactions. Bank of America also plans to influence lawmakers to set up regulations for issuing stablecoins before their stablecoin is created.