Bank of America Merrill Lynch: The disruptive impact of stablecoins on traditional bank deposits and payment systems will be "clearly visible" in the next 2-3 years

The signing of a bill is opening a new chapter for the U.S. digital asset market and may reshape the future landscape of traditional banking.

According to news from the Chase Trading Desk, a recent research report from Bank of America Merrill Lynch indicates that as the U.S. paves the way for stablecoin issuance with regulatory clarity, this digital asset will have a clearly visible disruptive impact on the deposit base and payment systems of traditional banks in the next 2 to 3 years.

The latest development is that U.S. President Trump has officially signed the GENIUS Act, which sets a preliminary framework for the issuance and regulation of stablecoins. Meanwhile, the CLARITY Act, aimed at delineating the jurisdiction of the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) over the crypto market, has also passed in the House of Representatives, and both bills have now been handed over to the Senate for review.

This series of legislative developments marks a breakthrough in regulation, with market focus rapidly shifting from policy maneuvering to the actual construction of infrastructure. According to the interest rate strategy team at Bank of America Global Research, the stablecoin market is expected to see moderate growth of approximately $25 billion to $75 billion in the short term, with this incremental capital likely boosting demand for U.S. Treasury securities, especially short-term Treasury bills.

The report emphasizes that real change will become apparent in the medium term. As stablecoins become integrated and widely adopted, their impact on the existing financial system will become increasingly evident, and banks will face competitive pressure from digital currencies. With the preliminary establishment of a regulatory framework for stablecoins in the U.S., the banking industry finds itself at a crossroads of active positioning and cautious observation.

Banks Actively Positioning, but Doubts Remain on Use Cases

The U.S. banking industry is ready to embrace the arrival of the stablecoin era. From comments made by management at major banks, the industry is actively preparing to offer stablecoin solutions. However, there remains caution and even skepticism among bankers regarding specific use cases, particularly in domestic payment scenarios.

For instance, JPMorgan's management questions why customers would need stablecoins when the existing payment systems are already very convenient. Citigroup points out the real cost barriers, stating that the current on-ramp/off-ramp costs between stablecoins and fiat currencies could be as high as 7%, which significantly limits their application. Based on the need for interoperability and a large existing customer base, the banking industry seems more inclined to launch stablecoin solutions through the formation of alliances.

Cross-Border Payments Achieve Consensus

Despite doubts about domestic applications in the U.S., banking executives generally believe that stablecoins have practical application prospects in the cross-border payment sector. Bank of America CEO Brian Moynihan considers "small" cross-border payments to be a realistic use case. Fifth Third Bank views this as a "greenfield" market, hoping to capture market share from banks that outsource cross-border payment services.

However, regarding whether stablecoins will impact banks' core domestic payment businesses, most banks expect minimal short-term effects. Gunjan Kedia, CEO of U.S. Bank, points out that while stablecoins may intensify competition in their cash management services, the impact on card and merchant acquiring businesses is not significant Overall, although Bank of America states that current customer interest in stablecoins remains "tepid," almost all banks have indicated that they are closely monitoring developments and are prepared to act quickly once customer demand accelerates. From JPMorgan's deposit token JPMD to BNY Mellon providing custody services for leading issuers like Circle, the banking industry's layout is quietly underway.

Comments from major U.S. banks regarding stablecoins during the second quarter earnings call are as follows:

• JPMorgan (JPM): The company plans to engage in both stablecoins and digital assets. The recently announced JPMorgan deposit token (JPMD) for institutional clients is the first tokenized deposit product launched by a leading U.S. banking institution. Management is uncertain which application scenarios for stablecoins and tokenized deposits will be viable in the long term but will closely monitor developments.
• Bank of America (BAC): Bank of America is actively exploring stablecoin payment capabilities. Management believes that "small" cross-border payments are a realistic application scenario, but the long-term scalability of alternative scenarios remains uncertain. The bank has established partnerships with stablecoin providers to further expand its digital asset capabilities. Despite ongoing developments, customer interest remains low.
• Citigroup: Management continues to invest in various digital asset capabilities, utilizing "Citi Token Services" to provide clients with instant payment and tokenization services (launched in four markets; plans for further expansion; has processed amounts reaching billions of dollars since launch). Current deposit and withdrawal solutions may incur transaction costs of up to approximately 7% (Deposit: physical to digital / Withdrawal: digital to physical). Management is currently exploring four application scenarios for digital assets: 1) providing reserve management and custody services for stablecoins and crypto assets; 2) deposit and withdrawal services for stablecoin trading; 3) issuing "Citi Stablecoin"; 4) tokenized deposits.
• Goldman Sachs (GS): Views digital assets as a "fascinating opportunity," but requires regulatory clarity on crypto legislation (the "GENIUS Act," the "Clarity Act") to further build related capabilities. Management believes that ongoing digitization can eliminate friction in the financial industry, potentially bringing new opportunities for crypto service providers.
• Morgan Stanley (MS): Morgan Stanley is actively discussing digital asset capabilities and exploring potential application scenarios for clients.
• BNY Mellon (BK): Will utilize blockchain technology to serve the growing stablecoin industry. The acceleration of digital asset adoption will drive client demand for BNY Mellon's issuance, payment, and custody capabilities. BNY Mellon is currently the custodian for leading stablecoin issuers Circle (USDC), Ripple (RLUSD), and Société Générale (USDCV)
• State Street Bank (STT): State Street Bank remains optimistic about tokenization services; it expects customer demand to accelerate following the issuance of a regulatory framework for digital assets. Management emphasized three core application scenarios for tokenization: 1) tokenized deposits; 2) tokenized money market funds (MMF); 3) collateral services.
• PNC Financial Services Group (PNC): PNC is developing digital asset services and expects significant customer growth as adoption accelerates.
• M&T Bank (MTB): Management is focusing on the development of stablecoins and assessing their feasibility as a payment mechanism. Increased accessibility of crypto wallets could drive adoption. As participation increases, M&T Bank may collaborate with stablecoin providers.
• U.S. Bancorp (USB): Management anticipates that cryptocurrency legislation (the GENIUS Act, the Stablecoin Act) will pass in Congress and is preparing to pilot the "U.S. Bancorp" stablecoin.
• Citizens Financial Group (CFG): Citizens Financial Group is monitoring ongoing developments and assessing the risks and opportunities presented by digital assets. CEO Bruce Van Saun believes that "significant investment" is not necessary at this stage.
• Fifth Third Bank (FITB): Fifth Third Bank is well-prepared to address the theme of digital assets and holds an optimistic outlook on the prospects of stablecoins. Management believes that existing relationships with crypto infrastructure and stablecoin providers give Fifth Third Bank a competitive advantage over regional peers.

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