A group of U.S. banks plans to offer its own stablecoin, called USDF, in a move to tackle concerns about the reserves behind nonbank-issued equivalents.
- The group – which is made up of institutions backed by the Federal Deposit Insurance Corp. (FDIC), one of the industry’s key regulators – said the coin “addresses the consumer protection and regulatory concerns of nonbank issued stablecoins,” according to an announcement Wednesday.
- Founding members of the USDF Consortium include Synovus (the 48th largest bank in the U.S. by assets, according to MX Technologies), New York Community Bank (No. 45), FirstBank of Nashville (No. 144) and Sterling National Bank (No, 77). The consortium wants more financial institutions to join.
- While these institutions are FDIC-insured, the announcement does not spell out whether the reserves backing USDF would be. The FDIC has been considering whether stablecoin reserves should qualify for its pass-through insurance, which would cover token holders up to $250,000 if the bank holding the collateral were to fail, sources told CoinDesk last year. The agency has not made a formal announcement on the matter.
- While stablecoins play a role in the broader crypto ecosystem by offering traders and investors secure entry and exit points because they are pegged to assets such as fiat currencies, there is concern about the opaque nature of some of the reserves that back up nonbank stablecoins such as Tether’s USDT.
- CoinDesk joined a court case earlier this month seeking access to documents received by the New York attorney general’s office (NYAG) from Tether.
- USDF will be a bank-minted alternative to USDT and Circle’s USD coin (USDC), which account for the lion’s share of the $170 billion stablecoin market. USDT has a market cap of $79 billion and a 24-hour trading volume of $56.5 billion, according to CoinGecko. USDC has a market cap of $44.5 billion with a trading volume of just under $3 billion.
- USDF will operate on the Provenance blockchain and will be redeemable 1:1 for cash from any of the group’s members. The consortium sees the stablecoin being used for applications such as capital call financing and supply chain finance.
- News of the consortium’s plans emerged in November last year when Figure Technologies met with U.S. regulators to discuss issuing such a stablecoin.
Read more: US Stablecoin Report Gets Mixed Reviews From Crypto Industry
UPDATE (16:30 UTC): Adds details on member banks.
UPDATE (17:00): Adds background about FDIC’s stablecoin deliberations.
UPDATE (Jan. 13, 16:25 UTC): Corrects ranking of FirstBank and adds its headquarters location. A previous version of this article gave the ranking for a different bank with the same name. An editing error was to blame.
