Welcome to issue 19 of Stablecoin State.
The weekly stablecoin brief for finance leaders, builders and fintech professionals who understand that stablecoins are now a monetary infrastructure story - not a crypto story.
Seven Samurai is one of the most influential films in cinematic history, inspiring remakes and homages alike: The Magnificent Seven, The Three Amigos and A Bug’s Life to name a few.
In Kurosawa’s classic, the peasants of a Japanese village in the 16th century are targeted by a bandit gang who plan to steal their harvest. They have no chance alone, so they pool what they have and enlist the help of seven samurai to protect against the coming threat.
In the modern day, traditional banks and insurgent blockchain alternatives are facing off in a similar way.
On August 25th, 39 state banking associations announced BankChain, representing 3,283 banks with $21.8 trillion in assets.
It is the seventh shared network for tokenised dollars announced in the US as banks organise to combat the threat to their deposit bases.
These banking cooperatives are drawn almost exactly along tier lines, with no interoperability commitment between them but sharing a common sense of urgency.
This issue we recap why they have formed, where they are in their development and whether any of them is addressing the real threat.
Stablecoin State is produced by AdaptXion - treasury, digital asset strategy and AI for rates and treasury teams.
A NEW THREAT
“Danger always strikes when everything seems fine” Kambei Shimada
The second Trump administration has seen a dramatic change in fortunes for the US cryptocurrency industry.
And, as a consequence, for US banks.
Following the FTX collapse in November 2022 and the related US banking crisis of March 2023, US regulators soured on blockchain. Major capital allocators also saw the writing on the wall (as did much of the technical talent in crypto) and moved to the artificial intelligence sector or offshore.
Crypto entered a long winter.
Enter Presidential candidate Donald Trump, seeking re-election in 2024.
After being heavily courted by the crypto and tech lobbies, he made US primacy in blockchain technology a key part of his platform, promising to make America the ‘crypto capital of the planet.’
After winning, he wasted no time.
Within days of his inauguration, Executive Order 14178 was signed which stated:
The administration would support “the responsible growth and use of digital assets, blockchain technology and related technologies across all sectors of the economy.”
The executive order also banned the creation and issuance of a US Central Bank Digital Currency, removing the prospect of a public alternative to private stablecoins.
In March 2025, the Office of the Comptroller of the Currency (OCC) confirmed that national banks could now hold crypto in custody, provide reserve backing for stablecoins and act as validators.
The administration created a ‘Special Advisor for AI and Crypto’ and gave the role to David Sacks.
The message was clear: US dominance in artificial intelligence and blockchain technology was a matter of strategic national interest.
This ultimately led to the GENIUS Act being signed into law in July 2025.
It gave regulated stablecoin issuers a federal statute, mandating:
Permitted issuer status
Reserves held 1:1 in cash, cash equivalents or short-dated Treasuries
Monthly disclosure
A clear redemption right
Twenty months into the second Trump presidency, banks are facing a radically different playing field. Competition for their deposit base has been opened up in a way that had never previously been allowed.
Why?
After all, the GENIUS Act had given the banks the one concession they had asked for:
Stablecoin issuers were prohibited from paying interest or yield directly to holders.
But nothing stopped them paying indirectly.
Circle cannot pay a USDC holder anything. But through its agreement with Coinbase, the largest exchange in the US, USDC balances held there earn 3.5% APY in the form of ‘rewards.’
Funded by Circle.
In 2025, Circle paid out $1.4Bn to Coinbase under this agreement, around 51% of its total revenue and reserve income for the year.
That is the price of stablecoin distribution. USDC market capitalisation rose 72% over the year, and Circle's payout rises with it.
For banks, these ‘rewards’ look a lot like interest. And are an existential threat to the deposit franchises which underpin their business model.
Bank of America CEO Brian Moynihan this year stated that $6 trillion in US commercial bank deposits could migrate to stablecoins under certain regulatory outcomes, roughly 30-35% of the total.
Standard Chartered put the number at $500Bn by 2028.
US banks have responded to the threat to their harvest, in seven different forms.
And they may have organised against the wrong instrument.
THE SEVEN
“This is the nature of war. By protecting others, you save yourself” Kambei Shimada
The BankChain announcement on August 25th marks the seventh announcement of plans by US banks to organise against the threat.
The current list, in order of the size of the institutions behind them:
The Clearing House is at the top, an organisation owned by the world's largest commercial banks, which between them hold more than 50% of all US deposits.
Then Zelle, owned by seven of the biggest. Then two regional groupings. Then the Texas independents. Then a single bank in San Antonio. Then the community tier nationally.
Now reorder them by what is actually running:
Only three of the seven have something working.
Hazel is a division of Vantage Bank in San Antonio, built with Custodia. Its reference implementation has been live on Ethereum mainnet since March. One of four production phases is complete. It has a working pilot with Participate, a loan participation network covering more than 600 banks.
DTX is a wholly owned subsidiary of the Independent Bankers Association of Texas, funded by the IBAT board in December 2025. 60 banks, 3 technology partners named in July. The pilot is underway.
Cari has had an MVP running since March, more than 30 banks, and five regional design partners.
A single Texas bank. A state trade association. A startup.
Now the other four.
The Clearing House (TCH) is backed by JP Morgan, Citibank, BoA and Wells Fargo among others.
Its announcement in June named no vendor, no network name, no rulebook and no launch date. The 2027 timeline that ran everywhere came from Wall Street Journal reporting, not from TCH.
Keystone has not been heard from since April.
Then we have ZelleUSD.
Reserves, issuance, chain and custody are all undisclosed. It is also the only one of the seven that is a stablecoin rather than a tokenised deposit, which is worth sitting with, given it is backed by seven of the largest banks in the country and their lobby is trying to constrain exactly that instrument with regulators.
BankChain has completed the first phase of an RFP.
So, thus far, the largest memberships have built the least.
So why seven networks and not one?
Because nobody is willing to bet on someone else’s rail.
KeyBank, Huntington and M&T are in both Cari and Keystone.
Huntington, Fifth Third and Citizens span Keystone and The Clearing House.
Wells Fargo part-owns The Clearing House and is preparing its own dollar-sterling tokenised deposit service this autumn.
Banks are not choosing a perimeter. They are hedging across several at once.
One more, which is not on the list.
Open USD (OUSD), which we covered previously, is not there because Open Standard is not a bank. More than 140 payments and technology firms are behind it, and on current timelines it will arrive before any of the seven.
THE REAL THREAT
The banks are not waiting for the seven to be built.
They are also lobbying.
The American Bankers Association and 52 state bankers associations wrote to Congress asking it to enforce the GENIUS prohibition against issuers and their affiliated platforms, warning that yield-like incentives risk disintermediating deposit taking and the local lending that follows it.
JPMorgan, Bank of America, Citi, HSBC and Wells Fargo have pushed to amend GENIUS retrospectively to close the same gap.
It is a serious campaign, well organised, and aimed at a real leak.
It is also aimed at the wrong instrument.
The Congressional Research Service has stated that deposits and stablecoins are not close substitutes, that several of the largest stablecoin use cases are unlikely to displace US deposits at all, and that tokenised deposits and tokenised money market funds may be the better blockchain substitutes.
Tokenised money market funds, such as BlackRock’s BUIDL and Franklin Templeton’s BENJI, are the real digital threat to bank deposits.
BlackRock's BUIDL has Securitize as transfer agent with BNY holding the cash.
Circle's USYC, the on-chain share class of the ‘Hashnote Short Duration Yield Fund’, is backed largely by reverse repo against Treasuries.
Franklin Templeton's BENJI, the on-chain share class of FOBXX, registered under the Investment Company Act of 1940, live on 8 chains, costs 15 basis points, and is available to a US retail customer through an app for $20.
They pay 4-5% yield.
Not as a reward, not through a distributor, and not at the discretion of an issuer.
They pay it because that is what the underlying paper pays.
Now the honest part.
This has not happened yet, and most of it currently cannot.
BUIDL is restricted to qualified purchasers. USYC requires qualified investor status. Ondo's USDY, the freest moving of the yield tokens, is issued under Regulation S and cannot be sold to a US person at all. Against roughly $18 trillion of US commercial bank deposits, the entire tokenised fund complex is a rounding error.
But the instrument exists. It is legal. It pays the market rate. It carries no yield prohibition. And it settles into a payment token the same day.
One future we could be heading to: stablecoins as a modern transaction account (fast, free, programmable) with tokenised US treasury funds like BUIDL and BENJI attracting an increasing amount of funds that once sat as bank deposits - the preferred saving vehicle for the digital age.
This future obviously implies a structural decline in bank deposits as funds flow to capital markets.
HOW THIS ENDS
Walk it forward.
Let’s say the banks spend what it takes and the seven rails get built.
Settlement is atomic, the deposits stay on balance sheet, and every institution from a money-centre bank to a community bank in Texas can move a tokenised dollar at 3am on a Sunday.
It may not matter.
The low-cost balances can still go to capital markets, because a wallet that can hold a tokenised deposit can also hold a fund share paying 4%.
Then look at who is being paid to build the defence.
Infinant is working on Hazel and on DTX.
Matter Labs supplies Cari, which has also acquired technology from Tassat.
FIS supplies Keystone.
BankChain's RFP is open, and 3,283 banks are about to find out what the winning bid costs.
There is a part of Kurosawa's ending the homages leave out.
The farmers win. The bandits are destroyed, the rice is planted, and the village is safe.
Four of the seven are buried on the hill above it.
The survivors leave with nothing, and Kambei says it plainly as they go.
This was not their victory. It belonged to the people who owned the harvest.
The seven networks may well get built and the harvests protected.
It is less clear that the banks will be the ones who get rich defending them.
-Thanks for reading.
Mark McKendry
Founder, AdaptXion
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