U.S. Bancorp, operating as U.S. Bank, has initiated testing of a custom stablecoin on the Stellar blockchain, marking a significant step in traditional banking's adoption of on-chain payments. This move places the Minneapolis-based bank at the forefront of financial institutions exploring programmable digital money to enhance speed and reduce costs. The bank has established a dedicated division for crypto and money movement, with Gunjan Kedia, President and CEO, highlighting dual focuses: holding cryptocurrency for clients and testing stablecoin payments, though client demand for payments remains muted.
Mike Villano, Senior Vice President and Head of Digital Asset Products at U.S. Bank, emphasized that stablecoins offer advantages like faster settlement, lower costs, and 24/7 access, but banks require additional safeguards. "For bank customers, we had to think about other protections around know-your-customer, the ability for online transactions, the ability to claw back transactions," Villano stated. Stellar's architecture, designed for finance-first applications, allows token issuers to freeze assets and unwind transactions, a key factor in Bancorp's choice over alternatives.
Stellar's ecosystem is expanding, with Circle's USDC and Franklin Templeton already utilizing its rails. As of September, the network boasted 9.8 million unique wallets and processed $32 billion in payments over the past year, according to the Stellar Development Foundation (SDF). Jose Fernandez da Ponte, President and Chief Growth Officer of SDF, noted growing institutional comfort with on-chain operations, "One of the very important things is that institutions are considering deploying on-chain. That’s a ton of progress from where the institutional market was a few years back."
The initiative is part of a broader trend, with competitors like Citigroup partnering with Coinbase, Ripple raising $500 million from firms like Fortress Investment Group and Citadel Securities, and projects like Base and Tempo targeting similar spaces. Additionally, the European Central Bank (ECB) warned in a recent report that stablecoins, with a market capitalization surpassing $280 billion and dominated by Tether (USDT) at $184 billion and USDC at $75 billion, pose emerging financial-stability risks due to deepening global interlinkages.
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