A consortium of US banks is exploring the possibility of launching a bank-issued stablecoin
The FDIC-insured financial institutions organisation formed Wednesday with the objective of establishing a network of banks to accelerate the adoption and interoperability of a bank-minted stablecoin.
A consortium of US banks, or “an association of FDIC-insured financial institutions,” comprising New York Community Bank (NYCB), NBH Bank, FirstBank, Sterling National Bank, and Synovus Bank, is preparing to launch the USDF stablecoin.
According to a press release issued on Wednesday, January 12th, the coalition of banks aims to “develop a network of banks to accelerate the adoption and interoperability of a bank-minted stablecoin, which will enable the compliant transfer of value on the blockchain, thereby removing friction from the financial system and enabling a broader network of users to benefit from the financial opportunities that blockchain and digital transactions can provide.”
USDF is a bank-minted stablecoin that will compete with non-bank-issued stablecoins. It will be created solely by US banks and will be redeemed 1:1 for cash at a member bank. According to the press announcement, USDF “addresses consumer protection and regulatory issues associated with non-bank issued stablecoins and provides a more secure choice for blockchain transactions.”
The USDF stablecoin will be based on the open-source Provenance Blockchain, which was built by Figure Technologies, Inc., one of the founding members. The Provenance Blockchain is an application-specific Proof-of-Stake blockchain built on the Cosmos SDK. It was “designed and developed to support financial service industry needs by providing a ledger, registry, and exchange across multiple financial assets and markets,” according to the Provenance Blockchain documentation.
Provenance Blockchain, according to the same paper, offers an on-chain governance framework for managing software upgrades and changes, as well as for overseeing the usage of the Provenance Blockchain community money. Users who have staked HASH* tokens may vote on governance proposals that shape the blockchain’s developing configuration.
Money transfers between individuals and businesses
According to the press release, “the availability of USDF on a public blockchain means that, in addition to peer-to-peer and business-to-business money transfers, banks and their customers will be able to use USDF for a variety of purposes, including capital call financing, invoice and supply chain finance.”
“USDF expands the potential for DeFi transactions,” stated Figure CEO Mike Cagney. “This autumn, NYCB showed the convenience and immediacy of adopting USDF for on-chain transactions by minting USDF to settle securities trades conducted on Figure’s alternative trading platforms. We are ecstatic that NYCB anticipates minting USDF on demand and on a consistent basis in the coming weeks.”
USDT and USDC are up against competition.
If the USDF stablecoin is released to the public, it will compete with known centralised stablecoins such as Tether (USDT), Circle’s USDC, and Paxos’ USDP. The USDF, on the other hand, will benefit from the fact that it will be issued by FDIC-insured financial institutions, while the USDT, USDC, and USDP would not.
This new stablecoin attempt bolsters the case that the United States should refrain from developing a government Central Bank Digital Currency (CBDC) à la China, preferring to rely on the private sector to supply a solution.
CryptoSlate was unable to determine any decentralised qualities of the Provenance Blockchain or the proposed USDF coin at the time of writing. According to the documentation for the Provenance Blockchain, the blockchain is public, wallets offer self-custody, and it seems as if anybody may install and manage a network node. However, it is unknown at this time whether issuing banks would be able to blacklist or cancel issued tokens, as is now the case with controlled stablecoin tokens.