Why one regional bank is excited about stablecoins

Liam Kennedy/Bloomberg

UPDATE: This story include comments from an interview with Fifth Third CFO Bryan Preston.

Fifth Third Bancorp is ready for the massive stablecoin market to become more ubiquitous following the passage of watershed crypto legislation that could be signed into law as soon as today.

The stablecoin bill has drawn the ire of many community banking groups that are concerned that the so-called GENIUS Act could disintermediate the banking system, but Fifth Third CEO Tim Spence said Thursday that the legislation represents a "greenfield" for the Cincinnati-based bank.

Spence said he doesn't put much stock in the risks of disintermediation in the point-of-sale and domestic payments sectors.

"Stablecoins in markets with unstable central banks or not a broad-based banking system? Absolutely an interesting application," Spence said. "Internationally, stablecoins for cross-border payment or for collateral and different exchanges? Interesting use case. Domestic payments? I think there's probably more smoke than fire on that one right now."

Fifth Third, which at $210 billion of assets is one of the 25 largest banks in the country, has a head start in the space. The bank operates its own real-time payment processing product, and it has done business with crypto infrastructure platforms like Stripe and Fireblocks.

The bank's opportunities with stablecoins are twofold, Spence said. Fifth Third can provide banking activities, like reserve accounts and payment rails, to companies that provide crypto infrastructure to users. It can also be a user of stablecoins, through cross-border payments and cross-platform settlements — services it currently outsources to correspondent banks.

Fifth Third didn't provide estimates for how much stablecoin activities could contribute to earnings. But stablecoins can streamline payments processes, making cross-border activities more efficient, said Chief Financial Officer Bryan Preston said in a Thursday afternoon interview.

"I think it's too early to put any real numbers around it, but we do think the opportunity is quite large, for both Fifth Third, and just the broader banking industry," Preston said. "This is an opportunity, in particular, to make the costs associated with these payments go down significantly, as well as to decrease the settlement time."

The GENIUS Act expressly prohibits stablecoins from offering yield, though some groups are worried about potential loopholes in the form of incentives. Spence said he isn't concerned about the competition for deposits in the U.S.

"The wild card would be if you saw people move money out of banks and into stablecoins in the U.S. for domestic payments or domestic cash management," Spence said. "That feels highly unlikely to me. We have digital money that provides a yield, which stablecoin doesn't, in the form of all of these online banks and money market funds that already exist."

Big banks have long been preparing for the day when the stablecoin market, which is currently valued at over $250 billion, permeates the regulated financial system. Many banks have doubled down on these efforts since the crypto-friendly Trump administration took office.

JPMorganChase, Bank of America and U.S. Bancorp have all worked on developing stablecoin products and services, though with varying degrees of enthusiasm.

Jamie Dimon, JPMorgan's chairman and CEO, said this week that his bank will be involved in deposit tokens and stablecoins, even though he doesn't understand the advantage of using stablecoins over other forms of payment.

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Fifth Third, which reported its second-quarter earnings on Thursday, beat the consensus of analysts' estimates for its bottom line.

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The bank reeled in $591 million in net income for the quarter, up 5% from a year ago. Net interest income also increased 4% year over year, due to higher loan balances, asset repricing and deposit cost management. Fifth Third slightly upped its net interest income guidance for 2025, to a range of 5.5% to 6.5%, up from its previous projection of 5% to 6%.

But uncertainty around tariff policies still put a question mark over loan growth, which rose 5% from the same time a year ago, the bank's strongest increase in two years.

Spence noted that Fifth Third doesn't operate in the upper end of the markets business, which has recently been providing a boon to the megabanks' bottom lines amid lukewarm commercial lending activity.

Fifth Third's world is Main Street banking, the CEO said, which is showing some puts and takes. The bank's third-quarter middle-market pipeline is up almost 50% from the prior quarter, but companies in manufacturing and supply chain sectors are still cautious.

"I think in that universe, loan growth is back," he said. "It just may not be back at the level that, when people said loan growth was going to be back, that everybody thought about."

And while the banking industry will likely get some additional flexibility as a result of deregulation, Spence reiterated a point he's previously made: Those same deregulatory forces will also work in favor of banks' competitors.

"I just want everybody to remember that there's another side to this, which is it's not just the banks that are seeing regulatory relief," Spence said. "There are a lot of nonbank competitors who also have influence in Washington — some of whom as a category gave 10 times this last election cycle what all banks in total gave, and who, as a result, are influential in policymaking circles."