- Key insight: Standard Chartered and BNY now let institutional clients mint and redeem Circle's USDC through the bank instead of a direct Circle account.
- What's at stake: Handling stablecoins directly gives banks a new custody-and-fee business, but it also risks client cash shifting out of deposits into stablecoins and tokenized funds.
- Forward look: Standard Chartered plans to expand beyond Dubai and BNY to add more issuers, while the OCC is still writing the GENIUS Act's implementing rules.
Overview bullets generated by AI with editorial review.
Two of the world's largest banks recently began letting their institutional clients turn dollars into blockchain tokens and back again, co-opting a business that grew up without them.
BNY, the world's largest custody bank,
Days later, Standard Chartered
In both cases, a client that wants to move money onto a blockchain can now do so through an institution with which it already banks, avoiding the need to open its own account with the company that issues the token.
For most of stablecoins'
That matters to any banker weighing whether their bank needs a stablecoin strategy. The first movers are treating the moment as an opportunity for either a new custody-and-fee business or a way to keep clients' cash from leaking to crypto firms. Many are doing both.
What Standard Chartered and BNY did
In its announcement last week, Standard Chartered framed its launch as offering institutional clients "integrated access to USDC minting and redemption through a single onboarding," nodding to the fact that big customers do not have to hold their own accounts with Circle to play with USDC.
The service is available first through the bank's operations in the Dubai International Financial Centre, where regulators have run a dedicated rulebook for crypto tokens since 2022.
The launch is starting there because of that regulatory clarity, but Standard Chartered calls it only the first phase of a broader global stablecoin push that will expand to other markets as regulators allow.
"Institutional clients are seeking the same levels of trust and governance that underpin traditional markets," Roberto Hoornweg, the chief executive of Standard Chartered's corporate and investment bank, said in the announcement.
"We are extending those standards into a rapidly evolving segment of the financial system," he said.
For BNY's part, USDC last week became the first stablecoin on the bank's Digital Asset Custody platform, allowing BNY clients to store, transfer, mint and redeem the token.
A BNY spokesperson did not immediately respond to a request for comment.
BNY already served as a primary custodian of Circle's cash reserves that back USDC, so the new service builds on that existing relationship. The bank, which oversees $59.4 trillion in assets under custody and administration, said in its press release last week that it plans to add more stablecoin issuers over time.
The upshot is that Standard Chartered and BNY are each betting it can become its clients' single door for accessing USDC tokens.
Why these banks are moving now
The
Additionally, institutional clients increasingly want around-the-clock, near-instant settlement. Blockchains offer that, so banks see in stablecoins a means of earning clients, custody and transaction fees.
This is what Standard Chartered sees. Waqar Chaudry, the bank's global head of digital assets for financing and securities services, told American Banker that clients want stablecoins for "treasury, liquidity management, on-chain settlement and payment-related use cases."
Chaudry said clients also use them to move money in and out of tokenized money market funds (mutual funds whose shares live on a blockchain).
There is a defensive motive, too. If corporate treasurers and asset managers are going to use stablecoins, banks would rather be the on-ramp than watch
Banks do not want to be cut out of the flow of money as it moves onto blockchains, according to Markus Veith, the national leader for blockchain and digital assets at Grant Thornton, an accounting and advisory firm.
"Banks are realizing that stablecoins have the potential of becoming the new financial rails, and they don't want to be disintermediated," Veith told American Banker.
By offering minting and redemption directly, a bank can "stay in the transaction flow," collect fees and hold on to deposits that might otherwise leave, he said.
How minting and redeeming work
The mechanics of minting and redeeming USDC are simpler than the jargon suggests.
To mint a stablecoin, a client sends dollars to the issuer; the issuer tells a piece of blockchain software called a smart contract to create an equal number of new tokens; and the issuer hands over the tokens while holding the dollars in reserve.
One dollar goes in; one USDC comes out.
Redeeming (also called burning) does the reverse. The client sends the tokens back; the issuer tells the smart contract to take them out of circulation; and the issuer wires dollars from its reserves back to the client, minus any fees.
What the banks provide is a different front door for these two operations. A Standard Chartered or BNY client can bring dollars or tokens to the bank instead of Circle, removing the need to hold a Circle account or directly interface with the company.
In BNY's description, clients hold USDC in custody wallets at the bank and, through BNY, "instruct Circle to convert ('mint') U.S. dollars into USDC and to redeem ('burn') USDC for U.S. dollars."
Standard Chartered "supports the operational flow, including reconciliations and controls under the agreed operating model," according to Chaudry, so clients reach USDC "within a familiar banking framework."
As for why it would participate in these relationships, a Circle spokesperson said banks such as Standard Chartered and BNY are "extending the reach of dollar-backed digital infrastructure in a way that's deeply complementary to Circle's role as the sole issuer of USDC."
While USDC tokens run around the economy, the dollars backing them sit in reserve the whole time.
Most of USDC's backing is held in a government money market fund run by BlackRock, holding cash, short-term Treasuries and overnight loans backed by Treasuries, according to
One of the key differentiators of stablecoins for their end users is that they offer a rail for instant payments. At least, moving along those rails is instant, but it's unclear how quickly a client can get on or off.
Circle's
Asked how long minting and redemption take in production, the Circle spokesperson did not give a figure.
What comes next for the stablecoin market
The business these banks are entering is small next to the banking system it is attaching to, though the stablecoin piece is not tiny. There are about $74 billion USDC tokens in circulation, second only to Tether's USDT, and the dollar-pegged stablecoin market as a whole runs to more than $250 billion, according to the data tracker
USDT is
The slice the banks are building on is smaller still. Tokenized U.S. Treasury products (on-chain funds that some stablecoin issuers can count toward their reserves) held about $14.9 billion as of Thursday across some 84 funds, according to the data service
That is a rounding error against the multitrillion-dollar money-fund and deposit markets, but it has grown fast.
The near-term direction is more of the same. Standard Chartered says it will move beyond Dubai; BNY says it will add more issuers; the clear legal path makes it likely other large banks follow.
Standard Chartered will expand "jurisdiction-by-jurisdiction rather than tied to a fixed global timetable," Chaudry said, with each new market subject to local regulatory approval.
The OCC is still writing the detailed rules that will govern how the GENIUS Act works in practice.
That unfinished rulemaking is only part of what a bank has to weigh, said Tiffany Smith, a partner at law firm WilmerHale and co-chair of its blockchain and cryptocurrency working group.
The GENIUS Act is "a huge step forward," she said, but "there remain a lot of open questions" about how the law will actually work.
She also pointed to politics. There are "considerations around whether the regulatory pendulum might start swinging in a different direction after the midterm congressional elections," Smith said.
What banks and their clients take on as the activity moves in-house is less settled. The risks include new competition for deposits and the operational and reserve risks of running blockchain plumbing.
The sharpest of those risks, Veith said, is a "digital bank run."
The reserves behind USDC are Circle's, not the bank's. But the bank is the door its clients redeem through, so a wave of redemptions still becomes the bank's to process and settle in real time.
Stablecoins trade around the clock, so a bank that supports redemptions has to stand ready for large-scale demands at any hour, according to Veith, adding pressure to their intraday cash and operational readiness.
Hilary Allen, a law professor at American University who studies financial stability, is not convinced the GENIUS Act's guardrails (chiefly the reserve rules requiring issuers to fully back their tokens with cash and short-term Treasuries) go far enough. Stablecoins "do not provide any improved payments functionality," she said, so mass adoption is not guaranteed.
But if crypto exchanges start paying yield on stablecoins and customers bite, Allen said, money drains out of the banking system. A big enough exodus from community banks could crimp their lending to small businesses and farms (a complaint community banks themselves
She also flagged a risk she said the GENIUS Act ignores: leaning on public blockchains. On a permissionless network, "no one is accountable for maintenance, cybersecurity or getting the infrastructure up and running after an outage," Allen said.
Veith said that, for many banks, the move is more defense than offense. Although bank executives talk publicly about stablecoins as an offensive growth opportunity, it's "primarily a defensive strategy," he said.
"When you speak with bank executives privately, the defensive rationale is often the more urgent one," he said.
