Traditional finance is moving beyond debating whether stablecoins and public blockchains belong in the financial system and toward competing for control of the infrastructure that will carry digital money, industry experts said.
The shift could reshape how payments and institutional settlements operate as banks begin developing their own digital-dollar products alongside established stablecoins, tokenized deposits and other forms of blockchain-based money.
Rather than replacing existing tokens overnight, the development could create a more fragmented market in which interoperability, liquidity and settlement become increasingly important.
Banks Move From Watching To Building
In a note sent to Yellow.com, Alex Witt, Founding General Partner at Verda Ventures, sees the involvement of 21 financial institutions as one of the clearest signs yet that blockchain adoption is increasingly being driven by traditional finance.
“Twenty-one banks backing a stablecoin is the clearest sign yet that the growth in blockchain rails is coming from TradFi now,” Witt said.
He said the debate has shifted from whether public blockchains can support settlement to which institutions will control the issuers operating on those networks.
The group plans to establish a new company to issue stablecoins for payments and digital asset transactions. Its first product is expected to be denominated in U.S. dollars, with additional currencies planned later.
The initiative has expanded significantly from an effort announced in October 2025, when 10 banks began exploring a reserve-backed digital payment asset that could operate on public blockchains.
Stablecoins Gain Banking Validation
Utkarsh Ahuja, Founder and Managing Partner at Moon Pursuit Capital, said the banks' decision to participate directly represents a broader change in how traditional finance approaches stablecoins.
“Banks spent years debating whether stablecoins were a threat to traditional finance. Now 21 major financial institutions are getting together to issue one,” Ahuja said.
He said banks face a strategic choice as money increasingly moves through blockchain-based systems. They can adapt to that shift or risk being disrupted by it.
The expanded group includes major institutions such as Bank of America, Citi, Goldman Sachs and UBS, alongside financial firms from North America, Europe, Asia, the Middle East and Africa.
Ahuja does not expect the initiative to immediately take substantial market share from USDT or USDC. Those tokens already have significant advantages in liquidity, distribution and established network effects.
The larger significance, he said, is the validation that comes when major financial institutions begin treating stablecoins as part of future financial infrastructure.
That could create new demand for services supporting on-chain finance, including custody, compliance, liquidity and settlement infrastructure.
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The Digital Dollar Market Could Fragment
Kyle Sonlin, President and Co-Founder of Global Settlement Network, expects multiple forms of digital money to coexist rather than one stablecoin emerging as the sole winner.
“Stablecoins have proven there’s demand for dollars that can move around the clock, and banks want to be part of that,” Sonlin said.
The market could eventually contain bank-issued stablecoins alongside USDC, USDT, tokenized deposits and digital currencies denominated in multiple fiat currencies.
That would make interoperability increasingly important. If institutions hold different forms of digital dollars, they need to be able to transact between them without creating new settlement bottlenecks.
Sonlin said 24/7 availability is of limited value if liquidity and settlement between different digital assets remain tied to conventional banking hours.
Interoperability Becomes The Infrastructure Test
Bernardo Brites, Co-Founder and CEO of Trace Finance, said the development marks a transition in which stablecoins are moving beyond their crypto-native origins and toward mainstream financial infrastructure.
“This news is evidence that we are moving beyond stablecoins being a crypto-native experiment and shifting toward core payments infrastructure that traditional finance wants to own a piece of,” Brites said.
He said the challenge will be making bank-issued stablecoins, tokenized deposits and existing digital-dollar tokens work together.
Individual networks can offer fast settlement, but that does not necessarily solve the problem if assets remain isolated from one another. Brites said the infrastructure connecting these systems, together with the compliance and settlement technology underneath them, will become increasingly important.
Banks Face A Race For Ownership
Witt sees the emerging market developing across several distinct segments, with established stablecoins retaining important positions while newer bank-backed products target institutional settlement and other financial use cases.
The consortium plans to launch its dollar stablecoin in the first half of 2027 and has identified the euro as a priority for future expansion. It also intends to structure the venture around regulatory requirements in the U.S. and Europe.
The project therefore enters a market that is already dominated by dollar-backed stablecoins, with Tether's USDT and Circle's USDC holding the largest positions.
But the experts argue that the more important competition may not be over stablecoin market share alone.
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