Draft:Stablecoin banking

Stablecoin banking involves the integration of stablecoin issuance, custody and settlement with regulated banking and payment services. In a February 2026 analysis, S&P Global described firms seeking banking charters to bring these activities within regulated institutions, including trust banks and full-service banks.

Stablecoins are crypto-assets designed to maintain a stable value relative to a reference asset, commonly a fiat currency. Their uses include trading crypto-assets and making payments. Banks can support stablecoin arrangements by holding reserve deposits, providing settlement accounts and offering custody services. These relationships do not make stablecoin holdings equivalent to bank deposits: the holder's rights depend on the instrument and the applicable legal framework.

Background

Stablecoins developed principally as instruments for trading and holding liquidity in cryptocurrency markets. A 2025 International Monetary Fund report found that crypto trading remained their main use, while cross-border payment activity was increasing. In April 2026, Federal Reserve Bank of Kansas City researcher Franklin Noll estimated that payments accounted for less than one per cent of the outstanding stablecoin supply under his allocation methodology. The estimate distinguished payments from exchange holdings, crypto-finance activity and other uses; it was not a direct count of all payment transactions.

Payments and settlement

Stablecoin arrangements transfer tokens using distributed ledger infrastructure. In their 2022 guidance, the Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions treated the transfer function of a systemically important stablecoin arrangement as comparable to that of other financial market infrastructures. Their guidance distinguishes technical settlement on a ledger from legally final settlement and calls for measures to prevent discrepancies between the two.

Blockchain operation outside conventional banking hours can support continuous transfers, but an end-to-end payment may also require currency conversion, intermediaries and access to domestic payment systems. The cost and speed of these stages affect the payment as a whole. Confirmation of a token transfer is therefore distinct from conversion into fiat currency and payment into a bank account.

Cross-border payments

Stablecoins can be used between the fiat-currency stages of a cross-border payment. In a February 2025 speech, Federal Reserve governor Christopher Waller described an arrangement in which funds are converted from a local currency into a dollar stablecoin, transferred, and converted into the destination currency.

A March 2026 Federal Reserve staff analysis examined how stablecoins could shorten correspondent-banking payment chains. It also noted that large international banks could retain intermediary roles because of their capacity to hold currency inventories and conduct compliance checks across jurisdictions. The CPMI has cautioned that potential benefits must be assessed against costs and risks, and that stablecoin arrangements are one of several approaches to improving cross-border payments.

Fiat conversion and payment networks

On-ramps and off-ramps connect stablecoins with conventional currencies. They allow users or intermediaries to acquire stablecoins using fiat currency and to exchange stablecoins back into fiat. Their availability, liquidity and links to local payment infrastructure affect whether a stablecoin payment is usable by its intended recipient. In October 2025, Federal Reserve governor Michael Barr identified conversion fees as a constraint on remittance savings, while noting that acceptance networks in some corridors had reduced those fees.

Connections to the banking system also support issuance and redemption. S&P Global's analysis of U.S. stablecoin-oriented banks identified deposit-taking, transaction accounts and liquidity management as ways to provide fiat conversion and support settlement.

Payment cards

Stablecoin-linked payment cards can connect a stablecoin balance to an existing card network. In April 2025, Visa and Bridge announced a card product under which Bridge would deduct funds from the cardholder's stablecoin balance and convert them to fiat currency, allowing the merchant to receive local currency.

Stablecoins can also be used for settlement between financial institutions in a card network. In December 2025, Visa announced that participating U.S. issuers and acquirers could settle obligations with Visa in USDC, initially with Cross River Bank and Lead Bank using Solana. Visa stated that this did not change the consumer card experience.

Custody

Cryptocurrency wallets manage the private keys used to authorise transactions. Under self-custody, the user manages those keys; under third-party custody, a provider controls access to them. Loss of keys or the failure of a custodian can prevent access to the assets. Custody of a user's tokens is distinct from safekeeping the reserve assets backing a stablecoin, which may involve financial institutions holding cash or securities for the issuer.

Regulation

European Union

The Markets in Crypto-Assets Regulation (MiCA) defines an e-money token as a crypto-asset that purports to maintain a stable value by referencing one official currency. Article 48 deems e-money tokens to be electronic money and generally requires issuers offering them to the public or seeking admission to trading in the European Union to be authorised credit institutions or electronic money institutions, subject to specified exemptions. Article 49 provides for issuance at par on receipt of funds and redemption at any time at par. Article 50 prohibits issuers and crypto-asset service providers from granting interest in relation to e-money tokens. Article 75 sets requirements for custody and administration of crypto-assets on behalf of clients.

United States and international standards

In March 2025, the U.S. Office of the Comptroller of the Currency reaffirmed that national banks and federal savings associations could undertake the crypto-asset custody, stablecoin reserve-deposit and distributed-ledger payment activities described in its earlier interpretive letters. This concerned specified activities by those institutions rather than unrestricted permission for any provider to conduct banking business.

The Financial Stability Board's 2023 recommendations for global stablecoin arrangements address governance, risk management, redemption rights and cross-border supervisory cooperation. They are recommendations to national authorities, to be applied within their respective mandates.

Risks and limitations

Stablecoin prices can diverge from their reference value. S&P Global's study of depegging identified reserve quality, market liquidity, confidence and access to redemption as factors affecting price stability. Operational and legal risks also arise from blockchain infrastructure, intermediaries and cross-border differences in regulation.

Links between stablecoin issuers and banks can transmit liquidity pressures. A February 2026 Federal Reserve Bank of New York staff report, using data linking blockchain activity to interbank payments, found increased payment demand and liquidity exposure at banks holding stablecoin-related deposits. Separate Federal Reserve analysis has described possible effects on deposit composition, bank funding and credit provision, with outcomes depending on how issuers hold their reserves and how users adopt stablecoins.

The Bank for International Settlements argued in its 2025 Annual Economic Report that stablecoins fell short of three requirements for a monetary system: acceptance of money at par, an elastic supply of liquidity and protection against financial crime. It distinguished these limitations from the potential uses of tokenisation in payment infrastructure.

See also

• Stablecoin
• Payment system
• Correspondent account
• Digital currency