Key Points

• Large financial institutions plan to launch a shared digital dollar
• Banks hope to have greater control over the stablecoin economy.
• Tokenized assets require reliable digital cash for settlement.

Goldman Sachs, Bank of America, Citibank, and another 18 financial institutions are preparing to develop a shared digital dollar in order to challenge the dominance of existing stablecoins.

According to a announcement released by Wells Fargo on September 1st, the consortium plans to establish a company in 2026 and launch the first US dollar-backed stablecoin in the first half of 2027.

The participants include 18 banks, asset management companies Fidelity and WisdomTree, as well as Sirius International Holding. But since Circle's USDC already provides blockchain payments denominated in US dollars, why is there a need to develop a new token?

Why don't banks want to rely entirely on USDC

The answer lies first in the control over customers, payment infrastructure, and revenue.

When a company converts regular US dollars into USDC, the resulting tokens become liabilities of the Circle issuing entity, rather than deposits in the customers' original banks.

Circle is responsible for managing the reserve structure and redemption arrangements, while financial institutions may provide custody, distribution, and payment services.

For banks, the widespread adoption of stablecoins may gradually lead to customers transferring their balances out of traditional deposit accounts.

This is also one of the reasons why these institutions develop their own digital dollars instead of relying entirely on external issuers.

In addition, there are also income opportunities involved here.

Stablecoin reserves typically include cash and short-term government bond instruments, which can generate interest income.

The financial disclosures of Circle highlight the importance of these earnings, however, their distribution agreement requires them to share a considerable portion of the revenue with their partners.

Funds supported by banks may capture a larger portion of this economic value.

However, the participants have not yet disclosed how the reserve income, expenses, or profits from their proposed tokens will be allocated.

Why are 21 institutions jointly creating a stablecoin?

Shared tokens can solve one problem that arises from individual banks issuing stablecoins: fragmentation.

Imagine a company holding digital dollars issued by Bank A, while its suppliers only accept tokens issued by Bank B.

Converting between these tokens may require additional liquidity providers, fees, and settlement processes.

If the participants reach an agreement on redemption standards and interoperability, a universal stablecoin supported by multiple financial institutions could reduce such friction.

The consortium plans to initially focus on cross-border payments and digital asset settlements, using the US dollar at first, and may later expand to euros and other G7 currencies.

This approach is different from Japan's joint stablecoin initiative, which involves three major banking groups jointly developing a shared issuance structure.

It is also different from tokenized bank deposits, which represent a digital form of customers' existing liabilities with commercial banks, rather than being independent stablecoin claims.

The consortium has not yet explained whether the tokens in their plan will operate on one blockchain or multiple blockchains.

Can bank stablecoins really compete with Circle?

Compared to persuading companies and financial platforms to use it, creating a digital dollar is relatively easier.

USDC already possesses mature trading liquidity, exchange integration, and payment relationships.

Therefore, what banks need is not just regulatory credibility. They must also provide competitive redemption mechanisms, reliable interoperability, and substantial advantages for corporate customers.

The opportunities are quite considerable, as tokenized securities require digital settlement assets.

Banks might be able to directly link blockchain payments with their custody and fund management services, thereby reducing intermediate steps.

However, independent issuers are also responding. Circle has been exploring USDC products that are targeted at institutions and emphasize privacy in order to meet the needs of customers who require confidential transactions.