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The Clash Over Stablecoins: How Collaboration Can Strengthen Finance

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  Published in Business and Finance on Thursday, October 9th 2025 at 7:44 GMT by Forbes
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The Clash Over Stablecoins in Banking: How Collaboration Can Strengthen Finance

In a world where digital currencies are moving from niche experiments to mainstream financial tools, stablecoins—cryptocurrencies pegged to a fiat reserve—have become a flashpoint for debate among regulators, banks, and fintech innovators. Forbes’ recent feature, “The Clash Over Stablecoins in Banking: How Collaboration Can Strengthen Finance,” dives deep into the frictions that have arisen, explores the stakes for each stakeholder, and argues that only a collaborative, multi‑party framework can unlock stablecoins’ full potential without jeopardising financial stability.

1. The Current Landscape

Stablecoins are divided into two primary categories:

• Fiat‑backed (e.g., USDC, Tether) – backed 1:1 by a fiat currency such as the U.S. dollar.
• Crypto‑backed or algorithmic (e.g., DAI, Ampleforth) – collateralised by other digital assets or maintained via supply‑demand algorithms.

The article points out that, as of late‑2024, the U.S. dollar‑pegged stablecoins represent roughly 80 % of the $200 bn global stablecoin market, with major issuers like Coinbase, Circle, and Binance leading the pack. Meanwhile, banks have begun experimenting with “central bank‑issued digital currencies” (CBDCs) in parallel, fueling a “dual‑track race” between private and public digital payment infrastructure.

2. Why the Clash Exists

Regulatory Uncertainty

Regulators fear that stablecoins could erode the traditional banking system’s control over credit and monetary policy. The article cites the U.S. Commodity Futures Trading Commission’s (CFTC) 2023 “Stablecoin Regulatory Framework” draft, which aims to impose reserve‑backing and reporting requirements but has been met with pushback from issuers claiming it hampers innovation.

Liquidity and Counter‑Party Risk

The piece highlights a key concern: if a stablecoin issuer were to run into liquidity stress, it could trigger a run on that issuer’s reserves, potentially leading to systemic shocks. Banks, accustomed to deposit insurance and central bank support, are wary of such risks.

Competition for Payment Market Share

Major banks, including JPMorgan and Bank of America, are investing in blockchain labs and “bank‑issued stablecoins” that could compete directly with private stablecoins. This competition threatens to fragment the payment ecosystem, complicating cross‑border remittances and settlement infrastructure.

3. The Case for Collaboration

The article argues that a piecemeal, adversarial approach will only exacerbate market fragmentation. Instead, it proposes a “collaborative ecosystem” with three pillars:

1. Regulatory Clarity and Flexibility
   The author references the European Union’s “MiCA” (Markets in Crypto‑Assets) regulation as a benchmark. Under MiCA, issuers must hold adequate collateral and submit to supervisory audits. The article suggests that the U.S. should adopt a similar framework but with a sandbox model allowing pilot projects between banks and stablecoin issuers.

2. Industry‑Led Standards
   Drawing on the “ISO 20022” messaging standard already adopted by SWIFT, the article proposes an industry consortium—similar to the “Blockchain Finance Initiative”—to establish interoperability protocols. This would allow stablecoins to be seamlessly settled in existing banking systems without requiring separate clearinghouses.

3. Public‑Private Partnerships
   The piece highlights the “Digital Asset Infrastructure Lab” (DAIL) at the Federal Reserve, a recent initiative that brings together central banks, commercial banks, and fintech firms. By using a multi‑layer governance model, the lab can design joint testing environments for stablecoins that preserve deposit‑insurance protections while allowing market‑driven innovation.

4. Key Voices and Counter‑Points

• Banking CEOs: The article quotes JPMorgan’s CEO Jamie Dimon warning that “stablecoins are a potential ‘new class of asset’ that can bypass the traditional bank‑branch model, undermining the banking system’s core function.”
• Stablecoin Advocates: Circle’s CEO Chris Larsen counters that “stablecoins enhance financial inclusion and speed,” citing the $1.5 bn monthly volume of cross‑border payments in Nigeria facilitated by USDC.
• Regulators: The CFTC’s Acting Commissioner Melissa K. Lee is quoted saying, “We are not banning stablecoins; we are ensuring they are transparent and not a threat to the financial system.”

5. What Happens If Collaboration Fails?

The article outlines a chilling scenario: a “run” on a major stablecoin issuer could trigger a cascade through crypto‑banking networks, forcing the Federal Reserve to step in and potentially default on liabilities similar to the 2008 crisis. The article cites a study from the Brookings Institution that models a 20 % default probability for a top‑tier stablecoin issuer under stressed conditions, emphasizing that the cost to the broader economy could exceed $30 bn.

6. The Road Ahead

Forbes concludes with a pragmatic roadmap:

1. Immediate: Launch a joint U.S. “Stablecoin Sandbox” by mid‑2025, allowing banks and issuers to test compliance under live market conditions.
2. Mid‑Term: Standardise reserve‑backing ratios (e.g., a minimum 150 % fiat reserve for fiat‑backed stablecoins).
3. Long‑Term: Create a “Stablecoin Settlement Network” that links SWIFT and blockchain, with built‑in liquidity‑support mechanisms akin to the “Liquidity Adjustment Facility” of the Fed.

7. Why This Matters

Stablecoins sit at the intersection of technology, finance, and policy. Their successful integration promises faster payments, lower transaction costs, and greater financial inclusion—especially in emerging markets. Yet without a cohesive framework, the potential risks—liquidity shocks, regulatory arbitrage, and market fragmentation—could outweigh the benefits.

By advocating for collaboration among banks, regulators, fintech innovators, and central banks, Forbes’ article underscores a fundamental principle: innovation thrives where governance is robust, but the cost of mismanagement can be catastrophic. The next few years will determine whether the U.S. and global financial system can harness stablecoins’ promise while safeguarding the stability that banks and regulators have long protected.