U.S. Bancorp tests its own stablecoin as Wall Street races into tokenized finance

Bancorp is now officially testing a stablecoin on the Stellar blockchain, making it the latest Wall Street name to wade into crypto. That puts the firm right in the middle of a growing push by U.S. financial giants to move money faster and cheaper using blockchain tech.

The Minneapolis-based bank, which operates as U.S. Bank, has already formed a new division focused on crypto and money movement. During an earnings call in October, Gunjan Kedia, President and CEO, stated that Bancorp is now working on two stablecoin fronts: holding cryptocurrency for clients and testing actual payments using stablecoins. “Client demand is more muted” on the payments side, she admitted.

Bancorp builds in-house rails for stablecoin transfers

Mike Villano, senior vice president and head of digital asset products at U.S. Bank, said in an interview that stablecoins bring obvious advantages: faster settlement, lower cost, and 24/7 access.

But, he added, banks like his can’t just plug into off-the-shelf tokens and call it a day. “But for bank customers, we had to think about other protections around know-your-customers, the ability for online transactions, the ability to claw back transactions,” Mike said.

That’s where Stellar comes in. The public blockchain, originally co-founded by Jed McCaleb, was designed from the start for finance-first applications.

The network allows token issuers to freeze assets, a feature that gives traditional institutions more control than most blockchains can offer. Mike said that was a key reason Bancorp chose Stellar over alternatives.

Circle, the company behind USDC, and asset manager Franklin Templeton are already using Stellar’s rails. And the ecosystem is growing. As of September, Stellar had 9.8 million unique wallets.

In the last year, it processed $32 billion in payments, based on the latest quarterly update from the Stellar Development Foundation, the nonprofit that maintains the network.

The foundation’s president and chief growth officer, Jose Fernandez da Ponte, said more institutions are getting comfortable with moving operations on-chain.

“One of the very important things is that institutions are considering deploying on-chain,” Jose said. “That’s a ton of progress from where the institutional market was a few years back.”

More firms race to serve banks in crypto

Bancorp isn’t the only one circling the stablecoin runway. Citigroup has already linked up with Coinbase, while Ripple just raised $500 million from big-money names like Fortress Investment Group and Citadel Securities.

Ripple’s plan? Roll out products for financial firms, the exact same crowd Bancorp is targeting. Base, a chain built by Coinbase on top of Ethereum, is also going after the same space. So is Tempo, a blockchain project incubated by Stripe.

But Jose says Stellar’s independence gives it an edge. He believes banks are more likely to trust a network that’s not tied to a direct competitor.

“We think that it is very important that there are open blockchains out there that are independent, that are not affiliated with a corporate,” he said. “That’s going to give a ton of confidence for institutions that they’re building on someone that is not related to a competitor, but also someone who’s playing the long game and devoted to the progress of the technology itself.”