Wall Street banks start ‘stablecoin war’

Ever since the US Senate passed the so-called “Genius Act” last year, the growth in usage of stablecoins (issued by Circle and Tether) has been unstoppable. Wall Street banks are fearful of this phenomenon. They’ve responded by filing lawsuits. The Financial Times calls it the “stablecoin war” and is already wondering who will emerge victorious.

Bank account

Although stablecoins represents only a fraction of the traditional financial work done by banks, they are increasingly noticing that younger clients are primarily interested in crypto products. Some are even transferring part of their savings into stablecoin accounts. What does this mean for the future of banks?

The “Genius Act,” the federal law signed by Donald Trump last July to regulate cryptocurrencies, is therefore being attacked on two fronts simultaneously.

Last Monday, a coalition of New York prosecutors (backed by the powerful US banking lobby) launched a coordinated attack on the largest stablecoin issuers, Circle (USDC) and Tether (USDT). They argue that the Genius Act offers no protection to consumers and even gives stablecoin issuers “legal cover” to facilitate financial fraud.

The accusations against Tether and Circle are serious and will be dealt with in the courts. This is likely just the first warning shot fired by the banking lobby, with many more to come.