JPMorgan's Dimon and Citigroup's Fraser consider stablecoins in Wall Street crypto pivot

JPMorgan Chase (JPM) CEO Jamie Dimon and Citigroup (C) CEO Jane Fraser both said Tuesday they are going to get involved in stablecoins, the latest evidence of how Wall Street is pivoting to embrace digital assets as federal lawmakers debate new legislation favorable to the crypto industry.

“We are looking at the issuance of a Citi stablecoin,” Fraser told analysts Tuesday. “We really welcome the administration’s willingness to allow banks to participate in the digital asset space more easily,” Fraser added.

The effort to push crypto legislation through Congress in a week dubbed “Crypto Week” by some in the GOP hit a roadblock Tuesday as 13 Republicans voting with Democrats blocked a procedural motion that would have cleared the way for votes on the House floor.

The three bills House GOP lawmakers hoped to pass this week were designed to produce a sweeping regulation of all crypto assets, prohibit the creation of central bank digital currencies, and establish the first federal framework for stablecoins.

Some in the GOP who blocked the floor votes want all of the bill packaged together instead of considered separately, according to Politico.

Big banks are nonetheless preparing for what they expect to be an ultimate stamp of approval from Washington for widespread use of stablecoins, cryptocurrencies typically backed by US dollars.

Dimon, a longtime skeptic of cryptocurrencies, said the bank needs to embrace stablecoins as a way to keep pace with payment rivals. Last month, JPMorgan announced plans to launch a so-called deposit token called JPMD that is somewhat like a stablecoin but available only to JPMorgan’s institutional clients.

“We’re going to be involved in both JPMorgan deposit coin and stablecoins to understand it, to be good at it,” Dimon said.

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He also made it clear he hasn’t dropped his skepticism entirely: “I think they’re real, but I don’t know why you’d want to [use a] stablecoin as opposed to just payment.”

Bank of America (BAC) CEO Brian Moynihan has also said his bank is going to take a look at stablecoins after key crypto legislation passes.

“We’re working with the industry, working individually. We have this pretty well understood … but the problem before was it wasn’t clear we were allowed to do it under the banking regulations, and there was a lot of mystery about that,” Moynihan said last month.

The stablecoin bill already passed by the Senate lays out how US companies can issue and manage dollar-backed stablecoins for payments, giving those digital assets a massive stamp of approval that is expected to encourage wider adoption.

That version bans members of Congress and their families from earning profits from stablecoins, but not Trump and his family, an omission that irked some Democrats and slowed progress on the legislation earlier this spring.

Read more: Can you buy crypto with a credit card? See the pros and cons.

If the legislation passes the House and goes to President Trump’s desk, it is expected to unleash a wave of new stablecoin entrants.

Last month, Bank of America and other big banks convened to explore prospects for launching a collaborative stablecoin network. The Wall Street Journal has also reported that Amazon (AMZN) and Walmart (WMT) are exploring stablecoin opportunities.

The new wave of competition could upend the traditional payment system, especially if merchants seek to use stablecoins to circumvent conventional card-based networks such as Visa (V) and Mastercard (MA).

Dimon was asked Tuesday about a possible joint venture among many banks.

“That’s a great question, and we’ll leave it remaining as a question,” Dimon said. “You can assume we’re thinking about all that.”

The legislation that passed the Senate would empower the Federal Reserve and the Office of the Comptroller of the Currency (OCC) to oversee stablecoin issuers that hold $10 billion or more in assets, while smaller issuers would be under the purview of state regulators.

All issuers would be required to hold reserves in cash or US Treasurys, undergo regular audits, and publicly disclose their holdings and redemption processes.

Like money market funds, the tokens must aim to be redeemable at face value. But unlike money market funds, stablecoins under this bill cannot pay interest.

There’s an ongoing debate about how widespread the usage of these digital assets will ultimately be.

Stablecoin proponents tout these assets as a haven from crypto’s wild volatility and a safer place for traders to store their gains because they can be pegged to non-crypto assets like the dollar.

Their near-instant settlement and programmability also carry advantages proponents believe could enhance cross-border transactions and wider access to the US dollar.

But concerns remain among detractors that there could be risks with stablecoins, including the possibility of panic runs among investors.

“Keep in mind, right now … about 88% of all stablecoin transactions are used to settle crypto trades,” Citigroup’s Fraser added on Tuesday. “It’s only 6% which is payments.”

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