From debanking to a banking arms race—The rise of stablecoins

The financial industry is undergoing a significant shift in its relationship with cryptocurrencies, moving from widespread debanking of crypto businesses to an embrace of stablecoins. This change follows the repeal of policies like “Operation Chokepoint 2.0” and the recision of SAB 121, which previously discriminated against the crypto industry. Banks like Bank of America, JPMorgan, Wells Fargo, and Citibank, which faced the brunt of debanking complaints, are now showing increased interest.

Stablecoins, while not new, are gaining traction. Major institutions have experimented with them for internal uses, but the true potential lies in their deployment on public blockchains. This allows for features like eradicating unauthorized payment disputes and enabling faster payment cycles. The complexity of payroll processing, involving ACH transfers, wires, and various data formats, can be significantly streamlined using the programmability of stablecoins.

Smaller banks are recognizing the opportunity to integrate permissionless, public network stablecoins into their operations. This mirrors the adoption of AI by businesses after ChatGPT’s release. Custodia Bank’s issuance of its own stablecoin, Avit, on Ethereum serves as a prime example of successful implementation.

The growth in active stablecoin wallets, increasing from 19.6 million in February 2024 to over 30 million in February 2025, underscores the rising adoption. Legislative support is also emerging, with President Trump aiming for stablecoin legislation by August 2025 and Wyoming already enacting such legislation in March 2025. Partnerships like Mastercard’s collaboration with Circle and Paxos further demonstrate the growing integration of stablecoins into mainstream financial systems.

Improvements in stablecoin infrastructure, a high percentage of fiat-backed stablecoins (91%), and simplified user experiences are contributing to increased confidence and wider adoption. The shift towards on-chain asset movement will further prepare payment companies for the future financial system. BlackRock’s interest in tokenized bonds and stocks further illustrates the broader movement towards blockchain technology in finance. For banks seeking a competitive edge, leveraging stablecoins to enhance products and internal operations presents a significant opportunity.