Bank of America Prepares Stablecoin Launch Pending Client Demand

Bank of America (BofA) has confirmed its plans to enter the stablecoin market, pending client demand. The institution's CEO, Brian Moynihan, announced this during the bank’s quarterly earnings discussion, stating that all preparatory work is complete. BofA will partner with existing stablecoin projects, and the deployment of their stablecoin will depend on an increase in client demand.

Moynihan drew parallels between the stablecoin process and digital payment services like Zelle, noting that current usage varies across sectors. He emphasized that adoption may follow regulatory clarity and consumer needs, but did not provide a specific timeline for the launch.

Other major U.S. banks are also moving in this direction. Citigroup CEO Jane Fraser confirmed plans for a Citi-branded stablecoin, while Morgan Stanley is evaluating client applications for similar services. JPMorgan CEO Jamie Dimon has acknowledged future involvement in the stablecoin space.

These developments coincide with legislative progress. The U.S. House passed the GENIUS Act, which aims to create federal rules for stablecoins. The bill passed by a vote of 215-211 and is awaiting final approval, which could occur this week. Additionally, the CLARITY Act is advancing toward defining broader oversight for digital currencies.

Financial institutions appear to be awaiting regulatory certainty before fully committing to stablecoin operations. Congressional progress on these bills may accelerate bank participation in digital dollar products, providing the necessary framework for stablecoin issuance and management.

BofA’s stablecoin plans could have significant market effects. A dollar-pegged stablecoin from BofA might improve payment speed between corporate clients, potentially reducing the reliance on traditional fee-based banking services. However, this also presents inherent risks, including credit risk, liquidity risk, operational vulnerabilities, smart contract flaws, settlement failures, and governance gaps.

Moynihan stressed that regulatory clarity must precede any launch. Clear rules would address concerns about illegal activity and system stability. Congressional bills like the GENIUS Act aim to establish federal oversight frameworks, which are crucial for mitigating the risks associated with stablecoins.

Widespread stablecoin usage could create interconnected risks across the financial system. If many institutions adopt stablecoins simultaneously, problems at one issuer might affect others. This interdependence requires coordinated regulatory approaches to ensure the stability and security of the financial ecosystem.