The news: SoFi launched the SoFiUSD stablecoin on the Ethereum blockchain. The bank will also provide infrastructure that lets other banks and fintechs issue white-label stablecoins that are interoperable with SoFiUSD. 

Zoom out: Under the GENIUS Act, subsidiaries of insured depository institutions are allowed to issue stablecoins if they obtain regulatory approval. Issuers must hold one-for-one reserves in high-quality liquid assets like dollars and Treasury bills, publicly disclose redemption policies, and comply with reporting standards. Issuers must also comply with AML rules.

Public stablecoin issuance isn’t new, but chartered banks’ involvement is. JPMorgan issued an institutional deposit token on the Ethereum blockchain in November, and Zelle said that it would develop a stablecoin for cross-border payments. SoFi’s consumer-focused stablecoin likely can help lower remittance costs for senders.

Our take: “Stablecoins as a service” like SoFi’s offering—and Fiserv's—may democratize stablecoins to a broader base of financial institutions. Up until now, banks that wanted to issue stablecoins needed to develop their own decentralized finance (DeFi) infrastructure and internal compliance guardrails. Like with other transformative investments in technology, only the largest banks can afford to build that infrastructure in-house and manage the administrative obligations. 

A widespread entry into stablecoins would be a massive pivot for a banking sector used to dealing in fiat currency. If it came to fruition, it would normalize stablecoins as a payment mechanism across the US—further blending traditional finance and DeFi—and establishing major crypto companies as accepted infrastructure providers for what may become mainstream banking products and services.