Bitcoin Forum

Is it possible stable coins could have their own bank since they are backed by a country's currency like the U.S Dollar which they use to maintain a stable value?

Or also, knowing that stablecoins are different from cryptoassets which do not have assets as backings and are more volatile, will in the future, the success of stablecoins not call for something like a bank or a recognized office building built to show legalization and acceptance as a means of payments for transactions and services?

I assume that we are already into it. Yeah, unlike traditional banking, these days I am able to open a bank checking account online without visiting any branches; this is very much similar to registering an account in a crypto exchange with KYC. I agree there are few differences like debitcard, check facility, overdrafting etc.. but we can find other third party services to work with cryptocurrencies to avail exact similar functionalities.

I mean bitcoin was developed to provide banking facility to each and every human without trusting any central authorities including governments and here stablecoins providing additional layer of simplicity to take banking  facility to needed people.

Definitely will call. But, I believe we do not need any regulation/legalization for that to make it more common among all people; only awareness is enough. But, we need to remember stablecoins are not decentralized which means they may collapse at any time or government may seize. So, holding a big money in stablecoin is highly NOT recommended.

Stable coins that runs on blockchain doesn't necessarily need banks because we get to store the coins in the blockchain itself so there is no job for bank in this process but that's different when it comes to CBDC cause it's backed to that fiat value of the country so mostly you need bank account to connect your CBDC wallet since that is the most preferred way for verification until now in CBDCs.

They could have their own bank but that’s not the goal of stablecoins. When stablecoins were first released it was so users could transfer money from exchanges such as Bitfinex to exchanges which had tons of altcoins which the bigger exchanges didn’t have.

So the user wouldn’t need to sell their US dollars, buy bitcoin, send bitcoin to some alt exchange and then sell that bitcoin for US dollar and finally buy what alt coin they want. This is too many transactions and hence why stablecoins were introduced because you could send back and forth between exchanges.

There is no point is having a bank for stablecoins however. Just send to your exchange, sell for fiat and withdraw that fiat to your bank and buy whatever you want.

I think what you're describing is pretty much a CBDC.


I don't think it even matters much of stablecoins have their own bank. What matters most is that they have proof that these stablecoins actually have a 1:1 backing on whatever bank as long as the bank is decent.

Exactly, he is describing a CBDC issued by a central bank, eg. the European Central Bank.
However, centrally issued CBDCs are the subject of much controversy, primarily due to their programmability (which ECB boss Lagarde, for example, has described as a "major breakthrough") and the resulting process of displacement of traditional currencies and cash.

They have their own banks, with private keys, with valuable assets to back their stable coins.

A biggest stable coin Tether USD has its transparency page and audit report.
https://coinmarketcap.com/currencies/tether/
Tether's transparency (https://tether.to/transparency/)
Independent Auditor's report (March 2024) (https://assets.ctfassets.net/vyse88cgwfbl/2JwUN6EeDvWi02CyuQd2nJ/d7b3b4c3800ec70abd7282cc79fa2973/ISAE_3000R_-_Opinion_on_Consolidated_Financials_Figures_and_Reserves_Report_31.03.2024_RC134792024BD0043.pdf)

If a stable coin is mint from thin air, without backed assets like US. dollar, gold, is it still a stable coin?

Its value will crash to $0 when people detect this terrible fact.
A deep dive into valuation and depegging of stablecoins (https://www.spglobal.com/en/research-insights/featured/special-editorial/stablecoins-a-deep-dive-into-valuation-and-depegging)

Not 100% sure, but I'm pretty sure USDT/USDC are pretty much 'programmable' as well, with their lock functions and stuff.

But yea, safe to assume that CBDCs will be far stricter as they're highly more likely to comply with regulations and stuff, so locking of funds are highly more likely in my opinion.

They are programmable, that is true.
However, the programmability of CBDCs (e.g. that of the digital euro) should go even further. One "feature", for example, is that unused capital expires after a few months and is set to 0. So you are forced to spend the money, saving is not possible with a digital euro.

Programmability can therefore also have a negative consequence ;)

Overall it's always possible. As we all know stablecoins have a lot of issues, especially decentralization and regulations.

So the major problem here is the regulation. As you can see the current famous stablecoins, Tether(USDT) and Circle (USDC) are already like banks, and they already encountered a lot of issues recently.

From what I read from the explanation it seems quite reasonable and very risky if there is no one to back it up and at any time it could collapse. Will it be like UST in the future? I hope not.

For any coin to have its own bank they don't need to be "backed" by anything. The criteria is to be centralized which stablecoins already are. That means the answer is yes they can have their own bank.

After all the dollar itself is not backed by anything and it has its own banks simply because it is centralized!

This is exactly why there is a flaw in this design. You see centralization and blockchain technology don't mix well. It is like addition of contradictions!

Why not? The world is getting more digital and with the acceptance of cryptocurrency in many climes, there is no way some banks will not be transacting in the USDT and it will be easier for them if their country is such that is crypto-friendly. But this will be cryptocurrency banks because there are wide distinctions between the USD and USDT, and I can't possibly think that any central bank would want to mix that up. First, it is the USD that can back the USDT and not the other way around. Also, the fact that the central bank can not oversight and control the USDT, they will not be able to allow the regular commercial banks to get involved in such.

However, special crypto banks will be doing that, and I believe it is already happening with the current ones, though I have never used them before to know their mode of operation. Nevertheless, for a bank in China to involve itself with illegal underground USDT operations in a country that frowns so much on cryptocurrency means that even the commercial banks that are dealing with fiats will still try it despite knowing that it will never gain the support of the central bank.

Link: https://www.theblock.co/post/294777/china-busts-1-9-billion-underground-banking-operation-using-usdt

It's possible that when stablecoins have their own bank, maybe they want to provide banking services and then they buy a bank that is going bankrupt in a country, then after operating and getting permission to launch crypto assets, they launch their own stablecoins product. However, the question is, how important is this bank to users, because if the stablecoins company only wants to target the global crypto market, then they don't need to have a bank since they can launch their stablecoins product to market easily. Because the most important thing for users to trust these stablecoins is that the company is legal, has strict audits, and reserve assets that can be accounted for to users.

Pooya explained it well what you are describing.

They're actually working as that right now. And there will be more and bigger institutions that will make their own stable coins. Lately, we've seen that PayPal launched their own stable coins, PYUSD. They're not a bank but they function like a bank, a storage, an exchange and as well as remittance for everybody.

We don't need to have bank on our assets for stablecoins, our encrypted wallets is one of the best security. Banks isn't a reliable storage for this because the control is not in our end anymore. Digital wallets like metamask, trustwallet and different trusted platforms. These coins is now running through crypo network like bsc chain, ethereum and trx which made it more sustainable when it comes to trading.

Exactly, for long-term investments like what you are doing, it is very smart, it is better to store assets in the form of cryptocurrency such as Bitcoin in wallets such as Electrum and others. Because a wallet like this can be stored for a very long time and will not be affected when a problem occurs at the exchange which causes the exchange to close.

Their coin or token value is backed by quality of idea from which their project initiated and their recent, current and future development ideas and plans as well as how they already fulfilled their development promises to investors through roadmaps and how will the complete their development plans in future.

Stable coins backed by gold, US. dollar or any fiat currency but except gold, all fiat currencies can be printed from thin air by governments. It does not help for a coin or token value if it is backed by something from thin air.

Gold has production cost but its value is from demands too because exchange price rate of gold has big contribution from demand, not only or mostly comes from its production cost.

Like the USA. national debt can be temporary resolved by a check that can be created by centralized decision but in reality the debt is there, not vanish anywhere.

Most of the Stable Coins have backed by huge liquidity pool and they make their earning by stacking and or by other means like transaction fees etc.

I don't believe that there could be a bank who may be the back of those stable coins but surely there is chance of some huge investment companies owning those stable coins or maybe governments IDK.

But when it comes to CBDC's then surely they are part of a government's money system and that's why they have their bank. CBDC's

Stable coins are backed by USD and the US doesn't consider them as a currency that is why they won't be have a bank. Stable coins use blockchains which means all transactions are recorded and kept for infinity that is another reason why the won't needs bank. I doubt any country will ever legalize stable coin as doing it they will be accepting USD as thier currency.

Maybe not the first goal but stablecoins have changed the cryptocurrency world, simplified value transfers between exchanges. This is just the beginning of their potential. Acting as digital cash, stablecoins are setting the stage for a new era in financial services. We are already seeing the rise of crypto lending platforms and interest-bearing stablecoin accounts, which are early indicators of a broader evolution. These platforms, though not traditional banks, offer core banking functions like secure storage, yield generation, borrowing, and seamless payments, as far as I know. This trend reflects the growing integration of crypto with traditional finance, as institutional investors enter the space and regulators work to adapt.
Dedicated stablecoin institutions could bridge the gap between these two worlds, providing regulatory clarity and a familiar interface for traditional finance players, IMO. They would also streamline the currently fragmented stablecoin services, offering users a one-stop shop for their financial needs.While "bank" might not be the perfect term, the concept holds great promise. The crypto world often exceeds expectations, and the rise of stablecoin-centric financial institutions seems likely in the coming years, ushering in a new era of financial innovation

I may not know about the possibilities for the provision of banks for stable coins but my intake is that it doesn't seem a necessary idea to such development since it's a currency embarking crypto assets. It's also referred as digital currency even though it's not volatile so the possibility of bringing the stable coind in a physical form as the fiats is assumed that the latter could also be achieved in the physical form which is impossible. Hence, the stable coin isn't useful without the cryptocurrencies.

I think it is possible for the bank to have their own stablecoins, because here in our country there is a bank named Unionbank, and it created its own stablecoins, and crypto enthusiasts have not noticed or felt it much because the crypto community here in our country still wants to invest cryptocurrency instead of their stablecoins.

Then we also know that the majority of stablecoins are centralized, although I also know that there are stablecoins in DEX that are not the same as in centralized-based systems.

I dont think he mean CBDC as it is already a cryptocurrency of a bank. I think more of like DeFi than CBDC, as even now many token or platfrom provide service like a bank like those lending platform

By the term "Own Bank" I think it means a store of value but isn't all currency and assets have this already? Banks are known to be centralized but I think a decentralized bank is also possible. Dunno bout you but I think dollar is backed by something and anything that are legit is also like it. The backer of dollar can be literally banks and maybe the governments too?

Nothing is perfect in this world but each must have their own flaws. We only need to accept this reality or we can still go for the other if we don't like what the other is offering. I am sure we are not forced to use them. Blockchain itself must offer transparency and so as centralization. They do mix well actually.

Maybe this will be a different statement when we read it correctly, such as “is it possible for stablecoins to have their own banks” and the phrase “banks have their own stable coins' which we know with CBDC which is still under construction, but if you look at the context that might fit the title of the thread is ‘is it possible for stablecoins to have their own banks’ it's like USDT, USDC, FDUSD and other stable coins that are not born from banking institutions like CBDC, get their own banks or they create banks after they launch stable coins first before building their bank institutions.

I think it is quite difficult because the administrative process and so on need to have attachments with the government and others but it is not impossible to do.

Im not professional but I guess banks will just operate with the fiat currency of their country as part of their regulations, possible if they are not direct banks like the finance companies like third parties supporting the use of the crypto that they can operate their own currencies, here in my country the team of coins.ph offering now a stable coin which is the PHPC as per them its the same like the bank or what OP says would like but it's not direct as came from the bank this thing is currently cooking here if they will make an immediate implementation.

I just want to point you to a core difference between Stablecoins And CBDCs according to the link below and also what Defi stands to represent:
https://www.ccn.com/education/stablecoins-vs-cbdcs-similarities-and-differences/

Decentralized bank do exist, it's Bitcoin.

Dollar is backed by "trust", if all people in the world didn't trust Dollar anymore, Dollar will become worthless since the thing that backed Dollar is gone. After that banks will collapse since people will withdraw all of their money and they will not trust in government anymore.