Citi Backs Stablecoin Firm BVNK Despite Previously Opposing Crypto Payment Rails
Citigroup invested in stablecoin infrastructure firm BVNK by means of its enterprise capital arm Citi Ventures, which is a pointy reversal from the financial institution’s earlier warnings about deposit flight dangers from yield-bearing stablecoins.
BVNK’s core know-how operates as a funds rail facilitating international stablecoin transactions, permitting prospects to maneuver cash between fiat and cryptocurrency.
US Regulatory Clarity Drives Stablecoin Infrastructure Growth
According to CNBC, the corporate declined to reveal Citi’s funding quantity or its present valuation.
However, co-founder Chris Harmse confirmed the valuation exceeds the $750 million publicly disclosed at its final funding spherical.
BVNK, additionally backed by Coinbase and Tiger Global, operates in a extremely aggressive house alongside newcomers like Alchemy Pay and TripleA, in addition to established gamers like Ripple vying for the cross-border digital cash market.
Harmse stated the corporate is experiencing momentum, notably within the United States, which has been its fastest-growing market over the previous 12 to 18 months following the passage of the GENIUS Act earlier this yr.
The laws established regulatory readability for the stablecoin market, creating what the trade views as a extra favorable surroundings.
The funding comes as CEO Jane Fraser confirmed in July that Citigroup is considering issuing its own stablecoin and creating custodian providers for crypto property.
Fraser stated the financial institution goals to ship “the advantages of developments in stablecoin and digital property to our shoppers in a secure and sound method by modernizing our personal infrastructure.”
Banking Industry Split Over Stablecoin Competition
The backing arrives simply months after Citigroup analyst Ronit Ghose warned in August that stablecoin curiosity funds might set off Eighties-style deposit flight from conventional banks.
Ghose drew parallels to the late Nineteen Seventies and early Eighties when cash market funds skyrocketed from $4 billion to $235 billion in seven years, draining deposits from banks whose deposit charges had been tightly regulated.
Major U.S. banking teams, together with the American Bankers Association and Bank Policy Institute, lobbied Congress to close what they called a “loophole” in the GENIUS Act permitting crypto exchanges and affiliated companies to supply yields on third-party stablecoins.
The teams cited Treasury estimates suggesting yield-bearing stablecoins might lead to as much as $6.6 trillion in deposit outflows, basically altering how banks fund loans.
However, crypto trade teams pushed again towards these considerations.
Coinbase Chief Legal Officer Paul Grewal dismissed the banking foyer’s efforts, calling it an “unrestrained effort to keep away from competitors.”
At the identical time, the Crypto Council for Innovation argued that proscribing stablecoin yields would “tilt the enjoying subject in favour of legacy establishments” and stifle client alternative.
Just final month, Coinbase analysis found no significant correlation between stablecoin adoption and deposit flight for group banks over the previous 5 years.
The obvious contradiction between Ghose’s warnings and Citi’s funding might need resulted from the simultaneous worry and embrace of stablecoin know-how.
Fraser emphasised in the course of the financial institution’s July earnings name that “digital property are the following evolution within the broader digitization of funds, financing, and liquidity” and that the financial institution’s focus stays on assembly consumer wants.
Wall Street Accelerates Digital Asset Integration
JPMorgan Chase also launched its own stablecoin-like token referred to as JPMD this yr, after earlier permitting shoppers to purchase bitcoin.
Bank of New York Mellon is already testing tokenized deposits, whereas HSBC has additionally launched a tokenized deposit service, as conventional monetary establishments race to combine blockchain know-how.
In the final 30 days alone, stablecoins processed over $5 trillion in transactions, based on Visa, whereas complete stablecoin market capitalization has exceeded $300 billion per DefiLlama knowledge.
The property have advanced from instruments for rapidly buying and selling out and in of cryptocurrencies like Bitcoin to potential infrastructure for cross-border transactions on account of pace, low price, and 24/7 settlement capabilities.
Treasury Secretary Scott Bessent lately expressed assist for stablecoin adoption, arguing that “stablecoins will broaden greenback entry for billions throughout the globe and result in a surge in demand for U.S. Treasuries” as backing property.
For this newest backing, Harmse stated BVNK has “dipped out and in of profitability” as the corporate invested in development, however is on observe to be worthwhile subsequent yr.
He famous that “U.S. banks on the scale of Citi, due to the GENIUS Act, are placing their weight behind investing in main companies within the house to ensure they’re at forefront of this technological shift in funds.“
The publish Citi Backs Stablecoin Firm BVNK Despite Previously Opposing Crypto Payment Rails appeared first on Cryptonews.
