Global banks including Goldman Sachs and UBS plan to issue reserve-backed digital money on public blockchains, aiming to modernize payments.

Major global banks are now exploring a major new initiative. They are looking into issuing “digital money” on public blockchains. This group comprises of Goldman Sachs, UBS, and Citigroup. The aim is to create a stable payment asset. This decision marks a radical change in the financial landscape.

Global Consortium Pioneers Reserve-Backed Digital Money on Public Chains

According to Bloomberg, the powerful consortium consists of Deutsche Bank and Bank of America. In addition, BNP Paribas, MUFG, and TD Bank are also part of the scheme. They described this plan in a joint statement on Friday. They will explore the possibility of releasing a stable digital currency. It will be backed 1:1 by reserves. It will be using G7 currencies.

The goal of the plan is to have a stable payment asset. This resource would be shared in public chains. Therefore, the term digital money is used, not a stablecoin. The initiative evokes no negative connotations in reference to cryptocurrency. It provides payment stability with regulatory certainty.

Related Reading: Crypto News: Bullish Taps Deutsche Bank to Enhance Institutional Crypto Adoption | Live Bitcoin News

Such plans are being announced by banks worldwide. This renewed interest is spurred by the rise in the price of cryptocurrencies. In addition, the sector benefits from the support of Trump’s presidency. This has brought a resurgence in the use of blockchain. The mainstream financial system is looking for a docile entry point.

This trend is worrying to regulators. The danger of stablecoins being used to transfer money outside the banking system is what Central Banks are concerned about. In addition, this could completely bypass the role of commercial banks. This affects payment flows to international markets. The authorities are concerned with the financial stability and supervision.

For example, the Governor of the Bank of England (BoE), Andrew Bailey, came up with a warning. He warned UK banks about issuing their own stablecoins. Similarly, there was a warning from ECB President Christine Lagarde to the market in June. She mentioned threats to monetary policy and financial stability.

Global Banks Develop Regulated Stablecoins on Public Blockchains

Currently, the major use of stablecoins is to transfer money between crypto markets. The size of this market is small relative to the entire finance industry. Earlier this year, BCG estimated the data. Almost nine-tenths of transactions involve the trading of cryptocurrencies. These are intended only for the purchase of goods or services.

The mission of the initiative is straightforward. They will be checking out an all-industry solution. Therefore, digital assets from this offering could be of great value. It also seeks to increase competition on the market. Also, it should ensure total regulatory compliance. Another area is on best practice risk management.

The banks are looking for competitive advantages right now. Stablecoin legislation allows them to act swiftly. Specifically, they can build on their existing trust and infrastructure. They can also reduce friction within cross-border payments. This new digital money guarantees their position in the world’s flows.

Currently, the market for crypto is dominated by non-bank stablecoins. However, this new attempt is a straightforward challenge to that domination. The intervention of the banks is a sign of a reassertion of control. Everyone wants to have public chains with centralized control. This approach is to provide stability to the ecosystem.

The move is a significant sign to the market. Payments on the blockchain are taken seriously by the mainstream. Furthermore, this cooperative strategy reduces the individual risk. It also makes it easier to achieve widespread adoption. The project has the potential to change the way the world does business permanently.