MINNEAPOLIS–U.S. Bank is reporting it is testing custom stablecoin issuance on the Stellar blockchain network.
The bank said it is partnering on the project with the Stellar Development Foundation (SDF) and PwC, the organizations stated in a blog post.
“It’s another way to move money on a blockchain, and we look at blockchain as an alternative payment rail, and we’re very interested to see what use cases are going to manifest from that and what customers are most interested in,” Mike Villano, senior vice president, head of digital asset products at U.S. Bank, said in a video that was included in the blog post.
Protections in Place
Villano said in the post that Stellar has protections that are needed for a project like this.
“For bank customers, we have to think about other protections around know your customers, the ability to unwind transactions, the ability to claw back transactions, and one of the great things about the Stellar platform as we did some more research and development on it was learning that they have the ability at their base operating layer to freeze assets and unwind transactions,” Villano said in the post.
According to the organizations, Stellar was designed to meet the needs of regulated institutions with things like 99.99% uptime over a decade, billions in annual payment volume, built-in asset controls and 3- to 5-second settlement.
Twofold Approach
U.S. Bancorp CEO Gunjan Kedia said earlier this year that the bank was looking to pilot stablecoin transactions via partnerships. According to Kedia, U.S. Bank has a twofold approach to stablecoins as a payment rail.
“One is to just be ready to onboard and offboard a stablecoin into the banking system, and we are working on that in conjunction with the industry consortiums,” Kedia said during an earnings call. “And then the second is just being ready to provide stablecoin services as a payment vehicle should that market take off within our client base.”
