U.S. Bank has officially begun testing for the issuance of custom stablecoins using Stellar infrastructure, marking a decisive advance toward institutional programmable money. Mike Villano, Senior Vice President at U.S. Bank, highlighted that safety and control are non-negotiable when integrating tokenized assets into the banking environment. This strategic move is supported technically by PwC and the Stellar Development Foundation (SDF).
The revelation was made during a Money 20/20 podcast episode, where the specific technical capabilities driving this technological choice were detailed. Stellar allows for freezing assets and unwinding transactions directly at its base operating layer, a critical functionality for complying with strict know-your-customer (KYC) regulations. Additionally, the network ensures the ability to undo erroneous operations, an indispensable requirement for traditional banking.
On the other hand, the infrastructure of this blockchain is specifically designed for asset issuance and money movement at a massive global scale. Operations offer fast settlements of between 3 to 5 seconds and fees costing a fraction of a U.S. cent. José Fernández da Ponte, from the SDF, emphasized that institutional-grade reliability is fundamental for moving consumers’ money safely and consistently.
Likewise, this development occurs at a time when the European Central Bank is warning about the rapid global expansion of stablecoins. A recent report notes that the combined market capitalization has surpassed 280 billion dollars, reaching an all-time high and accounting for roughly 8% of the total crypto market. Tether and USDC overwhelmingly dominate the sector, posing financial stability risks if not properly managed.
What risks does the ECB warn about regarding the growth of these assets?
However, U.S. Bank’s initiative seeks to mitigate these risks through the use of “programmable money” with compliance safeguards built in from the start. The ability to maintain regulatory control while leveraging the speed and efficiency of decentralized networks is the core of this pilot. This differentiates the banking approach from purely speculative stablecoins that lack mechanisms for reversal or freezing of illicit funds.
Finally, the collaboration between U.S. Bank and its technical partners sets a precedent for banking adoption of decentralized technologies under strict regulatory frameworks. It is expected that these tests will drive greater integration of programmable money, transforming the operational efficiency of traditional financial services in the coming years. The success of this pilot could define new standards for future tokenized deposit products in the banking industry.
