The BankChain Alliance, a group of 39 state banking associations comprised of 3,283 banks with a collective $21.8 trillion in assets, has formed to build an industry-owned blockchain network. The group is targeting a 2027 launch and is still searching for a technology partner.
Banks and state banking associations have launched the BankChain Alliance, aiming to build and operate its own blockchain network for the industry. The cohort includes 39 state banking associations comprised of 3,283 banks with a collective $21.8 trillion in assets, according to the organization's website.
What the alliance plans to build
Kathy Kraninger, president and chief executive officer of the Florida Bankers Association, serves as president and CEO of the BankChain Alliance. The goal is an interoperable blockchain that member institutions can use for smart payments, tokenized deposits, stablecoins, automated settlement, and other functions.
According to a statement from Kraninger: "This is about banks of all sizes building their own future." The alliance is still searching for a technology partner to build the network, but it is targeting a 2027 launch.
Why banks are moving now
Blockchain and cryptocurrency emerged as an alternative to traditional banking after the 2008 financial crisis, positioning crypto as a long-running competitor to banks. Stablecoins added to that pressure by offering a fast, theoretically inexpensive way to move money, and some companies began paying yield on them, posing a threat to bank deposits.
Banks have moved cautiously into crypto because they are heavily regulated. However, new legislation, the Genius Act, creates a regulatory framework requiring stablecoins to be 100% backed by liquid assets and issuers to comply with the Bank Secrecy Act.
A second bill, the Clarity Act, remains pending and would bar idle stablecoins from earning yield while allowing stablecoin transactions to earn rewards similar to credit card transactions. Even with that restriction, bank lobbyists remain concerned stablecoins could compete for bank deposits.
What it means for the industry
Most banks already answer to three regulators and comply with anti-money laundering and cybersecurity rules, which could give them an advantage in meeting new stablecoin regulations and in attracting large enterprises seeking blockchain tools. The larger question is whether banks can pull customers away from fintech and blockchain firms that are often better at customer acquisition. The BankChain Alliance marks a first step toward finding out.
Source: The Motley Fool
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