Why Companies Like JP Morgan And Visa Are Creating Crypto Tokens

Why Companies Like JP Morgan And Visa Are Creating Crypto Tokens

Crypto may finally be going
mainstream, spurred in part by the
billion-dollar public debut of Circle, the issuer of
stablecoin USDC, and the passage of the
stablecoin legislation drafted by the Senate,
dubbed the Genius Act. The yays are 68,
the nays are 30. The bill, as amended,
is passed. Big finance players are
getting in on the action. Coinbase, which earns half
of the revenue generated by USDC, launched a new
partnership with payment platform Stripe and
e-commerce giant Shopify to bring USDC payments to
merchants around the world. JPMorgan announced its own
stablecoin-like product called JPMD. Payments firm
Fiserv announced a stablecoin to pair with the
90 billion transactions that it processes every year,
and even Walmart and Amazon are reportedly looking into
their own tokens. Treasury Secretary Scott
Bessent says the launch of these dollar-pegged
stablecoins could unlock a $2 trillion market. We are a payments company,
and we saw the potential of this technology to bring the
next generation of payment rails. We didn’t know
whether it was going to play out or not, but it was
absolutely too important for a payments company not to
have a horse in the race. Cards were this whole new
money movement platform that were created many decades
ago, and they’ve created
trillions of new economic value. And we think that
stablecoins will do the same. But there are some who
believe that these products aren’t ready for prime time. Crypto is still fending off
an industrywide reckoning. Their concerns that the rise
of stablecoins risks the financial system stability,
and these digital dollars lock consumers out of
lucrative interest payments because stablecoins aren’t
allowed to pay yield. So why are some of the
biggest companies in the world going all in on their
own crypto tokens? Stablecoins are
cryptocurrencies that aim to do exactly what their name
suggests: remain stable. Unlike
Bitcoin, which garners investor
attention for its huge up and down side,
or NFTs, which often rise in price based on hype alone,
stablecoins are pegged to the price of another asset,
and in many cases, that’s the U.S. dollar. That digital representation
of a dollar, you can move around between
two different wallets, two different entities,
two different businesses in any jurisdiction in the
world. Stablecoins are able to keep
that one dollar peg because they hold reserves of real
dollars or cash equivalents, like U.S. treasuries. Those reserves are intended
to match the amount of the stablecoin in circulation. Circle’s USDC and Tether’s
USBT are the biggest stablecoins by far,
with a combined $217 billion in circulation. Tether is located in El
Salvador. They are targeting global
customers, not in the United States in
this case. But Circle, located in the
United States in New York, they are under the New York
regulatory umbrella, and they are targeting to
United States customers. Now, proponents of these
tokens say they have the potential to overhaul the
global financial system. Right now, transactions can
take days to complete, but stablecoins could settle
payments instantly day or night, thanks to the
blockchain. But here in the U.S.,
adoption of stablecoins has been slow. Many people don’t
really notice if their payment on the card is
processing for a few days. PayPal, Venmo and Cash App
provide sort of instant transfers for consumers,
even if it really takes days for that money to change
hands for the company. A barrier to access to
stablecoins is very low, and this gives unbanked
communities people an opportunity to receive,
save and spend U.S. dollars without a bank
account. These tokens could allow
cheap transactions across borders, and many people in
emerging markets are already using stablecoins as an
alternative to volatile local currencies. But here in the U.S.,
adoption of stablecoins has been slow. You can see today people who
are sending money to their loved ones abroad,
and they’re using stablecoins to fund those
remittances and avoid any transaction fees. But you’re also going to see
stablecoin use cases that are in the water supply,
that are infrastructure and that are abstracted from the
consumer. Many of the users out there
today are not aware of stablecoins or are not
interested in stablecoins, and they should not be. It should just be a way in
which you move a value, and in many cases it’s going
to be an infrastructure layer. Corporations, however,
see big potential for stablecoins. The IPO circle, which is the issuer of USDC, unlocked billions of dollars
in pent-up demand for these issuers. After raising $1.1
billion during its debut on June 5th, the company’s
stock soared more than 700% just in June. Then,
new Circle partnerships and competition quickly
followed. A stablecoin product
launches from crypto exchange Coinbase,
Shopify, French bank Societe Generale
and payments platform Fiserv quickly hit the headlines. We’re entering the utility
phase right now where the technology has matured. It’s gotten fast,
i t’s gotten cheap, it’s gotten easy to use,
and that’s leading to real world adoption across
businesses and consumers, and stablecoins are at the
forefront of it. These announcements all
touted the same benefits for companies: faster payments,
the ability to transact 24/7. But corporations are
also looking to stablecoins to cut costs. One big area
for savings? Payment processing fees. Card issuers raked in a
record $187 billion in transaction fees in 2024,
according to Nilson. Now, companies issuing their
own tokens could decimate those fees if they can
convince consumers to transact in dollar-pegged
tokens instead. In fact, when The Wall
Street Journal reported in June that Walmart and Amazon
were considering their own stablecoins to cut down on
fees, Visa, Mastercard,
and American Express all saw their stocks slide. Maybe the market fears that
the interchange revenue will be disrupted,
but people like credit cards. They like rewards
programs, they like points,
so I don’t think that’s going away. Maybe there will
be some disruption, but as far as I can tell,
Visa and Mastercard are leaning into the disruption.
They’re trying to disrupt themselves, so they seem to
be ahead of the curve here. Visa told CNBC that it’s
embracing stablecoins. We’ve been enabling people
to issue Visa credentials on top of stablecoins. We’ve
been modernizing our own settlement infrastructure
with stablecoins, and we have a whole host of
innovations that we plan to deploy around the world,
embracing stablecoins. Not to be left behind,
Mastercard announced that it was enabling multiple
stablecoin transactions on its token network with the
help of stablecoin issuer Paxos. And then there’s the
idea that stablecoins could speed up the financial
system. JPMorgan announced its JPMD
deposit token. The bank said it’s similar
to a stablecoin, but rather than representing
one U.S. dollar, the coin represents
a commercial bank deposit. Now it’s limited to
institutions, but it offers round-the-clock settlement. Right now, banks pay a
roughly 4.3% fee to get funds from the Fed
overnight, and many transactions can’t
happen overnight at all. JPMorgan told CNBC,
“The new offering allows clients to move money around
faster, earn interest and still keep
a close tie to the traditional financial
system.” But as TradFi quickly embraces these
crypto tokens, some are raising alarm bells
about the risks. 2023’s banking crisis didn’t
just expose cracks in the traditional financial
system, it also hit stablecoins. When Silicon Valley Bank
collapsed in March, Circle’s USDC lost its peg
to the U.S. dollar. So what happened to USDC? Well, it’s issuer C ircle
said that it had $3.3 billion worth of cash parked
with the now collapsed Silicon Valley bank. And as a result,
this is what happened: a massive D-peg. When the Federal Reserve
Bank of Boston convened to explore the implications of
stablecoins on financial stability, William
Birdthistle, former SEC Director of the
Division of Investment Management, compared
stablecoins to money market funds. He said that “in the
worst runs on those kind of funds, investors only lost a
penny or two on the dollar. But stablecoins? Those could fall to zero.”
Now, the industry saw this with
the collapse of the TerraUSD stablecoin in 2022. That event snowballed into a
total crash of the crypto market as investment firms
went under and crypto exchanges went bankrupt. There’s also money
laundering risks. A report from the U.S.
Treasury in 2021 found illicit finance concerns
with stablecoins, particularly giving bad
actors the ability to skirt sanctions and anti-money
laundering rules. Previous administration of
the United States made it very difficult,
you know, Senator Warren sent letters to the auditors
basically suggesting that they should not touch crypto
companies. And the OCC was very against
crypto companies, y ou know, banks were not
banking crypto companies. Now, crypto’s major collapse
and rise in criminal activity made Congress sit
up and pay attention. Now, lawmakers are hoping to
pass the first major regulation to solve some of
the problems that stablecoins exposed. The Senate’s advance of its
stablecoin regulation, the Genius Act,
was applauded by both crypto businesses and regulators. We’ve been embracing and
building for years, preparing for this moment. The Genius Act has now
passed the Senate, as you know, and is expected
to pass the House. I think that will give
regulatory clarity to stablecoins. The bill contains key
provisions: protections for consumers,
reserve and annual audit requirements for token
issuers, and it lets the Treasury
Department designate foreign stablecoin issuers as
non-compliant. The bill passed with
bipartisan support and now heads to the House,
which has been working on its own stablecoin
framework. But the Genius Act still
doesn’t answer some key questions about what these
companies owe their customers who hold on to
their stablecoins. Now, under the bill,
issuers are banned from providing yield to their
customers. So, unlike a bank account where
you would earn interest on your balance,
however small that interest might be, stablecoin issuers
would simply pocket that yield rather than paying it
out to you, or find a creative kickback
like rewards. They’ll call it something
else. They won’t call it “interest
payments.” They won’t be able to, but we will see a
lot of these models develop where there is that 4.5%
yield. Senate Democrats like
Massachusetts Senator Elizabeth Warren also warned
the bill doesn’t do enough to address potential
conflicts of interest with President Trump and World
Liberty Financial’s stablecoin that launched
this year, USD 1. Now, she pointed to
an investment from a United Arab Emirates firm into that
stablecoin as a particular pain point. The Senate
Banking Committee argues the Genius Act makes it clear
that ethics laws apply to members of Congress and
senior executives in the government. And when asked
about the president’s ties to crypto projects in his
name, the White House told CNBC
there are no conflicts of interest and that President
Trump’s assets are in a trust managed by his
children. The president has urged
Congress to send the bill to his desk, calling digital
assets “the future.” I think it was a mistake for
Trump to have a Trump-affiliated DeFi
project to issue a stablecoin, I think that
really set back his stablecoin legislative
agenda. I think we could do a lot
more in terms of tackling these conflicts of interest,
and I completely understand the Democrats when they try
and weed this out. You know, they should be in
the business of creating sound legislation,
regulation, not trying to enrich
themselves via the industry that they’re regulating. So, I’m very sympathetic to
those COI concerns. Now, when testifying before
Congress, Treasury Secretary Scott Bessent said that
stablecoins could become a $2 trillion business. And as lawmakers debate the
Big, Beautiful budget proposal
and what it means for the nation’s skyrocketing debt,
Secretary Bessent also said that stablecoins could
unlock a way to manage the deficit. Bessent sees a
world with the rise of stablecoins from American
corporate giants, could mean a boon for the
U.S. Treasury market,
which could lower the cost for the United States to
borrow money. We know that China and
Japan, the top two foreign holders
of U.S. treasuries, are net sellers, not buyers in 2024. However, stablecoins issuers
are in the top ten buyers as a total of U.S. treasuries in 2024. This will only increase
because the demand for stablecoins has been
decoupled from the crypto market cycle. The problem is
that the United States have to issue treasuries to
refinance the debt. Who’s going to buy those
treasuries? Now we have a new buyer. This is not the top buyer,
this is not going to save the U.S. debt problem
obviously, but that’s going to
alleviate the problem.

Mainstream financial companies from JP Morgan to Visa are creating their own crypto currencies, known as stablecoins. Market analysts predict they could disrupt the credit card industry. Watch the video to learn why corporate giants are racing to launch their own crypto tokens.

Chapters:
0:00 Introduction
1:48 The corporate embrace
7:06 Crypto risks
8:53 Regulation pushes ahead

Hosted by MacKenzie Sigalos
Reporting by Tanaya Macheel, Kaan Oguz
Senior Managing Producer Jordan Smith
Edited by Nora Rappaport
Animation by Mithra Krishnan
Senior Director of Video Lindsey Jacobson
Additional Footage Getty Images
Additional Sources Circle, Tether, CoinMarketCap, Fact Set

» Subscribe to CNBC: https://cnb.cx/SubscribeCNBC
» Subscribe to CNBC TV: https://cnb.cx/SubscribeCNBCtelevision
» Watch CNBC on the go with CNBC+: https://www.cnbc.com/WatchCNBCPlus

About CNBC: From ‘Wall Street’ to ‘Main Street’ to award winning original documentaries and Reality TV series, CNBC has you covered. Experience special sneak peeks of your favorite shows, exclusive video and more.

Do you want to buy a home but don’t know where to begin? Take CNBC’s new online course How to Buy Your First Home. Register today and use coupon code EARLYBIRD for an introductory discount of 30% off $97 (+taxes and fees) through July 15, 2025: https://cnb.cx/3STNNhr

Connect with CNBC News Online
Get the latest news: https://www.cnbc.com/
Follow CNBC on LinkedIn: https://cnb.cx/LinkedInCNBC
Follow CNBC News on Instagram: https://cnb.cx/InstagramCNBC
Follow CNBC News on Facebook: https://cnb.cx/LikeCNBC
Follow CNBC on Threads: https://cnb.cx/threads
Follow CNBC News on X: https://cnb.cx/FollowCNBC
Follow CNBC on WhatsApp: https://cnb.cx/WhatsAppCNBC

#CNBC

Why Companies Like JP Morgan And Visa Are Creating Crypto Tokens