On Oct 16, 2014, a new cybercurrency called Tether was born, with its value tethered to the dollar. It is regarded as the first stablecoin. It survived initial volatility to become the world’s largest stablecoin with a market value of $189B.
Today, that early experiment is reshaping financial institution strategy. As stablecoins gain traction, larger institutions are actively exploring issuing their own, while many community financial institutions (CFIs) remain cautious. One in 10 CFIs plan to issue a stablecoin within the next 10 years, compared to one in four national banks with assets over $100B, according to American Banker.
While many CFIs talk about their interest in stablecoins, few are taking action or plan to. But according to a survey done by FIS in November 2025, nearly 75% of surveyed consumers would try stablecoins if offered by their primary financial institution, while only 3.6% feel comfortable trying with unregulated providers. Rather than suggesting every bank should issue its own coin, these findings highlight a growing customer curiosity that CFIs will need to understand and address in a way that fits their risk posture and strategic priorities.
A Look at the Appetite for Stablecoins
Interest in issuing proprietary stablecoins is notably stronger among larger banks, according to American Banker.
- More than half of banks with over $100B in assets said they would definitely or probably issue their own stablecoins within the next decade, compared to less than a third of banks under $10B.
- Only 5% of big banks said they definitely would not issue stablecoins, compared to 10% of small banks.
- Just 5% of big banks said they probably would not issue stablecoins, versus 17% of small banks.
- Mid-sized banks of $10B - $100B were in the middle on these questions.
Why Smaller CFIs Aren’t Jumping In
Here are some of the key reasons smaller CFIs are hesitant to move forward with stablecoins:
- Smaller CFIs may lack the in‑house technical expertise to design, issue, and manage a stablecoin, making them more likely to explore partnerships or wait for clearer roadmaps even if they are intrigued by the concept.
- For many institutions, it is not yet clear whether stablecoins are desirable or appropriate for their specific business models, customer bases, and risk appetites.
- CFIs worry about the actual stability of stablecoins and how well reserves, governance, and technology would hold up under stress.
- They also face heightened concern about anti‑money‑laundering and sanctions risks, given that stablecoins can move quickly across borders and through different platforms. These uncertainties translate into significant reputational risk. A misstep or high‑profile incident involving a bank‑linked stablecoin could undermine hard‑won trust with customers, regulators, and local communities.
Against this backdrop, the GENIUS Act has moved payment stablecoins further into the regulatory mainstream by setting core requirements around reserves, disclosures, and compliance. Regulators are still working through how those standards will apply in practice through ongoing rulemaking and guidance, which is one reason many financial institutions are proceeding cautiously. For CFIs, the key question is not simply whether stablecoins have compelling payment use cases, but when — or if — the regulatory and operational environment will be mature enough to justify moving from curiosity to pilots or broader offerings.
Use Cases for Stablecoin
Financial institutions and regulators are actively studying how stablecoins could be used for payment settlement, liquidity movement between institutions and digital payment networks.
One of the most frequently discussed applications for stablecoin involves improving the speed and efficiency of payments and settlement. Traditional payment systems often rely on multiple intermediaries and settlement windows. Blockchain-based networks allow transactions to be recorded and validated across a distributed ledger, which in some designs may allow transfers to settle more quickly. Potential benefits include:
- Faster settlement times
- Reduced reliance on intermediaries
- Improved transparency of transaction status
These capabilities are particularly relevant for cross-border payments, where settlement can involve multiple banks, time zones, and messaging systems. International payments remain one of the most complex areas of banking. Transactions often require several correspondent institutions, and settlement may take several days. Some digital asset networks aim to simplify this process by enabling near real-time transfers across global participants. While adoption varies across institutions and jurisdictions, these models are being evaluated for their ability to reduce settlement delays, operational complexity, and transaction costs.
Examples of Early Stablecoin Pilots at CFIs:
Custodia Bank of Wyoming and Texas-based Vantage Bank joined together for a pilot stablecoin program that created a stablecoin called Avit. The banks conducted a multi-stage test involving the issuance, transfer, and redemption of Avit stablecoins for a customer. The project demonstrated potential benefits such as low transaction costs, fast settlement, programmability, and strong auditability within a regulated banking framework. Participants reported operational efficiencies, and the banks worked closely with US regulators to ensure compliance throughout the process.
Vantage Bank President and CEO Jeff Sinnott said, “This event marks a pivotal moment in reshaping the financial landscape, demonstrating how blockchain and stablecoins can revolutionize payments. By executing this transaction, we’re empowering banks to lead responsibly in cross-border modernization, while also leveraging the strength of the US dollar and demonstrating regulators’ support for responsible innovation.”
The Financial Brand highlighted two examples of smaller banks interested in stablecoins. Illinois-based INB, NA started internal testing of a stablecoin but has not yet rolled it out for customer use. Its stablecoin experiment is being conducted in a closed environment. Arkansas-based Encore Bank said it sees potential value in using stablecoins for cross-border payments, particularly for its customers who are wholesalers and distributors that have lots of international transactions. Encore said a key issue is how to integrate stablecoins into existing systems and processes.
For now, issuing or developing a proprietary stablecoin may not be a top‑of‑the‑list initiative for every CFI, but stablecoins and digital assets are increasingly top‑of‑mind across the financial industry as they move into the regulatory and competitive mainstream. As larger banks and fintechs press ahead, CFIs will need a deliberate strategy — whether that means partnering with providers, focusing on customer use cases, running limited pilots, or consciously postponing direct involvement while monitoring developments. Having a defined stance (including the decision not to issue a coin) can help CFIs respond to customer interest, manage risk, and avoid being forced into reactive decisions later.
