Citi Warned Stablecoins Could Drain Banks, Now Backs Their Tech

Citigroup has invested in stablecoin infrastructure supplier BVNK via Citi Ventures, simply months after warning that the cryptos may drain deposits from conventional banks

BVNK’s platform serves as an onramp and offramp for purchasers to maneuver cash between fiat and crypto. It is usually backed by US crypto alternate Coinbase and fund supervisor Tiger International Administration.

The funding underscores TradFi’s shift from warning to participation within the stablecoin ecosystem after the US GENIUS Act offered regulatory readability over their standing.

BVNK Valuation Exceeds $750 Million After Citi Funding

The firm has declined to reveal the quantity Citi invested or at what valuation. However co-founder Chris Harmse just lately confirmed that the funding has pushed its valuation nicely above the $750 million that was disclosed at its newest funding spherical.

BVNK at present finds itself in a aggressive market alongside newcomers comparable to Alchemy Pay, TripleA and even the nicely established Ripple. All of those companies are vying to take the lion’s share of the cross-border digital cash market.

Amid the sturdy competitors, Harmse mentioned that BVNK has “dipped out and in of profitability” as the corporate invested in development, however mentioned the agency is experiencing momentum, particularly within the US. 

The co-founder added that the US has been the corporate’’s strongest rising market previously 12-18 months. This development was spurred by the approval of the GENIUS stablecoin Act, which was signed into legislation earlier this 12 months by US President Donald Trump.

In August, US Treasury Secretary Scott Bessent expressed help for stablecoin adoption, and mentioned these tokens “will increase greenback entry for billions throughout the globe.” 

Implementing the GENIUS Act is important to securing American management in digital belongings.

Stablecoins will increase greenback entry for billions throughout the globe and result in a surge in demand for U.S. Treasuries, which again stablecoins.

It’s a win-win-win for everybody concerned:… https://t.co/p5nRQpBfnw

— Treasury Secretary Scott Bessent (@SecScottBessent) August 18, 2025

The regulatory readability offered by the GENIUS Act has boosted the capitalization of the stablecoin market in latest months, whereas a number of monetary establishments have since signaled plans to launch their very own stablecoins. 

Prior to now week, the capitalization for the stablecoin sector surged round $4.353 billion, based on DefiLlama information. 

Following the expansion previously seven days, the stablecoin market cap now stands at over $304.163 billion. 

Stablecoin market cap (Supply: DefiLlama)

Prior to now thirty days alone, $5 trillion in stablecoin transactions have taken place as nicely, based on on-chain analytics from Visa. 

One of many companies that has confirmed stablecoin plans is Citi, whose CEO Jane Fraser mentioned in July, the identical month the GENIUS Act was signed into legislation, that the financial institution is contemplating issuing its personal stablecoin. She additionally mentioned that Citigroup is growing custodian providers for crypto belongings. 

By means of these merchandise, Citi goals to ship “the advantages of developments in stablecoin and digital belongings” to its shoppers in a secure method by modernizing its personal infrastructure. 

Different companies are additionally exploring blockchain expertise and tokenization. This consists of Wall Road big JPMorgan Chase, which has launched its personal stablecoin-like token known as JPMD. In the meantime, Financial institution of New York Mellon has mentioned that it’s testing tokenized deposits. HSBC has launched its personal tokenized deposit service as nicely.

Citi Had Warned Of Deposit Flight Threat Comparable To The Nineteen Eighties

Citi’s funding in BVNK comes after one in every of its analyst, Ronit Ghose, warned in August {that a} rising curiosity in stablecoin funds presents deposit flight threat for conventional banks, much like what was seen within the Nineteen Eighties when cash market funds ballooned from $4 billion to $235 billion in seven years.

Main banking teams within the US have already expressed their considerations round yield-bearing stablecoins, and have lobbied for Congress to shut what they known as a “loophole” within the GENIUS Act.

The act prohibits stablecoin issuers from providing yields on to token holders, however doesn’t lengthen this ban to 3rd events or associates. This, based on the banking teams, opens the door for stablecoin issuers to bypass the restrictions. For instance, Coinbase at present presents its customers yields on Circle’s USD Coin (USDC) stablecoin.

If that “loophole” stays unaddressed, the banking teams predicted that it may lead to as much as $6.6 trillion in deposit outflows from the normal banking system. This might then essentially alter how banks fund loans.

Nonetheless, the crypto business has pushed again towards the banking teams’ claims, with many dismissing them as simply an effort by banks to forestall competitors. Some, together with Stripe CEO Patrick Collison, have additionally mentioned that stablecoins will now pressure banks to supply increased yields to prospects.

Good put up on evolving stablecoin market construction. I might lengthen it additional: sure, I believe that stablecoin issuers are going to should share yield with others, however this is only one occasion. Everybody goes to should share yield. Immediately, the typical curiosity on US financial savings… https://t.co/yjjLOzxoOk

— Patrick Collison (@patrickc) October 3, 2025

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