Eighteen banks and three other institutions that are planning a stablecoin joint venture are investing $270 million, with the funds intended to last five years. With a working name of Project Faro, they intend to incorporate in the US to issue a USD coin initially and are looking for a CEO, according to Bloomberg.
It’s been more than a year since a group of ten global systemically important banks (G-SIBs) announced plans for Faro, aiming to target G7 currencies with stablecoins. In September a new roster of 21 members was announced including ten G-SIBs, eight other banks plus three non-bank institutions. The G-SIBs involved are Banco Santander, Bank of America, Citi, Crédit Agricole, Deutsche Bank, Goldman Sachs, MUFG Bank, TD Bank, UBS and Wells Fargo.
Notably, several of the banks have their own tokenized deposit offerings and at least seven members are also shareholders in The Clearing House, which is building a tokenized deposit interoperability solution. Stablecoins make sense as a medium to enable interoperability between tokenized deposit networks, and there is already a precedent. The Hazel Network, which targets community banks enables payments between network banks as deposit tokens, but switches to a stablecoin for out of network payments. SoFi Bank also offers tokenized deposits, but switches to the SoFiUSD stablecoin for on chain payments.
Through this lens, Faro is a path to deposit retention. It could be used to bridge Citi Token Services, UBS Digital Cash, Crédit Agricole’s so|cash and the various other tokenized deposit solutions. Not just in the US, but internationally. That makes Faro quite different from USDC, where Coinbase pays rewards to holders who keep balances. Instead, this Faro stablecoin could be used primarily as a transit layer. PNC, one of the Faro banks, just announced that institutions can receive USDC, but it will be automatically converted to deposits, a potential model for Faro’s coins.
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