US Banks to Form Consortium and Roll Out USDF Stablecoin

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Provenance Blockchain, a proof-of-stake network, will support the USDF, allowing it to be cashable on a one-is-to-one ratio from any of the consortium’s banks.

A set of US banks have decided to come together to form a conglomerate that will eventually produce its native stablecoin. The stablecoin, called the USDF, will be proposed to attack the issues related to the reserves behind nonbank-issued equivalents.

The community constitutes several banks that are supported by the Federal Deposit Insurance Corp (FDIC). FDIC is one of the two agencies that provide deposit insurance to depositors in American depository establishments. The consortium stated that the USDF coin will ensure that it caters to the consumer protection and regulatory issues of nonbank-issued stablecoins. The group plans to establish a network of banks to eventually conform to the interoperability of a bank-minted stablecoin. This will allow the compliant exchange of value on the blockchain while making the financial procedure more convenient.

Georgia-based Synovus, formerly known as the Columbus Bank and Trust Company, is one of the founders of the USDF Consortium. Synovus is also the forty-eighth largest bank in the U.S. by assets, with the total asset value estimated at around $54 Million. Some other founding members of the group include New York Community Bank (NYCB), NBH Bank, FirstBank, among others. The group also plans to seriously expand its membership of FDIC-insured banks in 2022 and after.

Even though the organizations in the consortium are FDIC- insured, there is no indication about the insurance of reserves backing the USDF. In the past, FDIC has closely studied whether certain stablecoin would be qualified for the coverage using its pass-through insurance. This would safeguard the token owners up to $250,000 in case the bank reserving collateral falls. FDIC is still contemplating the issue and no strict conclusion has been met.

Stablecoins are essentially cryptocurrencies with prices created to be fixed to a cryptocurrency, fiat money, or exchange-traded commodities. Even with the stablecoins reflecting wider crypto opportunities through their leniency in entry and exit points, there are still apprehensions about the controversial spirit of the reserves that support nonbank stablecoins like Tether’s USDT. Many firms recently participated in the lawful proceedings between the New York Attorney General’s office (NYAG) and Tether to push for the documents related to the reserves supporting $78.4 billion of stablecoins.

USDF, a substitute to USDT or Circle‘s USD Coin (USDC) minted by the bank, has a massive share of $117 billion in the stablecoin market. On the other hand, USDT has a market maximum of $79 billion and a day-long trading volume of $56. Finally, USDC has a market peak at $44.5 billion with a total daily value of slightly under $3 billion.

Provenance Blockchain, a proof-of-stake network, will support the USDF, allowing it to be cashable on a one-is-to-one ratio from any of the consortium’s banks. Rumors of a consortium sprung up in November 2021 when Fintech firm Figure Technologies came in contact with the United States regulatory committee to talk about the authorization of a stablecoin.

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Sanaa Sharma

Sanaa is a chemistry major and a Blockchain enthusiast. As a science student, her research skills enable her to understand the intricacies of Financial Markets. She believes that Blockchain technology has the potential to revolutionize every industry in the world.

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