Major U.S. banks are accelerating reviews of digital dollar strategies, including issuing stablecoins.

On Aug. 26, blockchain media outlet U.Today reported that banks are raising their level of response because they believe the rapidly growing stablecoin market could increase crypto firms' and nonbanks' encroachment on traditional banking business.

Banks have kept their distance from stablecoins. Some executives questioned whether there was sufficient demand for bank-issued digital dollars. The industry has also opposed moves by crypto firms to issue stablecoins that could compete with deposits. As the market has grown, a shift from those earlier positions is emerging.

JPMorgan has recently been reported to be reviewing the possibility of launching its own stablecoin. The discussions are still at an early stage, and it has not begun actual product development. A JPMorgan spokesperson said, "We have no plans at this time to issue a stablecoin," but added it could review options depending on customer demand and changes in the regulatory environment.

JPMorgan already operates JPM Coin, a tokenised deposit system for blockchain-based payments. Tokenised deposits represent traditional bank deposits in digital form and differ structurally from stablecoins. In that sense, JPMorgan's review is being read as a move to examine the potential for a separate digital-asset payment instrument beyond its existing tokenised deposit model.

Large financial firms are also pursuing a joint response. More than 12 financial institutions, including Bank of America, Wells Fargo and Santander, are pushing ahead with a plan for a global stablecoin venture. The project is expected to start with a U.S. dollar-based coin and then consider expanding to the euro and Group of Seven currencies. The financial institutions are also separately assessing commercial use cases by region.

Smaller financial institutions are moving in a similar direction. On Aug. 26, a consortium of U.S. state bankers' associations unveiled plans to pursue a bank-owned blockchain platform. About 39 state bankers' associations representing about 3,000 banks are currently participating in the initiative.

The growing market size is driving banks' shift toward stablecoins. The market capitalisation of major stablecoins has already reached the hundreds of billions of dollars. For banks, it has become difficult to leave that market to crypto firms and other competitors.

In this trend, banks' approach to stablecoins is increasingly aimed at protecting their role in the payments market rather than accepting crypto assets themselves. JPMorgan leaving the possibility open subject to regulation and demand, and large financial institutions weighing a joint venture, show that stablecoins are moving from the fringes of traditional finance to competition over core payment infrastructure.