Citi Warned Stablecoins Could Drain Banks, Now Backs Their Tech

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Citigroup has invested in stablecoin infrastructure supplier BVNK via Citi Ventures, simply months after warning that the cryptos might 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 trade Coinbase and fund supervisor Tiger World Administration.

The funding underscores TradFi’s shift from warning to participation within the stablecoin ecosystem after the US GENIUS Act supplied 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 the moment finds itself in a aggressive market alongside newcomers reminiscent of Alchemy Pay, TripleA and even the nicely established Ripple. All of those corporations are vying to take the lion’s share of the cross-border digital cash market.

Amid the robust competitors, Harmse stated that BVNK has “dipped out and in of profitability” as the corporate invested in progress, however stated 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 progress was spurred by the approval of the GENIUS stablecoin Act, which was signed into legislation earlier this yr by US President Donald Trump.

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

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

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 supplied 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, in keeping with 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, in keeping with on-chain analytics from Visa.

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

By these merchandise, Citi goals to ship “the advantages of developments in stablecoin and digital property” to its purchasers in a protected method by modernizing its personal infrastructure.

Different corporations are additionally exploring blockchain know-how and tokenization. This consists of Wall Avenue big JPMorgan Chase, which has launched its personal stablecoin-like token referred to as JPMD. In the meantime, Financial institution of New York Mellon has stated that it’s testing tokenized deposits. HSBC has launched its personal tokenized deposit service as nicely.

Citi Had Warned Of Deposit Flight Danger Related To The Eighties

Citi’s funding in BVNK comes after considered one of its analyst, Ronit Ghose, warned in August {that a} rising curiosity in stablecoin funds presents deposit flight danger for conventional banks, much like what was seen within the 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 issues round yield-bearing stablecoins, and have lobbied for Congress to shut what they referred to as a “loophole” within the GENIUS Act.

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

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

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

Good put up on evolving stablecoin market construction. I’d prolong it additional: sure, I feel that stablecoin issuers are going to need to share yield with others, however this is only one occasion. Everybody goes to need to share yield. At this time, the common curiosity on US financial savings… https://t.co/yjjLOzxoOk

— Patrick Collison (@patrickc) October 3, 2025