UBS is among ten major banks exploring the issuance of a stablecoin, highlighting traditional finance’s growing interest in digital assets.

The consortium also includes Bank of America, Deutsche Bank, Goldman Sachs, Citi, MUFG, Barclays, TD Bank, Santander and BNP Paribas.

The banks said they will work together to investigate creating blockchain-based assets pegged to G7 currencies, Reuters reported.

The project, still in its early stages, will examine whether there is value in issuing assets on public blockchains that are pegged 1:1 to real-world currencies, a type of cryptocurrency known as a stablecoin.

“The objective of the initiative is to explore whether a new industry-wide offering could bring the benefits of digital assets and enhance competition across the market, while ensuring full compliance with regulatory requirements and best practice risk management,”

the banks said.

Several banks and other financial institutions have announced plans to explore stablecoins, as rising crypto prices and support from former US President Donald Trump have rekindled interest in the potential of blockchain in mainstream finance.

Regulators and financial stability authorities have expressed concern that stablecoins could facilitate the movement of funds outside regulated banking systems, potentially undermining commercial banks’ role in global payment flows.

Bank of England Governor Andrew Bailey has warned UK banks against issuing their own stablecoins, while European Central Bank President Christine Lagarde said privately issued stablecoins posed risks for monetary policy and financial stability.

To date, stablecoins have been mainly used for transferring money between crypto markets, which remain a small portion of wider financial markets.

Nearly nine-tenths of stablecoin transactions relate to crypto trading, while only around 6% are used for payments for goods or services, according to a report by BCG earlier this year.

France’s Societe Generale, which was not included in the current group, became the first major bank to issue a dollar-backed stablecoin through its digital asset subsidiary earlier this year.

The token has not been widely adopted, with just US$30.6 million in circulation.

Meanwhile, a separate consortium of nine European banks, including ING and UniCredit, announced last month that they were forming a company to launch a euro-denominated stablecoin.

Some banking executives see greater promise in the tokenisation of financial assets, where digital representations of deposits, stocks and bonds are created and stored on a blockchain.

Citi’s CEO said in July that tokenised deposits were likely more important than a stablecoin.

Many of these projects remain in the pilot phase, with executives noting that efforts to tokenise assets are progressing more slowly than expected.

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