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Banks tread carefully on stablecoins despite market growth, S&P Global says

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Stablecoins account for most illicit crypto activity, FATF says

Banks are approaching stablecoins cautiously despite rapid market growth, reflecting early-stage strategy and rising structural concerns, according to a report by S&P Global Market Intelligence.

According to the Wednesday report, the question is no longer whether stablecoins will endure, but how they will reshape business models, infrastructure and revenue, For banks, the trade-offs are sharp, spanning deposit risk, modernization costs and new competition.

A wait-and-see stance still dominates. S&P Global’s Q1 2026 U.S. Bank Outlook survey found just 7% of 100 mostly smaller institutions are developing frameworks, with none actively piloting, underscoring how exploratory strategies remain.

“Most financial institutions remain early and cautious,” said Jordan McKee, director of fintech research at S&P Global Market Intelligence, in emailed comments. “Our survey of U.S. banks shows that stablecoin strategy is still largely exploratory, with limited internal development and no active pilots among smaller institutions.”

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Stablecoins, digital tokens pegged to assets like fiat currencies or commodities, have become a core layer for payments and settlement in crypto, widely used in trading and cross-border flows. The market is dominated by Tether’s USDT, followed by Circle Internet’s (CRCL) USDC.

The stablecoin market has grown rapidly into a roughly $300 billion-plus sector, with total market capitalization surpassing $316 billion in early 2026 after nearly doubling since 2023, according to multiple data sources.

Transaction volumes have also surged into the tens of trillions annually, underscoring rising use in trading, payments and cross-border transfers, while forecasts point to continued expansion, potentially reaching $500 billion or more in the near term as institutional adoption accelerates.

Pressure is building. The report pointed to growing concern over deposit cannibalization and customer migration, alongside a surge in stablecoin mentions on earnings calls following the GENIUS Act’s passage in July 2025.

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Competition is also intensifying. S&P Global highlighted a wave of nonbanks pursuing charters to house stablecoin issuance, custody and settlement within regulated entities, positioning themselves as credible alternatives.

Banks are also wary of yield-like incentives in stablecoin ecosystems that could compete with deposits, even as direct interest payments remain restricted.

Responses will diverge. S&P Global analysts expect large, global banks to explore issuing tokenized deposits or bank-backed digital assets, while regional and midsize lenders focus on facilitating access via fiat on- and off-ramps. Regardless of strategy, banks will remain key gateways between fiat and stablecoin networks, but doing so will require significant upgrades to legacy systems ill-suited for real-time digital asset activity.

Cross-border banks face the strongest push to modernize as payments shift to multi-rail systems combining traditional, real-time and tokenized networks. Interoperability and wallet infrastructure will be critical, with large banks building multi-network connectivity and smaller firms leaning on fintech partners. Secure custody and embedded compliance are expected to become standard, the report added.

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Read more: Stablecoin rewards restrictions can slow but not stop Circle’s USDC, says Citigroup

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Crypto World

Binance Rolls out Prediction Markets for App Using Predict.fun

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Cryptocurrency Exchange, Applications, Binance, Prediction Markets

Binance Wallet has integrated prediction market features into its app, saying it will cover all trading and settlement transaction fees for users as it make a play for a piece of the $20 billion market.

In a Thursday notice, Binance said it will launch probability-based markets as a feature on the company’s app through an integration with third-party platforms, starting with Predict.fun. According to the crypto exchange, the integration will be “gasless,” with the company sponsoring fees for trades and settlements on the BNB Smart Chain.

Cryptocurrency Exchange, Applications, Binance, Prediction Markets
Source: Binance

Prediction market platforms like Kalshi and Polymarket offer users the chance to take a position on the outcome of events in a variety of topics, including politics and sports. The latter has put those platforms in the sights of multiple US state authorities who have filed lawsuits for allegedly violating state gaming laws by offering sports bets.

Binance’s integration is the latest example of a crypto platform moving deeper into prediction markets despite some of the more controversial bets on the platforms. Polymarket, for example, has offered users contracts on events related to US-Israeli military actions against Iran.

Related: DOJ and CFTC seek halt to Arizona action against Kalshi

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According to data from TRM Labs, the monthly transaction volume across prediction markets platforms reached $20 billion in January — a twenty-fold increase from levels seen in early 2025.

Kalshi co-founder denies Trump son is influencing US regulators

While state-level gaming authorities pursue the platforms in court, the US Commodity Futures Trading Commission (CFTC) has claimed it has “exclusive jurisdiction” to oversee prediction markets. Amid challenges by federal regulators to state actions, ties between some of the companies and the current US administration have stoked concerns among industry leaders and lawmakers about conflicts of interest.

In an Axios interview released on Thursday, Kalshi CEO Tarek Mansour and co-founder Luana Lopes Lara addressed questions about conflicts due to hiring US President Donald Trump’s son as a strategic adviser shortly before his father took office. 

“We have never asked for any favors […] and he has never done anything, any regulatory ask, nothing like that,” said Lara, referring to Donald Trump Jr. using his connections to the US government.

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Magazine: Anger grows over Polymarket bets on Iran war: ‘Dystopian death market’