Stablecoins do not yet credibly function as a payment method at scale, Bank for International Settlements General Manager Pablo Hernández de Cos said on Aug. 28 at the Federal Reserve’s Jackson Hole symposium.

In his official BIS speech, de Cos argued that tokenized bank deposits provide a stronger route to programmable payments. They remain within the existing banking system and settle through central bank money.

“Tokenised deposits offer a more direct path to harness tokenisation while preserving the monetary system’s foundations,” de Cos said.

However, he did not call for a complete ban on stablecoins. He said stablecoins and tokenized deposits could coexist if regulators defined their roles and imposed appropriate safeguards. Under his preferred model, tokenized deposits would handle most daily and wholesale payments. Stablecoins would serve narrower functions, including decentralized lending.

The speech came one day after the BIS-linked Financial Stability Institute published a study comparing stablecoin regulations in the United States, European Union, United Kingdom, Hong Kong and Singapore. The report found wide differences in which entities may issue stablecoins and which additional activities they may conduct.

The head of the BIS, the central bank for central banks, Pablo Hernández de Cos said Friday that stablecoins, in their current form, aren’t a credible means of payment at scale, and that tokenized bank deposits are the better path.

A perfectly reasonable thing to say when your… pic.twitter.com/nqRarC7p9j

— Lark Davis (@LarkDavis) August 29, 2026

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Stablecoins struggle to meet three features of money

De Cos assessed stablecoins against three characteristics he considers central to a functioning monetary system: singleness, interoperability and financial integrity.Singleness means different forms of money denominated in the same currency remain redeemable at equal value. A dollar held in one regulated bank should have the same value as a dollar held in another bank.

Stablecoins do not always meet this condition in secondary markets. A user holding USDT may need to sell it before buying USDC when a recipient accepts only the latter. Either token can trade above or below one dollar during stress, meaning the exchange may not occur at par.

By contrast, tokenized deposits remain liabilities of regulated commercial banks. Transfers can debit one customer’s bank balance and credit another while the banks settle through central bank accounts. De Cos argued that this arrangement preserves the connection to central bank money.

Interoperability presents another challenge. Stablecoins operate across several blockchains and scaling networks. Moving the same token between chains often requires bridges, centralized intermediaries or wrapped assets. Each method introduces operational, custody or smart-contract risks.

Tokenized deposits also face interoperability problems. Most current projects operate through permissioned networks that do not communicate freely with other platforms. De Cos acknowledged that no multi-bank, cross-border tokenized deposit system currently operates at full commercial scale.

Financial integrity formed his third concern. Public blockchains allow users to hold and transfer assets without relying on a regulated custodian. This structure can make anti-money laundering and counterterrorist financing controls harder to apply consistently.

That concern does not mean every self-custody transaction is illicit. It means regulators cannot always identify the parties as easily as they can within a bank account system. De Cos said policymakers still need to determine how AML rules should apply to peer-to-peer transfers while protecting privacy.

The BIS chief had already warned that dollar-backed tokens could create financial stability risks if they grow without traditional banking safeguards.

Stablecoin growth creates opposing economic effects

Stablecoin adoption could increase demand for short-term government debt. Issuers commonly hold Treasury bills and other liquid assets to back their circulating tokens.

The U.S. Treasury Department has noted that the GENIUS Act requires permitted payment stablecoins to maintain one-for-one reserves. Eligible assets include cash, deposits, repurchase agreements and Treasury securities with remaining maturities of 93 days or less.

Treasury Secretary Scott Bessent has argued that stablecoin growth could strengthen international demand for dollars and U.S. government debt. When the GENIUS Act became law in July 2025, Bessent called stablecoins “a revolution in digital finance” that could generate additional Treasury demand.

De Cos accepted that stablecoins could lower government borrowing costs, particularly when demand comes from outside the United States. Foreign stablecoin users can create additional demand for Treasury bills rather than merely replacing existing domestic buyers.

However, he said the effect could work against private borrowers. If households move money from bank deposits into stablecoins, banks may lose a relatively stable and inexpensive source of funding.

Issuers could return part of that money to banks as wholesale deposits. Yet wholesale funding tends to be more concentrated and sensitive to interest rates. Banks could respond by raising loan prices or holding more liquid assets.Smaller lenders could face greater pressure because they rely more heavily on customer deposits. Higher funding costs could then reach households and small businesses through more expensive credit.

The reserve structure also creates possible contagion channels. A wave of stablecoin redemptions could force an issuer to sell Treasury bills or withdraw large bank deposits. Such movements could place pressure on short-term funding markets during periods of stress.

These outcomes remain scenarios rather than confirmed forecasts. De Cos cited BIS modeling that found a modest overall economic effect, with the result depending on reserve composition, government debt and whether stablecoin demand originates domestically or abroad.

Five markets apply different stablecoin rules

The Financial Stability Institute study examined regulatory frameworks in five major markets. It found that all five generally limit issuers to functions such as issuance, redemption and reserve management.

The frameworks differ over lending, staking, proprietary trading and custody. The United States and Singapore take relatively restrictive approaches toward specialized non-bank issuers.

Under the U.S. GENIUS Act, activities such as lending, staking, proprietary trading and custody of third-party crypto assets generally fall outside a payment stablecoin issuer’s core permissions. Separate entities or regulatory approvals may still support some related services.

The European Union, United Kingdom and Hong Kong allow certain additional activities when issuers obtain separate authorization, regulatory consent or other required permissions. Banks may also operate under broader prudential frameworks than specialized issuers.

The study identified a potential group-level gap. Restrictions generally apply to the legal entity issuing the stablecoin, not every company within its corporate group.

A related affiliate could therefore conduct activities that the issuer cannot perform directly. Banks already face consolidated supervision designed to capture risks across their groups. Non-bank stablecoin businesses may not face an equivalent system in every jurisdiction.

The FSI authors said regulators may need to extend group-level oversight to larger non-bank issuers. The publication states that its conclusions represent the authors’ views and do not necessarily reflect the position of the BIS or its member central banks.

Meanwhile, the U.S. Treasury continues implementing the GENIUS Act. In April, it proposed AML and sanctions rules that would treat permitted payment stablecoin issuers as financial institutions under the Bank Secrecy Act.

The proposal would require issuers to maintain systems for blocking, freezing or rejecting transactions when legally required.

Tokenized deposits still face practical barriers

Tokenized deposits are digital representations of commercial bank deposits recorded on programmable infrastructure. They remain claims against banks rather than claims against separate stablecoin issuers.

Their main advantage is institutional. Banks already operate within capital, liquidity, resolution, supervision and customer-protection frameworks. Settlement through central bank money can also preserve equal value between deposits at different institutions.

Still, tokenized deposits have not solved every technical problem. Separate bank networks can become closed systems with trapped liquidity. Smaller institutions may struggle with implementation costs and network effects that favor larger banks.

Continuous operation also brings risk. Round-the-clock transfers could accelerate deposit withdrawals during a crisis. Banks and central banks may need new liquidity arrangements capable of responding outside traditional operating hours.

Legal questions remain around settlement finality, smart-contract enforcement and correcting mistaken transactions. Tokenized systems must also operate alongside existing banking infrastructure during any long transition.

The BIS is testing these ideas through Project Agorá, which brings together seven central banks and more than 40 private financial institutions. The project has tested cross-border settlement using tokenized commercial bank money and central bank reserves.

As crypto.news reported, the project moved from prototype work toward real-value testing in 2026. However, those trials do not establish that tokenized deposits are ready to replace existing payment networks.

De Cos’s position therefore presents tokenized deposits as the stronger institutional model, not a finished global product. Stablecoins already have wider public-blockchain distribution, while tokenized deposits retain a closer connection to regulated money.

What happens next?

Regulators must now turn broad principles into detailed operational requirements. In the United States, agencies are continuing to implement reserve, licensing, sanctions and AML provisions under the GENIUS Act.

Other jurisdictions will continue applying their own frameworks. Differences between the five markets could encourage issuers to choose structures or locations with broader permissions.

The FSI study suggests that regulators will pay closer attention to entire corporate groups, especially when non-bank affiliates provide lending, staking, trading or custody services around an issuer.

For central banks, the next step involves expanding tokenized settlement experiments while developing common technical and legal standards. Stablecoins are unlikely to disappear from this process. De Cos instead expects them to occupy specialized roles under rules that support redemption, transparency and financial integrity.

FAQs

Sberbank plans to expand its crypto-backed lending business by accepting Bitcoin, Ethereum and Tether’s USDT as collateral, Deputy Chairman Anatoly Popov told TASS on Aug. 28.

However, the proposal remains conditional. Popov said the Russian bank would only add ETH and USDT after the Bank of Russia permits their public circulation. Sberbank has not announced a launch date, loan terms or eligible customer groups.

“We plan to accept not only Bitcoin but also Ethereum and the stablecoin Tether as collateral,” Popov said. He added that the expansion would begin only “after the Central Bank, of course, allows them for public circulation.”

Sberbank will adapt loans to Russia’s crypto rules

Popov said Sberbank had prepared for the regulatory change and already had practical experience handling cryptocurrency. The bank intends to modify its existing products once every part of the new framework becomes effective.

The statement expands Sberbank’s previous interest in issuing ruble-denominated loans secured by cryptocurrency. Popov said in December 2025 that the bank was assessing crypto-backed lending and working with regulators on the required infrastructure.

Sberbank later completed a pilot Bitcoin-backed loan involving Russian mining company Intelion Data. The borrower pledged mined cryptocurrency as collateral. That transaction gave the bank experience in custody, collateral monitoring and enforcement procedures.

The new statement does not mean customers can immediately pledge ETH or USDT. Sberbank must wait for the Bank of Russia to determine which assets can circulate through regulated intermediaries and qualify for use in banking products.

Russia’s crypto framework starts September 1

Russia’s wider cryptocurrency framework takes effect on Sept. 1, 2026. According to the Bank of Russia, the rules create a regulated market involving banks, brokers, asset managers, crypto exchanges and digital depositories.

Both qualified and non-qualified investors will be able to conduct crypto transactions through approved intermediaries. However, retail access will remain restricted.

Non-qualified investors must pass a knowledge test. They may then purchase up to 300,000 rubles in eligible cryptocurrencies annually through each intermediary. Qualified investors must also pass testing but can access a wider group of assets without the same monetary limit.

Foreign stablecoins will generally face the same requirements as other cryptocurrencies. This provision could cover USDT, although the central bank must still determine which assets satisfy its circulation standards.

The framework does not legalize cryptocurrency as a domestic payment method. Payments for goods and services in Russia remain prohibited. Exporters and importers may use cryptocurrency for cross-border settlements under the applicable rules.

Sberbank builds trading and custody infrastructure

Sberbank is also preparing infrastructure for regulated cryptocurrency trading and custody. The bank aims to launch a digital depository by Dec. 1, 2026, as crypto.news reported.

The planned system would record customer ownership, manage wallets and support deposits, withdrawals and settlements. Sberbank has not yet confirmed which cryptocurrencies the platform will support or disclosed its fees and withdrawal limits.

The bank already operates within Russia’s digital financial asset market. It joined the Bank of Russia’s register of approved information system operators in 2022 and has since issued tokenized financial products through its platform.

Sberbank’s plans also remain separate from public blockchain lending protocols. The bank would issue conventional loans and hold cryptocurrency as collateral within a regulated custody structure. It has not announced any integration with decentralized lending platforms.

Regulatory approval will determine the launch

The Bank of Russia must now complete supporting standards covering eligible assets, custody, accounting and customer protection. These rules will determine whether Sberbank can use ETH and USDT as loan collateral.

Market participants have until July 1, 2027, to obtain the necessary licenses and align their operations with the framework. Sberbank’s Dec. 1 infrastructure target falls within that transition period.

Until the regulator approves the assets and Sberbank publishes commercial terms, the expanded collateral offering remains a plan rather than an available product. The bank must also explain how it will value volatile collateral, handle margin requirements and respond when asset prices fall.

Tokenized stock transfer volume climbed more than 415% over the 30 days ending Aug. 29, reaching $29.5 billion as Coinbase brought four equity tokens to Base.

Data from RWA.xyz also showed that monthly active addresses increased more than 209% to approximately 1.3 million. The number of holders rose 167% to 2.36 million during the same period.

The total distributed value of tokenized stocks increased at a much slower rate. It rose 1.45% over 30 days to $2.54 billion. However, that figure was about 637% above the $344 million recorded one year earlier.

Transfer volume measures the value moved between blockchain addresses. It does not necessarily represent purchases and sales by separate investors. Automated transfers, collateral movements and repeated activity between decentralized applications can also raise the figure.

Tokenized stock activity outpaces market value growth

The difference between transfer volume and distributed value shows that existing stock tokens are circulating more frequently. The $29.5 billion monthly figure was more than 11 times the sector’s $2.54 billion onchain value.

RWA.xyz ranked Securitize Corp. as the largest individual tokenized stock at approximately $163 million. Strategy PP Variable xStock followed at $136 million, while an Ondo-tokenized Circle Internet Group product held about $109 million.

Ondo led the platform rankings with $842.8 million in distributed value. Kraken’s xStocks followed with $609.3 million, while Binance’s bStocks held $599.9 million. Together, the three platforms represented roughly 81% of the tracked market.

The address and holder figures indicate broader onchain participation. Still, blockchain addresses do not always equal individual investors. One person or institution can control several wallets, while custodial platforms may use one address for many customers.

Coinbase tokenized stocks go live on Base

Coinbase launched tokenized versions of Nvidia, Meta, Apple and Alphabet shares on Base on Aug. 24. The products trade under the NVDAc, METAc, AAPLc and GOOGLc tickers using Coinbase’s B20 token standard.

According to the official Base announcement, the products can trade continuously through onchain markets and sit inside self-custody wallets. Supported decentralized applications can also integrate them into exchanges, lending markets and other financial products.

Coinbase Onchain SPV Ltd., a company incorporated in Abu Dhabi Global Market, issues the securities. Each token initially represents a beneficial interest in one underlying share held through a segregated custody account.

Alpaca Securities acts as the broker and custodian responsible for purchasing and holding the underlying stocks. Alpaca is registered with the U.S. Securities and Exchange Commission and belongs to FINRA and the Securities Investor Protection Corporation.

Base describes the products as “real shares” held one-for-one by a regulated custodian. However, the product prospectus distinguishes beneficial ownership from direct registration on the listed company’s shareholder records.

As crypto.news reported after the launch, verified holders may submit voting instructions. The issuer’s ability to act on those instructions remains subject to legal, operational and timing restrictions.

Base integrations expand beyond continuous trading

The B20 tokens can interact with supported Base applications. Aerodrome provides decentralized liquidity, while protocols including Aave, Morpho and Euler support or plan lending functions.

Chainlink also launched price feeds for the four assets. The feeds combine the underlying stock price with a Coinbase-provided multiplier that accounts for changes in the amount of equity represented by each token.

The data can help lending protocols calculate borrowing limits, collateral health and liquidations. As crypto.news reported in related coverage, each protocol remains responsible for setting its risk parameters.

Continuous trading creates additional risks. Token prices may move during weekends and outside regular Nasdaq or New York Stock Exchange sessions, when the underlying shares are not trading. Lower liquidity during those periods could produce wider price differences.

Corporate distributions also work differently from a conventional brokerage account. The issuer generally reinvests dividends into additional underlying shares after fees and applicable U.S. withholding taxes. This process changes the deposit ratio rather than delivering cash directly to tokenholders.

U.S. investors remain excluded from the offering

Coinbase limits the Base products to eligible non-U.S. users. The tokenized securities have not been registered under the U.S. Securities Act or approved for sale to U.S. persons.

The offering relies on Regulation S, which covers certain securities transactions outside the United States. Users who acquire tokens through decentralized markets must still complete the issuer’s compliance process before accessing redemption and voting functions.

Unverified holders cannot redeem tokens for shares, U.S. dollars or accepted stablecoins. Verified redemptions carry a 0.05% fee and remain subject to identity, sanctions and anti-money laundering checks.

Coinbase said “more stocks are coming,” but it has not published a complete launch schedule. Any additional products will remain subject to regulatory approval and separate prospectus disclosures.

Meanwhile, Bitwise has introduced three automated models using Coinbase tokenized stocks. The portfolios cover large technology companies, robotics and artificial intelligence. Crypto.news previously reported that the products charge a 0.15% methodology fee and remain unavailable to U.S. persons.

Real Trump Coins has denied launching, promoting or authorizing the Trump Digital GOLD token that briefly appeared across its online presence before collapsing, blaming the promotion on “third-party bad actors.”

The denial came after the Real Trump Coins X account promoted the Solana-based token on Saturday and directed users to RealTrumpCoins.com, where GOLD was also advertised. The X posts were later deleted, while the account now links to a separate domain, TrumpCoins.com.

“Trump Coins has not authorized and will not launch, promote, or authorize any digital token,” Real Trump Coins said in an X post on Saturday, adding that it was working with authorities to investigate the matter.

The statement follows a highly concentrated GOLD launch, with Lookonchain reporting that the developer and newly created wallets controlled 82.45% of its supply. According to the blockchain analytics platform, 15 wallets linked to the team sold their holdings for about $330,000, making an estimated $312,000 profit.

The involvement of both the X account and RealTrumpCoins.com confused crypto observers, with X user Rune questioning how both the account and the domain could have been compromised.

While the Real Trump Coins X account bio linked to TrumpCoins.com, the account was still directing customers to RealTrumpCoins.com as recently as Aug. 25 in a post that remained online at the time of publication.

The Real Trump Coins X account directed customers to RealTrumpCoins.com on Aug. 25. Source: Real Trump Coins

At the time of publication, RealTrumpCoins.com still displayed the GOLD promotion. Trump also continued to follow the Real Trump Coins X account, one of 53 accounts he followed on the platform.

Related: Trump cost investors $4.7B through crypto ‘schemes’: Public Citizen

Cointelegraph is committed to independent, transparent journalism. This news article is produced in accordance with Cointelegraph’s Editorial Policy and aims to provide accurate and timely information. Readers are encouraged to verify information independently.

Sheikh Tahnoon bin Zayed al Nahyan, the UAE’s national security advisor and brother of its president, holds the single largest stake in WLTC Holdings through StringZ Holding RSC. The Trump family owns 38%. On August 14, the OCC granted this entity preliminary conditional approval for a federally regulated national trust bank to issue and redeem USD1, a stablecoin with more than $4 billion in circulation. In the same administration that loosened AI chip export caps to the UAE, $263 million from the original deal has already flowed to Trump family entities.

A sitting president’s family has never before held a financial stake in a company that received a federal banking charter from regulators appointed by that same president. That is no longer a hypothetical. It happened on August 14, 2026, when the Office of the Comptroller of the Currency conditionally approved World Liberty Trust Company, National Association, to organize as a federally regulated national trust bank.

The approval capped a 221-day review process. The application was filed in January 2026, the same month the Trump administration began rolling back Biden-era restrictions on advanced chip exports to Gulf states. By the time the OCC signed off, the largest single shareholder in the holding company behind the bank was not Donald Trump or any member of his family. It was an entity controlled by Sheikh Tahnoon bin Zayed al Nahyan, the UAE’s national security advisor, brother of President Mohamed bin Zayed, and one of the most powerful figures in Middle Eastern finance.

The details, first reported by the Wall Street Journal on August 27, have reignited a debate about where personal enrichment ends and foreign policy begins in the Trump administration’s approach to digital assets.

The ownership structure behind WLTC Holdings

WLTC Holdings LLC is the holding company for the proposed bank. According to OCC filings and the Wall Street Journal’s reporting, the ownership breaks down as follows.

StringZ Holding RSC, an entity backed by Tahnoon and co-investors, holds 49% of WLTC Holdings. An entity affiliated with President Donald Trump and certain family members owns 38%. The remaining shares belong to associates of Zak Folkman and Chase Herro, co-founders of World Liberty Financial.

StringZ’s OCC commitment letter was signed by Hamad Khlfan Ali Matar Alshamsi, a former director of G42, the Abu Dhabi artificial intelligence holding company that Tahnoon also controls. That connection matters because G42 has been a primary beneficiary of the Trump administration’s decisions to ease technology export restrictions to the UAE.

The ownership arrangement means that Tahnoon’s group, not the Trump family, is the single largest shareholder in the entity that will control a federally regulated bank issuing a dollar-pegged stablecoin on American soil.

What the OCC actually approved

The OCC’s preliminary conditional approval, dated August 14, 2026, authorizes World Liberty Trust Company to organize as a national trust bank with a specific and narrow mandate. The bank will issue and redeem USD1, maintain reserve assets backing the stablecoin, provide fiduciary custody services to institutional clients, and offer conversion services between approved stablecoins and USD1.

The bank will be based in Bay Harbor Islands, Florida, and will be led by Zach Witkoff as president and chairman. Witkoff co-founded World Liberty Financial alongside Trump’s three sons: Eric Trump, Donald Trump Jr., and Barron Trump. Zach Witkoff is the son of Steve Witkoff, the longtime Trump friend who serves as U.S. special envoy.

Other named officers include Mack McCain as chief trust officer, Daniel Dietzel as chief financial officer (formerly at Hidden Road institutional prime broker), and board members Scott Alper, Robert Witkoff, Jeffrey Weiner (formerly of Marcum accounting firm), and Erin Baskett, who sits on the FINRA Board of Governors.

The approval carries several conditions. World Liberty Trust must maintain at least $20 million in eligible capital at opening. The chief financial officer must receive separate regulator approval. A qualified internal audit manager must be appointed. The company must apply for Federal Reserve Bank stock. And it must comply with the GENIUS Act, the stablecoin law that Trump signed on July 18, 2025.

Crucially, the approval specifies what the bank will not do. It will not accept customer deposits. It will not issue conventional loans. It will not carry FDIC insurance. It will not seek a Federal Reserve master account. And it will not issue, custody, or deal in WLFI governance tokens.

Final authorization to commence business will not be granted until all preopening requirements are met.

The $500 million deal that started it all

The roots of Tahnoon’s involvement in World Liberty Financial trace back to January 2025, just four days before Trump’s inauguration. Tahnoon and fellow investors committed $500 million to World Liberty Financial in exchange for a 49% ownership stake in the crypto venture. Eric Trump signed the investment documents on the Trump family’s side.

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Trump’s 2025 financial disclosure, a 927-page document released by the Office of Government Ethics between July 1 and July 3, 2026, reveals the scale of the financial returns. The president reported more than $1.4 billion in crypto-related income for 2025, making it the largest single category in his approximately $2.2 billion total reported income.

The crypto earnings broke down as follows. WLFI token sales generated more than $550 million, roughly nine times the $57 million reported in 2024. Sales of equity in the World Liberty Financial holding company produced $260 million. A separate stablecoin holdco equity sale brought in more than $196 million. And CIC Digital, the entity behind Trump’s memecoin ventures, contributed more than $635 million, largely from royalties tied to what the filing calls “Celebration Coins.”

Of the original $500 million investment from Tahnoon’s group, $263 million flowed directly to Trump family entities. That figure was confirmed through Trump’s financial disclosure and has been cited by congressional investigators and ethics watchdog groups.

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USD1: from quiet launch to fourth-largest stablecoin

World Liberty Financial quietly launched USD1 in March 2025 on Ethereum and Binance Smart Chain, initially without a formal announcement. The token achieved more than $140 million in trading volume within its first 24 hours.

Each USD1 token is designed to maintain a 1:1 peg with the U.S. dollar and is backed by a reserve of cash, U.S. Treasury securities, and government money market funds. BitGo Trust Company has served as the reserve custodian and exclusive issuer since launch. If the OCC grants final authorization, World Liberty Trust Company will assume those responsibilities, bringing stablecoin issuance and custody entirely in-house.

USD1 has grown to more than $4 billion in circulation, making it the fourth-largest stablecoin by market capitalization. A significant portion of that growth came from a single transaction: in May 2025, Abu Dhabi state-backed investment firm MGX used USD1 to settle a $2 billion transaction with Binance. MGX’s ties to the Abu Dhabi sovereign wealth ecosystem and Tahnoon’s broader financial network have raised questions about whether early adoption was organic or strategically coordinated.

As of February 2026, Binance held approximately 87% of USD1’s total supply, a concentration level that exceeds any other major stablecoin at a single exchange. That same month, USD1 briefly lost its dollar peg, falling to $0.994 during what World Liberty Financial described as a “coordinated attack” against the protocol. The peg was restored within hours.

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The stablecoin has since expanded to Canton Network and added listings on Coinbase, Kraken, Crypto.com, OKX, Bybit, Uniswap, and PancakeSwap. In June 2026, USD1 was used to pay $250,000 in fighter performance bonuses at UFC Freedom 250, an event held on the White House lawn.

World Liberty Financial CEO Zach Witkoff has pushed back against accusations of political favoritism, stating in late August 2026 that “USD1 grew because institutions trust how it operates, and confidence at enterprise scale deserves the backing of federal supervision.”

The AI chip connection

The conflict-of-interest concerns extend well beyond banking. Sheikh Tahnoon controls G42, the Abu Dhabi artificial intelligence holding company that has been one of the largest beneficiaries of the Trump administration’s decision to loosen restrictions on advanced chip exports to the UAE.

In November 2025, the Commerce Department authorized the export of 35,000 Nvidia Blackwell processors to G42 and Saudi Arabia’s Humain. In January 2026, the administration codified a broader policy shift, moving the licensing posture for chip exports from a presumption of denial to case-by-case review.

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Then, on July 14, 2026, exactly one month before the OCC approved the World Liberty banking charter, the Commerce Department’s Bureau of Industry and Security upgraded the UAE to Country Group A:5, its highest export control tier. The designation, which cited the UAE’s status as a “Major Defense Partner,” allows the UAE government and approved firms, including G42, to import advanced AI chips and servers without individual export licenses.

The chips now cleared for export include Nvidia’s H200 and AMD’s Instinct MI325X, which were previously restricted, as well as Nvidia’s even more powerful Blackwell-class processors. The upgrade essentially removes the ceiling on how much advanced AI compute the UAE can import from American manufacturers.

Senator Elizabeth Warren has drawn a direct line between these policy decisions and the Trump family’s financial relationship with Tahnoon. In an August 2026 letter to Commerce Secretary Howard Lutnick, Warren pressed for answers about whether the UAE’s access to sensitive U.S. technology was influenced by Tahnoon’s crypto investments with the Trump family. Warren and Senator Andy Kim had previously requested a CFIUS national security review of the World Liberty Financial arrangement as early as February 2026.

U.S. national security officials have separately voiced concerns that Emirati access to these chips could serve as a conduit for sensitive AI technology to reach China, compromising America’s strategic advantage in artificial intelligence development.

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World Liberty Financial spokesman David Wachsman responded to the conflict-of-interest allegations by stating: “No one at World Liberty works for the U.S. government and there are no conflicts of interest.”

A regulatory framework built for this moment

The timing of the World Liberty Trust charter approval is inseparable from the regulatory environment that the Trump administration has actively shaped.

Trump signed the GENIUS Act on July 18, 2025, creating the first federal framework specifically for payment stablecoins. The law requires issuers to back stablecoins with 100% reserves in Treasury bills or insured deposits, report weekly to regulators, and publish monthly disclosures. It takes effect on either January 18, 2027, or 120 days after final rules are issued, whichever comes first.

The OCC expects to finalize its GENIUS Act implementation rules by November 2026 after reviewing industry feedback on stablecoin reserves, custody, and licensing. World Liberty Trust’s charter application explicitly commits to operating under GENIUS Act compliance, a framework that the president signed into law and that his family’s company is now among the first to operate within.

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JUST IN: Chris Dixon says stablecoins now rival major payment networks like Visa with $300 billion issued, calling regulation of the remaining 90% of crypto the next big unlock for builders pic.twitter.com/7nKk4gxtcW

— crypto.news (@cryptodotnews) May 6, 2026

The Clarity Act, which passed the House with a 294-134 bipartisan vote and Trump’s backing, extends the regulatory framework beyond stablecoins to broader digital asset markets. Together, the GENIUS Act and the Clarity Act represent the most significant crypto legislation in U.S. history, and together they create the precise regulatory environment in which World Liberty Trust will operate.

Critics, including CNN, which called the OCC approval a “brazen act of self-dealing,” argue that the president cannot sign laws, appoint regulators, and then profit through a family business that those regulators approve. Defenders counter that the charter application went through a standard 221-day review process and that the OCC’s conditions, including capital requirements and compliance mandates, prove the approval was rigorous.

What the WLFI token tells us

While the banking charter applies exclusively to USD1, World Liberty Financial also operates the WLFI governance token, which tells its own story about investor returns.

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The Trump family takes 75% of net revenue from WLFI token sales. Those sales generated more than $550 million in 2025 income according to Trump’s financial disclosure. Yet the token itself has been a different story for outside investors. WLFI traded between $0.061 and $0.067 in late May 2026, representing a decline of more than 81% from its $0.2577 high in late 2024. It remains down more than 60% year-over-year.

The OCC’s approval letter specifically states that the bank “will not issue, custody, or deal in WLFI tokens,” a deliberate separation between the stablecoin banking operation and the governance token that has generated massive revenue for the Trump family while delivering steep losses for retail investors.

Congressional and ethics response

The political reaction has been sharply divided along partisan lines, though the scale of the financial entanglement has prompted some bipartisan concern.

Democrats, led by Senators Warren and Kim, have focused on three overlapping issues. First, they argue that the CFIUS review process should apply to any foreign investment that gives a non-U.S. entity significant ownership in a federally chartered financial institution. Second, they contend that the simultaneous loosening of AI chip export restrictions to the UAE, where Tahnoon wields significant influence, creates an appearance of quid pro quo that undermines public trust. Third, they question whether OCC Acting Comptroller Rodney Hood, a Trump appointee, should have recused himself from the charter decision given the president’s direct financial interest.

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The Senate Banking Committee’s minority staff issued a 14-page letter in February 2026 requesting that the OCC delay the charter review pending a national security assessment. The OCC did not comply, and the 221-day review proceeded on its original timeline.

Ethics watchdog groups have pointed to the unprecedented nature of the arrangement. No previous president has held a financial stake in a company that received a banking charter from regulators appointed by that president while simultaneously signing the legislation under which that bank would operate.

Republican lawmakers have largely defended the approval, arguing that the OCC’s conditions prove the process was merit-based and that blocking the charter would amount to political discrimination against a legitimate business. Senator Tim Scott, the Banking Committee chairman, has said that crypto companies should be evaluated on their compliance posture, not on who their investors happen to be, and that the GENIUS Act framework already provides the guardrails that critics claim are missing.

Follow the money: a timeline

The financial thread connecting the Trump family, Sheikh Tahnoon, and the proposed bank follows a clear chronological path.

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In September 2024, World Liberty Financial launched during the presidential campaign, co-founded by Trump and his three sons. In January 2025, four days before inauguration, Tahnoon’s group committed $500 million for a 49% stake, with $263 million directed to Trump family entities. In March 2025, USD1 launched on Ethereum and Binance Smart Chain. In May 2025, MGX used USD1 to settle a $2 billion Binance transaction. In November 2025, the Commerce Department authorized 35,000 Nvidia Blackwell chips for G42 and Humain. In January 2026, the administration moved chip export licensing from presumption of denial to case-by-case review, and WLTC Holdings filed the bank charter application with the OCC. In July 2026, the Commerce Department upgraded the UAE to Country Group A:5, and Trump’s financial disclosure revealed $1.4 billion in crypto income. On August 14, 2026, the OCC granted preliminary conditional approval for the bank. On August 27, the Wall Street Journal reported Tahnoon’s 49% stake in WLTC Holdings.

Each step is individually defensible. Taken together, they form a pattern that critics describe as the interweaving of presidential financial interests, foreign policy decisions, and regulatory approvals on a scale without precedent in modern American governance. Whether that pattern reflects corruption or simply the natural consequences of a business-minded president operating in a deregulatory environment is the central question that will define the legacy of this chapter in American crypto policy.

What to watch

OCC final authorization timeline: The preliminary approval requires World Liberty Trust to meet multiple preopening conditions, including the $20 million capital requirement and CFO approval. Watch for the final authorization date, which will signal when the bank can actually begin operations.

CFIUS review outcome: Warren and Kim’s request for a Committee on Foreign Investment review remains pending. A formal CFIUS investigation could delay or block the bank from operating even after OCC final authorization.

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GENIUS Act rulemaking by November: The OCC expects to finalize GENIUS Act implementation rules by November 2026. Those rules will determine reserve requirements, reporting standards, and compliance obligations that directly affect how World Liberty Trust operates.

Binance USD1 concentration changes: With Binance holding roughly 87% of all USD1 supply, any significant redistribution or withdrawal by the exchange would have outsized effects on the stablecoin’s market stability and perceived independence.

UAE chip export volumes post-upgrade: Now that the UAE holds Country Group A:5 status, tracking the actual volume and value of AI chip shipments to Emirati firms, especially G42, will reveal whether the export liberalization translates into material technology transfers at scale.

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What is WLTC Holdings?

WLTC Holdings LLC is the holding company for World Liberty Trust Company, National Association, the proposed federally regulated national trust bank. It was organized to file the bank charter application with the OCC in January 2026. StringZ Holding RSC, backed by Sheikh Tahnoon bin Zayed al Nahyan, owns 49% of WLTC Holdings. An entity affiliated with the Trump family owns 38%.

Who is Sheikh Tahnoon bin Zayed al Nahyan?

Sheikh Tahnoon is the national security advisor of the United Arab Emirates and the brother of UAE President Mohamed bin Zayed al Nahyan. He controls G42, the Abu Dhabi artificial intelligence holding company, and oversees several sovereign wealth and investment vehicles. His group committed $500 million to World Liberty Financial in January 2025, and his associated entity StringZ Holding RSC holds the largest single ownership stake in the company behind the proposed crypto bank.

What does USD1 do and how large is it?

USD1 is a dollar-pegged stablecoin issued by World Liberty Financial. Each token is backed 1:1 by reserves of U.S. Treasury securities, cash, and government money market funds. It launched in March 2025 and has grown to more than $4 billion in circulation, making it the fourth-largest stablecoin by market capitalization. It trades on Binance, Coinbase, Kraken, and several other major exchanges.

What did the OCC actually approve?

The OCC granted preliminary conditional approval on August 14, 2026, for World Liberty Trust Company to organize as a national trust bank. The bank will issue and redeem USD1, maintain reserve assets, and provide digital asset custody to institutional clients. It will not accept deposits, issue loans, carry FDIC insurance, or deal in WLFI tokens. Final authorization requires meeting additional conditions including a $20 million capital floor.

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How much money has flowed to the Trump family from World Liberty Financial?

Trump’s 2025 financial disclosure shows more than $1.4 billion in crypto-related income. This includes $550 million from WLFI token sales, $260 million from equity sales, $196 million from stablecoin holdco equity sales, and $263 million from the original January 2025 deal with Tahnoon’s group. Separately, CIC Digital, the memecoin entity, generated more than $635 million.

What is the connection between the crypto bank and AI chip exports to the UAE?

Sheikh Tahnoon controls G42, the Emirati AI firm that has been a primary beneficiary of the Trump administration’s decisions to loosen advanced chip export restrictions. The Commerce Department upgraded the UAE to its highest export tier on July 14, 2026, exactly one month before approving the World Liberty bank charter. Senator Warren has publicly questioned whether these policy decisions were influenced by Tahnoon’s $500 million crypto investment with the Trump family.

What is the GENIUS Act and how does it relate to this bank?

The GENIUS Act, signed by Trump on July 18, 2025, is the first federal law specifically governing payment stablecoins. It requires 100% reserves, weekly regulatory reporting, and monthly public disclosures. The OCC’s approval of World Liberty Trust is conditioned on compliance with the GENIUS Act. Critics note that the president signed the law under which his family’s company will operate, creating an unusual overlap between legislative and commercial interests.

Could the bank still be blocked?

Yes. The OCC’s approval is preliminary and conditional. Final authorization requires meeting preopening conditions including capital requirements and regulatory approvals for key officers. Separately, Senators Warren and Kim have requested a CFIUS national security review of the foreign ownership structure. If CFIUS opens a formal investigation, it could recommend that the president block the arrangement, creating the extraordinary scenario of Trump being asked to block his own family’s business deal. —

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Disclaimer: This article is for informational purposes only and does not constitute financial, legal, or investment advice. Cryptocurrency investments carry significant risk. Always conduct your own research before making any financial decisions. Published August 29, 2026.

The Wall Street Journal reports that JPMorgan Chase is exploring a public stablecoin separate from its existing JPM Coin deposit token while 39 state banking associations form the BankChain Alliance and target a 2027 blockchain launch. The GENIUS Act gave banks the legal rails they needed. The question is no longer whether traditional finance will enter the stablecoin market. It is whether Tether and Circle can hold their ground when incumbents arrive with balance sheets 100 times larger.

The bank that once dismissed Bitcoin as a fraud is now studying how to issue the very type of digital dollar it spent years criticizing. JPMorgan Chase, which already runs the largest blockchain payment network in traditional finance through its Kinexys platform, is weighing a public stablecoin that would sit alongside its existing JPM Coin deposit token. The disclosure came not from a press release or a keynote speech but from a Wall Street Journal report published on Aug. 26, 2026, that mapped a much broader shift across American banking.

JPMorgan is not alone. More than a dozen global banks are reportedly developing a multicurrency stablecoin venture beginning with dollars. Thirty-nine state banking associations have formed BankChain Alliance to build shared blockchain infrastructure. Early Warning Services, the Zelle operator owned by seven of the nation’s largest financial institutions, has already launched a dollar-backed stablecoin called ZLUSD. And The Clearing House, the payments company collectively owned by the biggest commercial banks, is coordinating a shared tokenized deposit network targeting the first half of 2027.

The catalyst behind all of this activity is a single piece of legislation: the GENIUS Act. Signed into law by President Donald Trump on July 18, 2025, it created the first federal framework for payment stablecoins and gave banks a clear license path to issue them. What had been a legal gray zone became a regulated on-ramp. Banks that had been watching from the sidelines for years suddenly had the one thing they always said they needed before entering the market: regulatory clarity.

The WSJ report and what JPMorgan actually said

The Aug. 26 Wall Street Journal report landed with the weight of inevitability rather than surprise. JPMorgan Chase confirmed through a spokesperson that the bank has no current plan to issue a stablecoin. But the spokesperson added that JPMorgan would consider its options in light of customer demand and the evolving regulatory environment. In corporate communications, that sentence is the closest a bank of JPMorgan’s size gets to saying yes without committing to a timeline.

The report arrived at a moment when banks are already weighing stablecoins as payments competition grows. JPMorgan recently discussed internally whether to launch a payment stablecoin separate from its existing deposit token infrastructure. The distinction matters. JPM Coin, which now trades under the ticker JPMD on the Base blockchain, is a tokenized deposit. It remains on JPMorgan’s balance sheet, operates within a closed network for institutional clients, and is legally classified as a bank deposit rather than a bearer instrument. A public stablecoin, by contrast, would function as a bearer token that anyone could hold and transfer without needing a JPMorgan account.

The difference is structural, not cosmetic. Tokenized deposits preserve the existing two-tier monetary system where central banks issue base money and commercial banks create deposits through lending. Stablecoins operate outside that system. Their issuers cannot make loans, expand credit, or accept deposits. They are simply digital representations of dollars held in reserve. For a bank like JPMorgan, issuing a stablecoin means creating a product that cannibalizes its own deposit base unless the strategic value of controlling digital dollar rails outweighs the cost.

JPMorgan’s Kinexys platform, formerly known as Onyx, has already processed more than $4 trillion in cumulative transactions. Daily volume averaged more than $7 billion as of June 2026, up from $5 billion earlier in the year. The bank has expanded JPM Coin deployments to the Canton Network and to Base, Coinbase’s public Layer 2, and completed a tokenized Treasury redemption test on the XRP Ledger alongside Mastercard, Ondo Finance, and Ripple. The infrastructure for a stablecoin already exists. The question is whether JPMorgan’s leadership decides the product warrants the regulatory and competitive exposure.

JUST IN: Chris Dixon says stablecoins now rival major payment networks like Visa with $300 billion issued, calling regulation of the remaining 90% of crypto the next big unlock for builders pic.twitter.com/7nKk4gxtcW

— crypto.news (@cryptodotnews) May 6, 2026

BankChain Alliance and the community bank counterattack

While JPMorgan deliberates, thousands of smaller banks have already committed to a collective response. The BankChain Alliance, announced in August 2026, unites 39 state banking associations representing 3,283 banks and $21.8 trillion in combined assets. The initiative was launched by the Texas Banking Association. Kathy Kraninger, who also leads the Florida Bankers Association, serves as interim chair.

The alliance is not building a stablecoin. It is building the plumbing for one. BankChain plans to develop a 24/7 nationwide permissioned blockchain that community and mid-sized commercial banks can use for tokenized deposits, stablecoins, and programmable payments. The network would be bank-governed, meaning the institutions that use it would also control its rules, access permissions, and upgrade cycles. The target launch date is 2027, though no technology partner has been selected.

The scale of the coalition matters more than any individual participant. Community banks in the United States collectively hold trillions in deposits but lack the technology budgets of the top five commercial banks. Without a shared infrastructure layer, each bank would need to build or license its own blockchain capabilities, a cost that would effectively exclude smaller institutions from the digital dollar economy. BankChain Alliance exists to prevent that exclusion.

The timing is not coincidental. Stablecoins processed more than $15 trillion in transaction volume in 2025, according to industry estimates. That figure is expected to exceed $25 trillion in 2026. For community banks, the threat is not hypothetical. Every dollar that moves through a stablecoin rail instead of a bank wire or ACH transfer is a dollar that bypasses the traditional banking system entirely. BankChain is the community banking sector’s attempt to build its own on-ramp before crypto-native rails make them irrelevant.

GENIUS Act: the law that unlocked everything

None of these initiatives would exist in their current form without the GENIUS Act. The Guiding and Establishing National Innovation for U.S. Stablecoins Act passed the Senate on June 17, 2025, with a 68-30 vote and cleared the House on July 17, 2025, with a 308-122 margin. President Trump signed it into law the following day.

The law made payment stablecoin issuance a licensed activity for the first time at the federal level. It defined a payment stablecoin as a digital asset issued for payment or settlement and redeemable at a predetermined fixed amount. It required issuers to hold at least one dollar of permitted reserves for every dollar of stablecoins outstanding. Permitted reserves include U.S. Treasury bills, insured bank deposits, and Treasury repurchase agreements. The law mandated monthly attested disclosure of reserve composition, required executive certification, and prohibited stablecoin issuers from paying interest to token holders.

The GENIUS Act also created a dual supervisory structure. Issuers with more than $10 billion in outstanding stablecoins fall under federal supervision through the OCC. Smaller issuers can operate under state-level regulators, provided those state frameworks meet minimum federal standards. The law distributed responsibility across multiple agencies: the OCC for prudential standards, FinCEN and OFAC for anti-money laundering and sanctions compliance, and the SEC for any stablecoins that might qualify as securities.

However, the GENIUS Act missed its implementation deadline and regulators are still writing the rules. The statutory one-year deadline for implementing regulations passed on July 18, 2026, without the OCC, Federal Reserve, FDIC, or NCUA completing all required rules. The OCC now expects to finalize its main GENIUS Act regulations by November 2026, which would push the effective date to approximately March 2027 under the 120-day implementation window. The law generally begins restricting unlicensed U.S. payment stablecoin issuance on January 18, 2027.

For banks, the delayed rulemaking creates both risk and opportunity. The risk is that products launched before final rules could require expensive modifications. The opportunity is that the enforcement date keeps sliding, giving banks more time to build while crypto-native issuers face growing uncertainty about whether their existing structures will pass muster.

ZLUSD and the Zelle stablecoin strategy

The most concrete bank stablecoin product to date is not from JPMorgan but from the company that already connects 2,200 financial institutions through the Zelle payment network. Early Warning Services, owned jointly by Bank of America, Capital One, JPMorgan Chase, PNC Bank, Truist, U.S. Bank, and Wells Fargo, launched ZLUSD in June 2026.

ZLUSD is a dollar-backed stablecoin issued directly by Early Warning Services rather than through a third-party issuer or new joint venture. The press release described it as proprietary, meaning Early Warning holds the token, manages the reserves, and controls the redemption process. The launch positions ZLUSD as a natural extension of Zelle’s existing infrastructure, which processed more than $1 trillion in payments in 2025.

The initial use case is cross-border remittances, with India as the first corridor. Zelle has historically been a domestic-only payment network, limited to transfers between U.S. bank accounts. ZLUSD changes that by enabling dollar-denominated transfers to recipients outside the United States without requiring both parties to hold accounts at the same institution. The stablecoin effectively turns Zelle into an international wire service that runs on blockchain rails.

The ownership structure gives ZLUSD an advantage that no crypto-native stablecoin can replicate. Seven of the largest banks in the country already own the issuing entity. Their combined balance sheet exceeds $14 trillion. Every one of those banks can offer ZLUSD to its existing customers through the Zelle interface they already use. No new app download, no crypto wallet setup, no know-your-customer re-verification. The distribution moat is the existing banking relationship.

The Clearing House and the tokenized deposit network

Running on a parallel track, JPMorgan, Citigroup, Bank of America, and Wells Fargo are building a shared tokenized deposit network through The Clearing House, targeting the first half of 2027. This network would allow corporate clients to move tokenized deposits around the clock, seven days a week, without waiting for Fedwire or CHIPS to open.

The distinction between this network and a stablecoin is important. Tokenized deposits remain on the issuing bank’s balance sheet. They are account-based, meaning ownership is tracked on a ledger the bank controls rather than through a bearer token that can be transferred peer-to-peer. They can pay interest, which stablecoins under the GENIUS Act cannot. And they operate within the existing regulatory framework for bank deposits, including FDIC insurance up to applicable limits.

The Clearing House network represents the banking industry’s preferred alternative to stablecoins. Rather than issuing bearer tokens that anyone can hold, the banks want to tokenize their existing deposit products and make them programmable. The strategy preserves the deposit base, maintains the lending relationship, and keeps the banks at the center of the payment flow. If tokenized deposits win the race, stablecoins become a product primarily for users who do not have or do not want a bank account.

The DTCC is also rolling out a tokenization service with more than 50 financial firms, with limited production trades starting in July 2026 and a broader launch in October. Mastercard has added stablecoin settlement for issuers and acquirers. Visa is testing private stablecoin settlement on the Canton Network. The infrastructure layer for bank-issued digital dollars is being built simultaneously by multiple institutions, each racing to define the standard before the others.

What bank stablecoins mean for Tether and Circle

The stablecoin market has reached approximately $316 billion in total supply. Tether’s USDT holds roughly $187 billion, or 59 percent, while Circle’s USDC follows at approximately $75 billion, or 24 percent. Together, they control more than 83 percent of the market. But the metrics that matter are shifting.

USDC has already won the volume race. Circle’s token now carries roughly 70 percent of adjusted stablecoin transaction volume, more than double USDT’s 25 percent share. The split reflects a market that has divided into two layers: a settlement layer dominated by USDC, which banks and institutions prefer for its regulatory compliance, and a savings layer dominated by USDT, which serves emerging-market users seeking offshore dollar exposure.

Bank stablecoins threaten both layers, but through different mechanisms. On the settlement side, a JPMorgan stablecoin or ZLUSD would offer corporate treasurers something USDC cannot: direct integration with an existing banking relationship, FDIC-insured reserves, and counterparty risk backed by institutions with hundreds of billions in equity capital. Circle went public in 2026 and has built a significant institutional franchise, but its balance sheet is a fraction of what any top-ten bank carries.

On the savings side, the threat is less immediate but still real. Tether’s strength in emerging markets comes from its permissionless distribution. Anyone with a smartphone and an internet connection can hold USDT without opening a bank account or passing identity verification. Bank stablecoins are unlikely to replicate that model. Regulatory requirements under the GENIUS Act and banking law would impose know-your-customer checks on every holder, limiting the addressable market.

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The foreign issuer question adds another layer of complexity. Tether Limited is incorporated in the British Virgin Islands and has never been licensed as a financial institution in the United States. The GENIUS Act creates a foreign issuer pathway that allows non-U.S. companies to serve American businesses, but only if the Treasury Department issues a reciprocity determination. As of August 2026, that determination has not been issued. If it never arrives, Tether’s $187 billion token could be locked out of the regulated U.S. market entirely.

The real risk for Tether and Circle is not that bank stablecoins will be better products. It is that bank stablecoins will be better distributed. Stablecoin regulation is fundamentally about the dollar, and the GENIUS Act was designed to ensure that dollar-denominated stablecoins serve as vehicles for U.S. Treasury debt distribution. Tether already holds approximately $98 billion in U.S. Treasury bills, a position larger than the sovereign Treasury holdings of all but 18 countries. But if banks issue their own stablecoins backed by the same assets, the Treasury gets the same demand without relying on an offshore entity it cannot directly supervise.

JPMorgan’s trademark filings and the quiet buildout

While JPMorgan’s official position remains exploratory, the bank’s actions suggest a more advanced state of preparation than its public statements indicate. JPMorgan has filed at least two trademark applications related to stablecoin products in 2026. The bank also submitted a filing to the SEC in May 2026 for the JPMorgan OnChain Liquidity-Token Money Market Fund under the ticker JLTXX, a blockchain-enabled money market fund designed to support stablecoin issuers preparing for the GENIUS Act regime.

The JLTXX fund is particularly revealing. It is not a stablecoin itself but a product that would hold the reserves that back stablecoins. If JPMorgan builds the reserve management infrastructure for other stablecoin issuers, it captures value from the stablecoin ecosystem regardless of whether its own stablecoin succeeds. And if it does launch its own stablecoin, the reserve management product is already in place.

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JPMorgan CEO Jamie Dimon has historically been one of the most prominent critics of Bitcoin and cryptocurrency. He called Bitcoin a fraud in 2017 and has repeatedly questioned the value proposition of decentralized digital assets. But his stance on stablecoins has been more nuanced. Dimon warned in 2026 that stablecoins could be a “huge problem” if not regulated thoughtfully, noting transaction costs and money movement risks. The comment reads less like opposition and more like a case for why banks, not crypto companies, should be the ones issuing digital dollars.

JPMorgan’s CFO has also warned about the risks of yield stablecoins, arguing that products offering returns on stablecoin holdings could create a form of unregulated parallel banking. That critique aligns with the GENIUS Act’s prohibition on paying interest to stablecoin holders and suggests JPMorgan views the regulatory framework as favorable to its interests.

The competitive landscape in 2027 and beyond

The next twelve months will determine whether bank stablecoins become a permanent fixture of the financial system or a compliance-heavy product that never achieves mass adoption. Several deadlines converge in early 2027. The GENIUS Act enforcement date of January 18, 2027, will restrict unlicensed stablecoin issuance. The Clearing House tokenized deposit network targets a first-half 2027 launch. BankChain Alliance is vetting technology partners for its 2027 blockchain deployment.

The competitive dynamics are not binary. The stablecoin market is large enough to support multiple issuers, just as the credit card market supports Visa, Mastercard, and American Express without any single network capturing 100 percent of transactions. The question is whether the market structure shifts from one dominated by two crypto-native issuers to one where bank stablecoins capture the institutional and corporate segments while Tether and Circle retain retail and cross-border flows.

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New entrants are accelerating. Stripe and Visa, along with more than 140 other businesses, announced plans to launch a stablecoin called OUSD. Revolut launched a euro stablecoin. Sky, formerly MakerDAO, Ethena, and Paxos have each carved real market share. Agora, Ripple, and First Digital have each pushed past $1 billion in stablecoin supply. The market is fragmenting from a duopoly into a multi-issuer ecosystem where distribution, regulatory compliance, and integration with existing payment networks matter more than being first.

For JPMorgan specifically, the strategic calculus is straightforward even if the execution is complex. The bank already processes $7 billion per day in tokenized deposits. It already operates on public blockchains. It already has the regulatory licenses. It already serves the corporate clients who represent the highest-value segment of the stablecoin market. The only thing missing is the product itself.

What to watch

OCC final rules timeline. The OCC targets November 2026 for its final GENIUS Act stablecoin regulations. Any further delay pushes the enforcement date deeper into 2027 and gives banks more time to prepare while leaving crypto-native issuers in regulatory limbo.

Treasury reciprocity determination for Tether. Without this ruling, Tether’s USDT could be locked out of the regulated U.S. market when the GENIUS Act enforcement date arrives. The absence of a determination as of August 2026 is itself a signal.

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BankChain technology partner selection. The alliance represents 3,283 banks but has not chosen a blockchain platform. The selection will reveal whether BankChain builds on an existing public or permissioned chain or attempts to create something new.

JPMorgan stablecoin announcement cadence. Watch for additional trademark filings, regulatory applications, or pilot programs. The gap between “no current plan” and “we are launching” can close in weeks once a bank of this size commits.

ZLUSD India corridor launch. Early Warning Services is targeting year-end 2026 for the India remittance corridor. If ZLUSD processes meaningful volume in its first international market, other bank stablecoins will accelerate their own cross-border strategies.

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Is JPMorgan launching a stablecoin?

JPMorgan told the Wall Street Journal on Aug. 26, 2026, that it has no current plan to issue a stablecoin but is evaluating the option as customer demand and the regulatory environment evolve. The bank already operates JPM Coin, a tokenized deposit product, through its Kinexys platform. A public stablecoin would be a separate product that functions as a bearer token rather than a bank deposit.

What is the BankChain Alliance?

BankChain Alliance is a coalition of 39 state banking associations representing 3,283 banks with $21.8 trillion in combined assets. The group is building a shared permissioned blockchain for tokenized deposits, stablecoins, and programmable payments, with a target launch date of 2027. The initiative was launched by the Texas Banking Association and is chaired by Kathy Kraninger of the Florida Bankers Association.

What is the GENIUS Act?

The Guiding and Establishing National Innovation for U.S. Stablecoins Act was signed into law on July 18, 2025. It created the first federal framework for payment stablecoins, requiring issuers to hold dollar-for-dollar reserves in Treasury bills, insured deposits, or repurchase agreements. The law also mandates monthly attested disclosure, executive certification, and prohibits stablecoin issuers from paying interest to token holders.

What is ZLUSD?

ZLUSD is a dollar-backed stablecoin launched in June 2026 by Early Warning Services, the company that operates the Zelle payment network. It is owned by seven major U.S. banks including JPMorgan Chase, Bank of America, Wells Fargo, Capital One, PNC Bank, Truist, and U.S. Bank. The initial use case is cross-border remittances, with India as the first international corridor.

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How is a stablecoin different from JPM Coin?

JPM Coin is a tokenized bank deposit that remains on JPMorgan’s balance sheet and operates within a closed network for institutional clients. A stablecoin is a bearer token that can be transferred peer-to-peer without the involvement of the issuing institution. Tokenized deposits can pay interest and are covered by existing banking regulations, while stablecoins under the GENIUS Act cannot pay interest and require a separate license.

What happens to Tether if banks launch stablecoins?

Tether faces a dual threat. On the regulatory side, Tether Limited has not received a Treasury reciprocity determination required for foreign stablecoin issuers to serve U.S. businesses under the GENIUS Act. On the competitive side, bank stablecoins would offer institutional users direct integration with existing banking relationships, FDIC-backed reserves, and counterparty risk backed by institutions with hundreds of billions in equity capital. Tether’s strength in emerging markets and permissionless distribution may insulate it from direct competition in those segments.

Will bank stablecoins replace USDC?

Not necessarily. USDC already carries roughly 70 percent of adjusted stablecoin transaction volume and has built significant institutional adoption. Bank stablecoins are more likely to compete for corporate treasury and cross-border settlement use cases where an existing banking relationship provides an advantage. The stablecoin market is large enough to support multiple issuers, similar to how the credit card market supports multiple networks.

When will bank stablecoin regulations be finalized?

The OCC expects to finalize its main GENIUS Act regulations by November 2026. The law’s enforcement provisions generally take effect on January 18, 2027, though the 120-day implementation window after final rules could push full compliance requirements into March 2027 or later. Three parallel rulemaking tracks are active: the OCC for prudential standards, FinCEN and OFAC for anti-money laundering, and the SEC for stablecoins that may qualify as securities.

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Disclaimer

The information presented in this article is for informational and educational purposes only. This article does not constitute financial advice, investment advice, trading advice, or any other type of advice, and readers should not treat any of the article’s content as such. crypto.news does not recommend the buying, selling, or holding of any cryptocurrency or other investment. Readers are advised to conduct their own due diligence and consult with a qualified financial advisor before making any investment decisions. Published August 29, 2026.

A bridge configuration flaw on Base and BNB Smart Chain let attackers hijack LayerZero delegate permissions, mint trillions of phantom SAND tokens, and drain roughly $675,000 from the Ethereum vault before the team shut everything down. The $49 billion face value headline masked the real story: structural constraints meant the attacker could never have cashed out more than a fraction of what was created.

On the night of Aug. 21, 2026, an address that had been dormant for 313 days routed a crafted payload through The Sandbox’s SAND token contract on Base. Within five hours, blockchain explorers showed trillions of freshly minted SAND tokens spreading across 173 wallets. Security firm PeckShield flagged the activity first, and by the time The Sandbox team responded, the attacker had already extracted what they could and moved on. The headline numbers were staggering, but the actual financial damage told a very different story.

The gap between the face value of minted tokens and the real amount stolen reveals something important about how bridge exploits actually work. It also exposes a recurring pattern in cross-chain infrastructure: the same design choices that make bridges useful also make them fragile, and a single misconfiguration can open a door that costs millions to close.

How the approveAndCall exploit worked

The technical root of the attack sat inside a function called `approveAndCall` on The Sandbox’s SAND omnichain fungible token contract deployed on Base. In a standard OFT setup built on LayerZero, a delegate address on the destination chain holds administrative rights over the endpoint configuration. Those rights include the ability to set trusted peers, update security stacks, and authorize privileged calls into the token contract.

The attacker discovered that the `approveAndCall` function could be weaponized to hijack those delegate permissions. By routing a crafted payload through the SAND token contract, the attacker manipulated the delegation mechanism and assumed control over the minting process on Base. Once the delegate was compromised, the OFT no longer required a legitimate burn on the source chain to authorize a mint on the destination chain. The attacker essentially became the sole verifier for incoming bridge messages, gaining the ability to approve fraudulent messages without the authorization normally required by the bridge.

The Sandbox’s post-mortem stressed that no private keys were compromised and no unauthorized access to wallets took place. The vulnerability stemmed entirely from design flaws in the operational contract structure itself. That distinction matters because it means the flaw was not a case of stolen credentials or social engineering. It was a configuration problem baked into the bridge architecture from deployment.

BREAKING: Curve Finance halts LayerZero infrastructure out of precaution after rsETH LayerZero hack, affecting CRV bridging on multiple chains and crvUSD fast bridge pic.twitter.com/UwNvfxBew9

— crypto.news (@cryptodotnews) April 19, 2026

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The attacker minted 329.24 trillion SAND across 703 separate events over approximately five hours on Aug. 21 and 22. The minting happened on Base first, with secondary exposure on BNB Smart Chain. Ethereum and Polygon, where the vast majority of SAND’s legitimate supply resides, were never affected.

The $49 billion illusion versus $675,000 reality

The most misleading number in the entire incident was the $49 billion face value that Blockaid attached to the minted tokens. That figure came from multiplying the number of minted tokens by SAND’s market price at the time, a calculation that ignored every practical constraint on actually selling those tokens.

The reality was far smaller. The attacker drained approximately 14.75 million SAND from the Ethereum OFT Adapter in under 60 seconds. That extraction generated about 80 ETH, worth roughly $675,000 at the time of the transactions. The attacker sold tokens across 26 separate transactions, each sized to extract approximately 90 percent of available ether from the liquidity pool before it could recover.

One detail from the EGamers post-mortem stood out: the attacker minted exactly 14,743,364.21 SAND, which was precisely 100 tokens below the vault’s holdings at that moment. The precision suggested careful reconnaissance of the vault balance before execution. However, an unforeseen arbitrage bot disrupted the plan, leaving the attacker with 14,095,483.66 SAND instead of the intended amount.

The trillions of additional tokens minted on Base were essentially worthless. They could not be redeemed through the official bridge because The Sandbox disabled bridging before any meaningful redemption could occur. They could not be sold on decentralized exchanges because liquidity pools on Base did not hold anywhere near enough paired assets to absorb even a tiny fraction of the supply. The tokens existed on chain but had no path to value extraction.

This dynamic is important for understanding bridge exploits more broadly. The “total tokens minted” headline dramatically overstates the actual damage. The constraint is always liquidity, not the number on screen. An attacker can print any number of tokens on a destination chain, but the tokens are only worth what someone will pay for them, and in a bridge exploit scenario, the available liquidity evaporates almost instantly.

The Sandbox response and bridge shutdown

The Sandbox team moved relatively quickly once the exploit was identified. Hours after PeckShield’s initial alert, the team disabled all bridging to and from Base and BNB Smart Chain. The shutdown was executed at the contract level on both chains, and the team removed LayerZero peer settings via multisig governance to prevent any further cross-chain messages from being processed.

The project issued a statement confirming that SAND tokens on Ethereum and Polygon were not affected. No user wallets were compromised. The SAND locked on Ethereum, which backs all legitimately bridged SAND, remained fully intact throughout the incident. The team estimated the impact at less than 0.01 percent of the total SAND token supply when measured against the 3 billion maximum supply.

Korean exchanges Upbit and Bithumb suspended SAND deposits and withdrawals on Aug. 22, citing a suspected security incident and South Korea’s Virtual Asset User Protection Act. Upbit went further and froze SAND transfers on Ethereum, the chain The Sandbox said was not affected, suggesting the exchange was taking a cautious approach regardless of the project’s assurances. Coinbase separately delisted SAND perpetual futures contracts.

SAND’s price saw a near 10 percent intraday plunge after the incident was disclosed but recovered most of the loss within 24 hours, trading down just 0.8 percent over the full day. The muted price impact reflected the market’s relatively quick understanding that the actual financial damage was small and that the inflated token count could not be converted to real value.

Bridge security remains the weakest link

The Sandbox exploit did not happen in isolation. It was the third major LayerZero-related bridge failure in five months, following the $292 million Kelp DAO attack in April and the Stake DAO breach in May. Each exploit targeted different aspects of LayerZero’s architecture, but all three shared a common thread: insufficient verification redundancy.

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The Kelp DAO attack was the most damaging. On April 18, 2026, attackers linked to North Korea’s Lazarus Group drained 116,500 rsETH, worth approximately $292 million, from KelpDAO’s LayerZero-powered bridge. The attack began six weeks earlier when an attacker socially engineered a LayerZero Labs developer, harvesting session keys and pivoting into LayerZero’s internal RPC environment. The attackers then poisoned internal RPC nodes and launched a DDoS attack against external providers, feeding false data to a single verifier that was the only checkpoint standing between the attacker and $292 million.

The KelpDAO hack wiped $13 billion from DeFi within 48 hours as users rushed to exit protocols they perceived as vulnerable. Curve Finance halted LayerZero infrastructure as a precaution after the attack, affecting CRV bridging on multiple chains.

LayerZero’s Decentralized Verifier Network allows applications to select as few as one verifier to validate cross-chain messages. Chainlink CCIP, by contrast, requires a minimum of 16 independent node operators per lane plus a separate Risk Management Network. That architectural difference explains why the industry response to these exploits has been a massive migration away from LayerZero.

By August 2026, publicly announced migrations from LayerZero to Chainlink CCIP totaled approximately $15 billion in secured value. BitGo led the wave by moving $7.4 billion in WBTC. Mantle shifted its $2.5 billion Super Portal. Lombard transferred over $1 billion in bitcoin-backed assets. Solv Protocol moved $700 million in tokenized bitcoin reserves. Kraken replaced LayerZero with Chainlink CCIP for its kBTC wrapped asset. Even Wyoming’s Stable Token Commission selected Chainlink CCIP for its Frontier Stable Token.

LayerZero’s ZRO token fell to approximately $302 million in market capitalization from an all-time high near $7.47. Nethermind, a former LayerZero verifier operator, exited to join Chainlink as a node operator.

The reimbursement plan

The Sandbox announced on Aug. 27 that it would reimburse affected SAND holders at a 1:1 ratio from its treasury. The total loss stood at 14.7 million SAND tokens, worth approximately $700,000. No new tokens would be minted for the compensation, meaning the reimbursement would not increase SAND’s circulating or maximum supply.

Eligible users were those who legitimately held bridged SAND on Base or BNB Smart Chain before the Aug. 21 attack. The project planned a snapshot-based compensation system using pre-attack balances. The two largest centralized exchanges holding over 72 percent of affected balances agreed to distribute replacement tokens directly to their customers without requiring individual claims. Other holders would need to submit claims through a dedicated portal expected to open within two weeks of the post-mortem.

The treasury-funded approach was a relatively clean resolution. Unlike some exploit responses that involve emergency token mints, governance votes on inflation, or protracted recovery processes, The Sandbox had sufficient reserves to absorb the loss directly. The $700,000 price tag, while not trivial, was manageable for a project with a treasury of its size.

The history of bridge exploits in numbers

Cross-chain bridges have consistently been the most attacked category of smart contracts since the technology emerged. The cumulative damage tells a sobering story about the structural risks of moving assets between blockchains.

Bridges have leaked more than $4 billion to hackers since 2021, according to data compiled across Chainalysis, DeFiLlama, and independent security researchers. The list of individual disasters includes the $624 million Ronin exploit in March 2022, the $326 million Wormhole theft in February 2022, the $190 million Nomad hack in August 2022, and the $292 million Kelp DAO breach in April 2026.

In 2024, bridges and cross-chain messaging protocols accounted for $1.19 billion of total crypto losses despite representing fewer than 5 percent of monitored protocols by count. That disproportionate figure reflects the concentrated risk that bridges carry: they hold or control large pools of assets across chains, and a small flaw can drain a fortune in minutes.

The year 2025 was worse. Over $3 billion was stolen across 119 hacks in just the first half of the year, a 50 percent jump over all of 2024’s losses. More than $1.5 billion of that total funneled through cross-chain bridges. The $1.5 billion Bybit compromise drove much of the annual total.

In 2026, bridge exploits have already accounted for $329 million from eight separate attacks through August. April 2026 was identified as the single worst month in DeFi’s history by number of attacks, with more than 30 separate incidents netting attackers almost $635 million in total. Q2 2026 saw 99 exploits draining $746 million, with cumulative DeFi losses for the year exceeding $840 million by the end of May.

The pattern is clear: despite years of audits, bug bounties, and architectural improvements, bridges remain the soft underbelly of cross-chain infrastructure. Each year brings new attack vectors and new headlines, but the fundamental vulnerability persists because bridges must hold concentrated pools of value and rely on verification mechanisms that can be compromised.

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The OFT architecture problem

The Sandbox exploit raised uncomfortable questions about the omnichain fungible token standard itself. OFTs are designed to allow tokens to move freely across multiple blockchains by burning on one chain and minting on another, with a locked pool on the home chain serving as the ultimate backing. The architecture is elegant in theory, but each destination chain introduces a new attack surface.

In The Sandbox’s case, the SAND contract on Base inherited the `approveAndCall` function from earlier ERC-20 implementations. That function was designed for a different era of token standards, one where tokens lived on a single chain and delegate permissions carried less weight. When combined with LayerZero’s OFT framework, the function became a vector for hijacking cross-chain minting authority. The interaction between legacy token functions and modern cross-chain messaging created a vulnerability that neither system would have had in isolation.

The problem extends beyond The Sandbox. Any OFT deployment that includes `approveAndCall` or similar callback functions on destination chains could be vulnerable to the same class of attack. The Sandbox’s post-mortem did not disclose how many other OFT deployments share this pattern, but security researchers have noted that the function is common in older token contracts that were later wrapped in OFT adapters.

The broader lesson is that cross-chain token standards must account for the full surface area of the underlying token contracts they wrap. An audit that examines only the bridge logic without scrutinizing legacy functions on the token itself can miss exactly the kind of flaw that enabled the SAND exploit. Projects that deployed OFT bridges on top of existing token contracts face a particular risk because the original contracts were designed without cross-chain minting authority in mind.

This architectural concern is separate from the LayerZero verifier discussion. Even with multiple verifiers, a delegate hijack through `approveAndCall` could bypass the verification layer entirely because the attacker would already hold the keys to the minting function. The fix requires changes at the token contract level, not just the messaging protocol level.

Lessons from the phantom mint

The Sandbox incident crystallized several lessons that apply far beyond a single gaming token.

First, face-value calculations are misleading and potentially dangerous for market participants. When Blockaid reported $49 billion in minted tokens, that number traveled through headlines and social media without context. Traders who sold SAND based on a $49 billion figure were reacting to a phantom number. The actual extraction was $675,000. The gap between those two numbers is the difference between a catastrophic failure and a manageable incident. Media outlets that reported the $49 billion number without qualifying it as a notional figure contributed to unnecessary panic selling and distorted the market’s initial reaction to the incident.

Second, the approveAndCall vulnerability was a configuration flaw, not a novel zero-day exploit. The function existed in the deployed contract from the beginning. The delegate permissions structure was part of the standard OFT architecture. The attacker did not need to discover a previously unknown cryptographic weakness or break any encryption. They needed to understand how the pieces fit together and find the point where a crafted payload could hijack existing permissions. That kind of composability risk, where two individually safe systems become dangerous when combined, is one of the hardest categories of vulnerability to catch in standard security audits.

Third, the dormant wallet pattern is worth watching. The attacker’s address had been inactive for 313 days before the exploit. That kind of operational patience suggests either a sophisticated actor who prepared the exploit well in advance or someone who acquired access to a previously funded wallet specifically for this purpose. Either way, the long dormancy period meant the address would not have triggered activity-based monitoring until it was too late. On-chain surveillance systems that rely on recent activity patterns would have classified the wallet as inactive and deprioritized it from alerting systems.

Fourth, the arbitrage bot interference highlighted an underappreciated dynamic in DeFi exploits. The attacker planned their extraction with precision, minting exactly 100 tokens below the vault’s holdings. An automated trading bot disrupted that plan, reducing the attacker’s take by roughly 650,000 SAND. The interaction between exploit execution and automated market activity is a growing factor in how these incidents play out. In some cases, bots can accelerate an exploit by front-running the attacker’s swaps. In this case, the bot accidentally served as an unintentional defense mechanism by consuming liquidity the attacker needed.

Fifth, the speed of the actual extraction deserves attention. The attacker drained 14.75 million SAND from the Ethereum OFT Adapter in under 60 seconds. The five-hour minting spree on Base was essentially noise. The real damage happened in a single minute on Ethereum. That timeline underscores why bridge monitoring systems need to focus on vault drain velocity rather than destination-chain minting volume. A system that alerted on unusual minting activity on Base would have fired hours before the actual theft, but the theft itself was over before any human could have intervened.

What to watch

Bridge audit disclosures: Whether The Sandbox publishes a full technical post-mortem with contract-level details, or limits disclosure to high-level summaries, will signal how transparent the project intends to be about the root cause

LayerZero configuration changes: LayerZero said it will stop signing messages for applications using single-DVN configurations; watch whether existing integrators upgrade or migrate to alternatives

Reimbursement portal launch: The claims portal for non-exchange holders is expected within two weeks of the Aug. 27 post-mortem; delays or complications could erode holder confidence

Korean exchange relisting: Upbit and Bithumb suspended SAND trading; their timeline for restoring deposits and withdrawals will indicate how regulators view the incident severity

CCIP migration pace: The $15 billion migration from LayerZero to Chainlink CCIP is accelerating; further bridge incidents could push total migration volume past $20 billion by year-end

Disclaimer: This article is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency investments carry significant risk, and readers should conduct their own research and consult with qualified professionals before making any investment decisions. Published Aug. 29, 2026.