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💬Simon's Market Readout – From Sibos, Simon explains why Open USD’s shared ownership and reserve earnings could win over banks.

📰 Stories You Can’t Miss - Lloyds pilots USDC settlement with Visa, Citi plans stablecoin checkout that pays merchants in fiat, and the Fed proposes the capital bill for stablecoin issuers.

Open USD just launched.

It comes from Open Standard, an independent company whose five initial founding partners are Coinbase, Mastercard, Shopify, Stripe and Visa, with more than 200 businesses signed up as partners. OUSD went live on Ethereum, Solana, Base and Tempo. More than $400 million of liquidity was available on Tempo at launch, and the founding partners have committed over $1 billion in total.

That is a different model from the one stablecoins have run on so far. Tether and Circle famously make most of their income from the yield on the U.S. Treasuries backing their coins. Circle gives a lot of that away through distribution partnerships with Coinbase and Binance, but it is still a private issuer model built around keeping the float.

And it has worked. We just saw Lloyds Banking Group use USDC to settle $750,000 of payment obligations with Visa in a seven-day pilot. Let's not take that away.

I'm at Sibos this week, and whenever I speak to financial institutions, they tell me a private issuer (by which they mean a stablecoin issuer) is something they could never work with.

The reason is the business model. A private stablecoin issuer earns the yield on its reserves, which puts it in a potentially adversarial position to your balance sheet. Deposits are your fuel as a financial institution. They fund your balance sheet, your balance sheet lets you lend, and lending is where you make your money. A stablecoin competes for those same deposits, and it is more portable. Deposits, by their nature, live inside your bank. USDC can go everywhere.

Circle will tell you the two are complementary, and that it is there to sit between banks as a network and partner with them. Banks still see the business model as adversarial.

Open USD removes the parts they object to. Ownership sits with its partners rather than a single issuer, reserve earnings go back to partners after a small management fee, and there are no mint or burn fees. That makes it appealing to the largest financial institutions. And let's not forget, they are still the gatekeepers, in many ways, to the traditional financial system and most of the liquidity in most of the world.

Which is why I think you'll see capital markets lean in heavily to Open USD. I also expect the two card networks, both founding partners, to use it for scheme settlement.

So it's early days. Open USD has a long way to go. But from here on the ground at Sibos, I can tell you there's also an awful lot of excitement about it.

A year ago, in Currency Wars 2.0, we wrote that tokenised deposits would do their best work inside the regulated banking system while stablecoins would carry value across borders and third-party networks.

September gave us both sides. UK Finance reported the first live GBTD customer transactions using tokenised sterling deposits on 24 September. Six days later, Lloyds and Visa disclosed a seven-day pilot using USDC to settle dollar obligations in the US.

So what is a sterling token for if Faster Payments already moves money almost instantly?

Some banks are choosing to become stablecoin issuers. Lloyds isn’t.

HSBC holds its Hong Kong stablecoin licence directly. Standard Chartered majority-owns Anchorpoint, the HKDAP issuer. In both cases, the bank sits at or next to stablecoin issuance rather than relying entirely on somebody else’s token.

Its sterling work has centred on tokenised deposits, while the Visa pilot used USDC supplied by Archax. A deposit token remains a claim on Lloyds, which Visa has no reason to hold. And Visa already settles in USDC, so the bank used external digital money because the money had to land with Visa. Visa’s wider stablecoin settlement activity has now passed a $20 billion annualised run-rate. The $750,000 Lloyds test therefore sits inside a settlement capability Visa is already scaling well beyond individual pilots.

Archax has been the access point each time. It issued and held the tokenised collateral in Lloyds’ 2025 FX trades with Aberdeen, sold the bank a tokenised gilt in January, and now sold it the USDC.

The sterling token earns its keep through conditionality. GBTD’s first transactions locked funds until a remortgage completed or goods changed hands. Since October 2024, sending and receiving PSPs have split eligible APP fraud reimbursement 50:50, so a payment that cannot release until the underlying transaction completes starts to show up in fraud losses and reimbursement costs.

Britain’s regulatory setup makes tokenised deposits the more obvious place for banks to start.

That explains the sterling side, not the dollar one.

Bank of England Governor Andrew Bailey has pushed banks toward tokenised deposits while warning about the risks of stablecoins drawing money out of the banking system. Britain’s crypto authorisation gateway opened on 30 September, but the new regime does not start until 25 October 2027. Existing crypto registrations will not convert automatically.

We cannot say that regulation is why Lloyds took this decision. What we can observe is that tokenised deposits already fit within the banking perimeter, while Britain’s dedicated stablecoin regime does not begin until 25 October 2027.

Lloyds plans to roll out tokenised deposits in the first half of 2027, according to CEO Charlie Nunn. If that rollout lands on schedule, Lloyds will reach live sterling tokenised deposits months before anyone can issue a regulated sterling stablecoin.

Citi and Coinbase are building stablecoin conversion into both directions of the fiat-stablecoin flow. Spring by Citi is adding stablecoin checkout powered by Coinbase, while Coinbase Virtual Accounts will use Citi’s banking infrastructure so incoming fiat can automatically become stablecoins.

The corporate customer gets the payment capability. The form of money can change underneath it.

Last October, we assumed the treasurer would choose the rail. Citi’s new setup suggests the better product is one where treasury doesn’t have to.

We pictured a corporate treasurer paying suppliers by choosing between SWIFT, Citi Token Services and stablecoin settlement according to speed, cost and finality. This product runs the other way: the payer chooses how to pay, Coinbase handles the stablecoin leg, and the merchant receives fiat through Citi.

Alec Lovett, Coinbase’s Head of Infrastructure Product, said the aim is for customers to move between fiat and digital assets “without ever having to think about which one they’re touching.”

That is probably what mainstream corporate adoption looks like, with fewer stablecoins on corporate balance sheets and more of them moving underneath products the CFO already uses.

Citi wants to stay in the flow whenever money changes form.

For a Citi merchant, stablecoin comes in and fiat comes out. For a Coinbase customer, fiat comes in through Citi and can leave as stablecoin. The bet is on the fiat leg, whichever direction the customer is travelling.

Stablecoins can move payment volume onto blockchain rails without removing the need for bank accounts, compliance, fiat settlement and liquidity around those flows.

Coinbase choosing Citi should get the attention of sponsor banks.

Coinbase has preliminary conditional approval for a national trust company, but the OCC decision says custodied fiat would still sit at third-party banks. A final charter would not remove Coinbase’s need for banking infrastructure like Citi on the fiat side.

Fintech sponsor-bank deals often go to specialist banks rather than a systemically important bank like Citi. At least one of the world’s largest banks now wants that business rather than leaving the plumbing to specialists.

Citi is starting to look more like a router between forms of money.

Citi has already integrated 24/7 USD Clearing with Citi Token Services. This week it also became the first bank live across multiple markets on Swift’s payments scheme , giving its clients instant payments in AUD through NPP, INR through IMPS, and GBP through Faster Payments, plus USD credited directly to Citi accounts. It separately is participating in Swift’s blockchain ledger for tokenized bank money.

If Citi connects these pieces, a corporate client would no longer need a view on which form of money moves underneath each payment. Citi’s job would become choosing the route while keeping the customer relationship above it.

A week after CLARITY failed, the Fed has put a capital formula on stablecoin issuance. But it covers only Fed-supervised issuers, meaning approved subsidiaries of insured state member banks and qualifying uninsured state-chartered depository institutions that move into the Fed framework. National banks such as SoFi Bank sit under the OCC framework.

Charter choice is becoming part of the stablecoin business model.

The Fed ties capital directly to issuance. The OCC is taking a different approach, where it sets capital issuer by issuer and adds a liquidity backstop equal to 12 months of expenses. That means two firms issuing the same stablecoin product could face different economics depending on which regulator sits above them.

On the Fed's formula, a clean loss record can beat size. A $10 billion issuer whose loss history keeps its scalar at 1.0 would hold issuance-based capital equal to 2% of outstanding stablecoins. A brand-new $50 billion issuer would hold 2.55%, because issuers without a loss history start on a 1.5x multiplier, and that multiplier lifts the revenue-based charge too. That penalty lands on the newest entrants, and under this framework that includes banks launching a stablecoin subsidiary from scratch. The proposal lets an issuer import loss history from businesses it acquires or merges with, but not from its parent bank.

Newcomers are also the issuers that most need to buy distribution, by sharing reserve income with wallets, exchanges and payment platforms. The extra capital comes out of the same margin.

Until the Fed, OCC and FDIC converge, choosing a charter means choosing a capital formula.

The Fed is also changing where stablecoin reserves want to sit.

The proposal puts a 2% capital charge on uninsured bank deposits held as reserves. That makes Treasuries and Federal Reserve balances relatively more attractive for Fed-supervised issuers.

For banks, that matters beyond stablecoin issuance. Imagine a customer moves $1 billion into a stablecoin. Under the old setup, some of that could have come back to a bank as the issuer's reserve deposit. With a 2% charge on that deposit, the issuer has a clear reason to buy Treasuries instead. The bank loses the customer deposit, then the potential reserve deposit as well.

The OCC has considered a much lower 0.40% charge on the same uninsured deposits, which reinforces the first point: even reserve strategy could depend on the issuer's regulator.

It also gives banks another reason to look at tokenized deposits. A bank issuing through a stablecoin subsidiary could face this charge on reserves deposited with its own parent. A tokenized deposit sits outside the GENIUS payment-stablecoin definition and avoids this specific stablecoin reserve-capital requirement.

If the 2% charge survives the comment period, the rulebook that decides who can issue digital dollars will also decide where the dollars behind them sit.

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