Stablecoins have come in for government scrutiny in recent weeks, but use of this blockchain-based technology to enable immediate business-to-business payments between bank clients is moving forward nonetheless. Late Thursday, Tassat Group Inc. announced Phoenix-based Western Alliance Bank will use the company’s TassatPay technology to allow business clients to pay each other with tokens backed by deposits held at the bank. The service will come with other key features, such as execution of smart contracts, that could distinguish it from conventional bank transfers.
Three-year-old Tassat, based in New York City, says Western Alliance Bank is one of the biggest financial institutions to adopt the technology so far. The bank is a unit of Western Alliance Bancorporation, a company with $50 billion in assets and ranking 43rd among all U.S. banks as of Sept. 30, according to Federal Reserve data.
“Western Alliance believes there will be growing demand for instantaneous digital payments among our clients and others as this technology continues to mature,” Kenneth Vecchione, president and chief executive of the bank, said in a statement. “As we get set to launch this capability over the next few months, we will also continue to build out advanced treasury-management solutions. We envision blockchain-based digital payments and related services will be important new offerings for our business.”
The service when completed will tokenize dollar deposits through a private Ethereum blockchain, the parties say. “TassatPay offers companies secure and reliable real-time settlement for B2B transactions, which will be increasingly important to the wide range of Western Alliance customers including mortgage industry-related businesses, attorneys, and the bank’s tech and innovation sector clients,” said Ron Totaro, Tassat’s chief executive, in a statement. Information was not immediately available regarding the fees the bank might pay for the service.
The move by Tassat to work with banking clients could reassure some critics, including federal regulators, who have lately expressed concerns that stablecoins—digital currency backed by fiat currency like the dollar—could pose risks to the nation’s financial system. Rising concerns about the potential for runs, money laundering, and terrorism financing led government officials last month to recommend Congress regulate this relatively new species of cryptocurrency. At the time, Totaro issued a statement underscoring that stablecoins should be issued only by banks that hold state or federal charters and are “covered by FDIC deposit insurance, and subject to existing and evolving regulations.”
The total market cap of all stablecoins has risen fast over the past year, from around $25 billion to the neighborhood of $150 billion as of Friday morning, according to Coinmarketcap.