Why Bank of America's (BAC) Bold Leap for Digital Dollars Could Benefit Shareholders
Legacy banks are beginning to embrace digital assets, and Bank of America (BAC) is the latest to prepare for a potential U.S. dollar-backed stablecoin, pending regulatory clarity.
Confident Investing Starts Here:
Easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions
Receive undervalued, market resilient stocks right to your inbox with TipRanks' Smart Value Newsletter
The timing aligns with growing momentum behind the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins) in Washington. As Bank of America signals caution about the macroeconomic outlook for the rest of 2025, this strategic move reflects both a necessary shift to keep pace with peers and a bold step into uncharted territory. While the risks are real and the implications far-reaching, I remain cautiously bullish about BAC's forward-looking approach.
Joining Forces for a Unified Digital Dollar Network
Bank of America is planning to join major peers, such as JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C), in developing a stablecoin network modeled after Zelle. The initiative would leverage existing infrastructure—specifically, Early Warning Services and The Clearing House—to create a unified, fiat-backed stablecoin designed for retail and cross-border payments. The goal is to streamline traditional systems, such as ACH, by offering faster and more cost-efficient transactions.
Bank of America has also floated the idea of launching its own 'Bank of America Coin', but for any of this to move forward, it will depend on the passage of favorable legislation.
Washington Paves the Way with the GENIUS Act
This is where the GENIUS Act comes into play. Just days ago, the Senate passed the crypto regulation bill with strong bipartisan support in a 68–30 vote, sending it to the House for further consideration. The bill includes key provisions like 1:1 reserve backing, segregated customer funds, and strict anti–money laundering standards.
Regulation has always been an inevitable and necessary step for digital assets, and now that more explicit rules are emerging, traditional banks are finally feeling confident enough to get involved.
Costs and Benefits for BAC Shareholders
There are clear incentives for banks to enter the stablecoin market. It offers potential cost savings, new revenue streams from transaction processing, and opportunities to develop innovative financial products. At a broader level, it could help reinforce the U.S. dollar's dominance as the global reserve currency.
However, stablecoins carry real risks. Though more 'stable' than unbacked cryptocurrencies, they are still vulnerable to collapse, as seen with TerraUSD in 2022, and pose potential systemic threats. Critics warn that the failure of a major issuer could have a ripple effect across the financial system. Some advocacy groups argue the GENIUS Act lacks sufficient consumer protections and could shift the burden of failure onto taxpayers.
Building a Zelle-style stablecoin alliance also presents challenges. Banks must align on key features and governance—a challenging task given differing priorities. Even if the network succeeds, it will face competition from established players like Circle's USDC, Tether (USDT), and PayPal (PYUSD). Retail giants like Walmart and Amazon are also eyeing the space, potentially bypassing card networks like Visa by tapping into their massive customer bases.
Bank of America's Strong Q1 Amidst Macroeconomic Caution
Still, this transformation will take time to unfold. In the meantime, Bank of America's Q1 2025 earnings were largely positive. The bank posted a solid EPS beat at $0.90, driven by a 9% year-over-year rise in sales and trading revenue and 4% growth in consumer spending. Perhaps most notably, Bank of America's capital position is stronger than ever, with total assets climbing to $3.35 trillion.
However, the outlook isn't as rosy as its first quarter results. The company expressed uncertainty over the macroeconomic outlook due to potential tariffs and their impact on the economy.
For example, if retailers raise the price of a television due to tariffs, fewer Americans will use their Bank of America cards to process the transaction. So, banks are quite vulnerable to economic stagnation. This, combined with the risky pivot into digital currencies, may be 'cause for pause' among investors.
Is Bank of America a Buy, Sell, or Hold?
On Wall Street, BAC earns a Strong Buy consensus rating based on 18 Buy, two Hold, and zero Sell ratings in the past three months. BAC's average price target of $49.38 implies an upside potential of almost 10% over the next 12 months.
Recently, Wells Fargo analyst Mike Mayo issued a Buy rating on BAC, noting the bank's 'strategic focus on expanding its consumer deposits and wealth management services, along with international commercial expansion, positions it for long-term growth.'
BAC Positioned for a Win in Ongoing Stablecoin Shift
Bank of America's move into digital currencies reflects a clear shift in the financial landscape—an uncertain but necessary step that no major bank can afford to ignore. While details are still being finalized and collaboration among competing banks will be crucial to building a stablecoin network, Bank of America's core business remains solid, consistently exceeding expectations.
With its strong balance sheet and operational scale, the bank is well-positioned to lead innovation in this emerging space. One thing is sure: the GENIUS Act favors large institutions, and Bank of America is well placed to capitalize on it.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Insider
2 hours ago
- Business Insider
Home Depot (HD) Gets a Buy from Telsey Advisory
Telsey Advisory analyst Joe Feldman maintained a Buy rating on Home Depot (HD – Research Report) yesterday and set a price target of $455.00. The company's shares closed yesterday at $349.62. Confident Investing Starts Here: Easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions Receive undervalued, market resilient stocks right to your inbox with TipRanks' Smart Value Newsletter According to TipRanks, Feldman is a 5-star analyst with an average return of 8.2% and a 52.56% success rate. Feldman covers the Consumer Cyclical sector, focusing on stocks such as Costco, Lowe's, and On Holding AG. The word on The Street in general, suggests a Strong Buy analyst consensus rating for Home Depot with a $428.77 average price target, representing a 22.64% upside. In a report released on June 17, Citi also maintained a Buy rating on the stock with a $433.00 price target. The company has a one-year high of $439.37 and a one-year low of $326.31. Currently, Home Depot has an average volume of 3.56M. Based on the recent corporate insider activity of 84 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of HD in relation to earlier this year. Earlier this month, John A. Deaton, the EVP – Supply Chain & Prod. Dev of HD sold 8,892.00 shares for a total of $3,289,951.08.
CNBC
3 hours ago
- CNBC
How the stablecoin bill gives Treasury Secretary Bessent a new tool to fund the U.S. deficit
The crypto industry is on the verge of a major regulatory milestone, and it could lead to digital assets being a significant source of funding for the U.S. government. On Tuesday, the Senate passed the GENIUS Act , which lays out a regulatory framework for stablecoins, sending it on to the House of Representatives with bipartisan support. Treasury Secretary Scott Bessent praised the bill in a post on X , saying that a regulated and growing stablecoin market could create new buyers for U.S. government debt. "A thriving stablecoin ecosystem will drive demand from the private sector for US Treasuries, which back stablecoins. This newfound demand could lower government borrowing costs and help rein in the national debt. It could also onramp millions of new users — across the globe — to the dollar-based digital asset economy," Bessent said. "It's a win-win-win for everyone involved" The exact size the stablecoin market can reach in the future is unclear, but it does appear that the U.S. government will have plenty of debt to sell to it. The Congressional Budget Office's dynamic score — which takes into account the legislation's potential changes to factors like economic growth — said the tax and spending bill that recently passed the House would increase the total deficit by $3.4 trillion from 2025 to 2034, including interest costs. The current size of the U.S. dollar-denominated stablecoin market is around $230 billion to $250 billion, according to Robbert van Batenburg, strategist at The Bear Traps Report, and there is a theory that a clearer regulatory framework can help lead to wider adoption. Several major tech and consumer companies are reportedly exploring issuing their own stablecoins or using existing coins more frequently. Bessent previously told the House Financial Services Committee in May that there is "speculation" the stablecoin market could be "up to $2 trillion of demand over the next few years for U.S. government securities from digital assets." The market could in theory surpass that $2 trillion figure if stablecoins start to take market share from traditional credit card payment networks, van Batenburg said. The stablecoin bill also comes at a time when Wall Street has started to fret about foreign investors and governments turning away from U.S. assets. Katie Haun, founder and CEO of Haun Ventures and former Coinbase board member, said Friday on " Squawk Box " that the stablecoin industry is already 14th largest holder in the world of U.S. Treasurys, ahead of nations like Germany and Norway, and that the new legislation should help it continue to grow. "I've been asking for regulatory clarity and more rules of the road, and I think the GENIUS Act is exactly that," Haun said. How stablecoins work Stablecoins are a type of digital currency that is often used to facilitate crypto trading but can also work for other types of transactions. They are designed to be "stable" at a set value. Some stablecoins have drawn scrutiny in the past over concerns that their reserves were insufficient or relied on mechanisms that would unreliable in times of market stress. The Senate bill calls for stablecoins to be backed on at least a 1-to-1 basis by highly liquid assets, including U.S. currency, U.S. Treasury bills, repurchase agreements — or "repos" — backed by Treasury securities, government money market funds and central bank reserve deposits. An example of a stablecoin's reserves can be found in the disclosures from Circle , which went public earlier this month and has seen its stock soar . CRCL 1M mountain Shares of Circle have soared since the IPO. Circle's IPO prospectus shows that the vast majority of its stablecoin reserves are held in a BlackRock vehicle called the Circle Reserve Fund . That fund's holdings are split roughly 50-50 between short-term U.S. Treasury Debt and Treasury repurchase agreements. If the GENIUS Act is enacted as currently written, stablecoin companies will be required to certify they have these holdings on a monthly basis, with the oversight of registered public accounting companies. Risks A growing stablecoin industry in the U.S. is not likely to completely fix the government's debt funding problem, and it could introduce additional risks. Nonprofit group Better Markets opposes the GENIUS Act, and its policy director Amanda Fischer said in a statement that the bill ignores "the susceptibility of stablecoin companies to runs, bankruptcies, and taxpayer-funded bailouts." Counting on the industry as a funding source for the Treasury market could also be tricky. Lawrence McDonald, founder of the Bear Traps Report, cautioned that additional demand from stablecoins will take time to develop while the U.S. Treasury will likely need to issue significant amounts of debt securities over the next year. McDonald also said that, while interest costs of short-term debt are cheaper than that of 30-year Treasurys, relying so heavily on the short-end of the bond market can be a problem for countries. "If something ever went wrong, in terms of say oil, and that prevented the [Federal Reserve] from cutting, then you're going to have a high bill rate for a long-time and the deficit is going to spiral out of control," McDonald said.
Yahoo
3 hours ago
- Yahoo
CoreWeave (CRWV) Downgraded to Hold by BofA Despite AI Momentum
CoreWeave, Inc. (NASDAQ:) is one of the 10 AI Stocks Getting Wall Street's Attention. On June 16, Bank of America analyst Bradley Sills downgraded the stock to 'Hold' from Buy on valuation concerns, adjusting its price target upwards from $76 to $185. Sills noted that the stock has rallied 145% since its first-quarter earnings, trading at a premium valuation of 2027 EV/EBIT of 25x. The analyst stated that 'much of the near-term upside has been priced in,' and that the stock's valuation is at a premium to peers. The firm is optimistic about CoreWeave's offerings amid the ongoing AI boom. Certain developments have also proven favourable for the stock, including a new hyperscaler customer, expansion of the OpenAI agreement worth $4 billion, remarkable top-line momentum, and a lower cost of capital for recently raised debt. Coreweave's (CRWV) Ascent Implies That with Great Data Comes Great Responsibility Sills continues to see 'solid sustained demand in CoreWeave's AI infrastructure market.' Even though the growth rate for capital expenditures related to artificial intelligence is surging, it remains 'very healthy.' AI infrastructure spending is estimated to reach $206 billion in 2027, a deceleration from the 65% jump observed in 2025. These estimates could move higher on a larger base. With OpenAI's ChatGPT being the single largest consumer of AI workloads, Sills anticipates CoreWeave's AI infrastructure market to witness continued growth. However, elevated capital expenditure is likely to result in an estimated $21 billion of negative free cash flow through 2027. The company may have raised capital at a lower cost, but it represents only a small proportion of the overall incremental debt needed to support growth. This is why Sills is concerned about the cost of debt, as the company has funded 85% of its capex with debt in the past. While we acknowledge the potential of CRWV as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: and Disclosure: None. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
