21 Financial Institutions Plan to Launch a New Dollar Stablecoin in 2027. Who Will Be the Biggest Winners and Losers?

The $300 billion stablecoin industry continues to see an influx of new entrants. There are now 10 different stablecoins with market caps of $1 billion or higher, led by the two stablecoin giants Tether (CRYPTO: USDT) and USDC (CRYPTO: USDC).

The latest entrant -- and one of the most intriguing ones to date -- is known as Project Faro. It's backed by 21 different banks and financial institutions, and has already raised $270 million for a new stablecoin launch in 2027.

So what does Project Faro mean for investors, and will it affect how they invest in the rapidly growing stablecoin industry?

Project Faro vs. Open USD

To answer that question, it's important to know some of the heavy hitters involved in Project Faro. Wall Street investment bank Goldman Sachs (NYSE: GS) is playing a key role, as is Citigroup (NYSE: C). Other financial institutions involved in the launch include Wells Fargo (NYSE: WFC), Deutsche Bank (NYSE: DB), and Fidelity.

Image source: Getty Images.

While Project Faro is still in the preliminary launch phase, the focus appears to extend far beyond just launching a U.S. dollar stablecoin. Plans also call for launching stablecoins pegged to other G7 currencies, including a stablecoin pegged to the euro. So this new stablecoin venture has truly worldwide ambitions.

If that sounds familiar, that's because it is. In June, a consortium of 140 different financial institutions and fintech companies announced the launch of a new stablecoin called Open USD (CRYPTO: OUSD). This dollar-pegged stablecoin already has a market cap of $1 billion, and has the support of some big names as well, including BlackRock (NYSE: BLK), Visa (NYSE: V), and Mastercard (NYSE: MA).

Potential winners and losers

From my perspective, this is setting up an epic battle for stablecoin dominance. Right now, the two leaders are Tether and USDC, and it's not even close. Together, they account for roughly 80% of the total stablecoin market. But the arrival of these massive new financial consortia -- backed by dozens of banks and mainstream financial institutions -- can't be ignored.

The company most at risk here is Circle Internet Group (NYSE: CRCL), the issuer of the USDC stablecoin. The higher the global supply of USDC is, the more money Circle makes. Thus, the arrival of new deep-pocketed rivals could put a serious dent in Circle's future growth prospects.

Companies attempting to go it alone in the stablecoin race could be left behind. For that reason, I'm also concerned about PayPal (NASDAQ: PYPL). The company has a rapidly growing stablecoin, PayPal USD (CRYPTO: PYUSD), but is not part of either financial consortium.

The biggest winners could be Mastercard and Visa. They have done the most to move their payments to blockchain rails, and are actively working to make stablecoin-backed payments a reality. Earlier this year, for example, Mastercard launched a massive new Crypto Partner Program that involves more than 100 blockchain, fintech, and crypto firms.

It remains to be seen how these new stablecoin initiatives will affect crypto-native companies. The one company that I'm watching closely now is Coinbase (NASDAQ: COIN). It helped to launch the USDC stablecoin in partnership with Circle in 2018, and is now one of the founding partners of the Open USD consortium.

Long-term outlook for the stablecoin industry

Both banks and credit card issuers are clearly responding to the threat posed by stablecoins. If stablecoins are able to offer highly attractive yields, they might be able to siphon away traditional bank deposits. If stablecoins become a mainstream form of payment, they might pose a threat to the big credit card giants.

That's one reason why there was so much debate over the Digital Asset Market Clarity Act ("Clarity Act") earlier this year. Banks and traditional financial institutions are doing everything they can to protect themselves against the rise of new rivals. From this perspective, both Project Faro and Open USD can be seen as defensive reactions to the exploding popularity of stablecoins.

The good news, if you're a crypto investor, is that there are now new ways to play the stablecoin boom. You can now invest in banks and financial institutions, not just fintech firms and crypto-native companies. Some early winners are already starting to emerge, and could be worth a closer look.

Citigroup is an advertising partner of Motley Fool Money. Wells Fargo is an advertising partner of Motley Fool Money. Dominic Basulto has positions in Circle Internet Group, PayPal USD, and USDC. The Motley Fool has positions in and recommends BlackRock, Goldman Sachs Group, Mastercard, PayPal, and Visa. The Motley Fool recommends Coinbase Global and recommends the following options: short December 2026 $62.50 calls on PayPal. The Motley Fool has a disclosure policy.