Stablecoins have the potential to grow significantly within the U.S. financial system, potentially reaching 10% of the U.S. money supply and foreign exchange transactions. This projection comes from a report by Standard Chartered and Zodia Markets, released on Thursday. Currently, stablecoins account for approximately 1% of the U.S.
M2 money supply and 1% of foreign exchange transactions. The report, authored by Geoff Kendrick and Nick Philpott, suggests that as the sector becomes more legitimized, achieving a 10% share in each measure is feasible. Stablecoins are a type of cryptocurrency designed to maintain a stable value, often pegged to the U.S.
dollar, though other assets, like gold, can also be involved. M2 is a measure of the U.S. money supply, encompassing cash, savings, and other short-term investments. The catalyst for this anticipated growth in stablecoin adoption will be the implementation of new U.S. regulations. The authors emphasize that cross-border payments and foreign exchange-equivalent transactions are key areas poised for expansion.
The report notes that during Joe Biden's administration, three bills concerning stablecoin regulation were introduced, but progress was limited. However, it anticipates more success on the regulatory front when Donald Trump's administration takes over in early 2025. Additionally, a research report by Bernstein in September highlighted the increasing importance of stablecoins in the global financial system, noting that they are now the 18th-largest holders of U.S.
Treasuries. This underscores the growing role of stablecoins in the broader financial landscape..