A new paper from Citi Institute forecasts the issuance of stablecoins reaching up to $3.7 trillion by 2030 in a bullish scenario that assumes minimal hurdles along the way. It also provided a base prediction of $1.6 trillion, which is less than the $2.4 trillion forecast from the Boston Consulting Group.
The Citi numbers are based on several factors such as the proportion of cash that switches to stablecoins both domestically and globally, as well as bank balances and term deposits. Further adoption of blockchain and cryptocurrency will make up the largest proportion of stablecoin balances in all scenarios.
While there are potential tailwinds from US and EU stablecoin legislation, the document highlights that more positive factors are required in order to achieve the optimistic case, including favorable legislation in other jurisdictions.
We recently wrote about how Circle pays a high proportion of its revenues to Coinbase and Binance, and the Paxos Global Dollar is sharing revenue with distributors. More of these sorts of initiatives are critical to achieving higher traction levels.
2025 is viewed as the year that stablecoins go mainstream. However, there are still many frictions in adoption which are only starting to be addressed.
Plus, users must continue to have confidence in stablecoins. A full de-peg event of a major stablecoin would push the sector towards the bear case of adoption.
The research also explores several potential headwinds. For example, some jurisdictions that fear dollarization could restrict the use of stablecoins. The IMF has regularly written about the challenges of crypto and stablecoin for monetary sovereignty, especially in countries that have exchange controls.
An opportunity for banks?
On the one hand, if there’s a dramatic shift towards stablecoins, this could negatively impact deposits and the ability of banks to provide affordable lending.
However, there are also opportunities for banks. These include obvious ones such as providing on and off ramps, stablecoin cash management services, custody of the reserves, and helping the issuer to buy and sell Treasuries and participate in repo.
Banks could even use stablecoin infrastructure themselves. For example, MUFG startup Progmat is exploring using stablecoins instead of Swift for cross border payments, with business users giving them instructions in the normal way.
Other banks are already leaning heavily into providing stablecoin services to issuers. BNY Mellon is Circle’s primary bank. Standard Chartered is the bank that has leaned in the most. It has relationships with issuers Paxos and StraitsX in Singapore and is part of a joint venture in Hong Kong to issue a stablecoin. Plus, one of its indirect subsidiaries, Zodia Markets, uses stablecoins for cross border foreign exchange.
The success of stablecoins will ultimately depend on their ability to deliver on promises of efficiency, accessibility, and stability while navigating the complex regulatory landscape that continues to evolve across global jurisdictions.
