An extensive joint report by Standard Chartered and Zodia Markets research has predicted stablecoins to account for 10% of the total US money supply and Foreign exchange transactions.
Stablecoins currently make up only 1% of the above metric in the US and are still a new alternative making up a tiny fraction of global financial transactions.
The Joint report titled: Stablecoins: The First Killer App by the two firms spelled out the current metrics of stablecoins in the US money flow while predicting it to surge significantly following the arrival of Donald Trump as president in 2025.
“ At present, stablecoins are equivalent in size to only 1% of US M2 transactions and just 1% of FX transactions. As the sector becomes legitimized, a move to 10% on each measure is feasible. We think both cross-border payments and (via nonUSD stablecoins) FX-equivalent transactions are key growth areas that could achieve this.
The main way for stablecoin market cap and use to increase tenfold as per this suggestion would be via US regulation of stablecoins. Three significant bills were brought forward during the Biden administration but little progress was made. Each aimed to create the guardrails for banks to issue stablecoins. More progress on this is likely under the Trump administration when it takes power in early 2025.” The report read in parts.
Regulations key to unlocking stablecoins potential
The report pinpointed regulation as the key to stablecoins making a major transition and increasing its share of global financial transactions. It explained that stablecoins have evolved beyond their original utility in the cryptocurrency space and are now used for a myriad of other things. Stablecoins are increasingly employed in cross-border payments, payroll, trade settlements, and remittances.
These New utilities for stablecoins demonstrate their ability to address inefficiencies in existing financial systems, such as high costs, delayed transaction times, and poor adoption in developing countries.
The upsides of stablecoin adoption include faster and cheaper transactions. This offers a compelling solution for international remittances and business operations making stablecoins an important tool in the modern financial world.
What to Know
- According to Chainalysis, Two-thirds of every crypto transaction is conducted using stablecoins and there is no doubt that the asset class represents the future of transactions. The research firm also revealed that Nigerians are shifting towards stablecoins to hedge against the devaluation of the Naira.
- Stablecoins are crypto assets that have their value pegged to a commodity or currency. Popular stablecoins like Tether USDT and Circle USDC are dollar-backed stablecoins and make up the bulk of stablecoins in circulation in the crypto market.
