Stablecoins Could Account for 10% of U.S. Money Supply and FX Transactions, Predicts Standard Chartered and Zodia Markets
According to a report by Standard Chartered (STAN) and Zodia Markets, stablecoins could make up as much as 10% of the U.S. money supply and foreign exchange transactions in the future, provided the sector becomes more regulated and widely adopted.
Currently, stablecoins represent approximately 1% of the U.S. M2 money supply and 1% of global foreign exchange transactions. However, the authors, Geoff Kendrick and Nick Philpott, suggest that with the right regulatory framework in place, stablecoins could grow to 10% in both areas.
Stablecoins and the U.S. Money Supply
A stablecoin is a cryptocurrency designed to maintain a stable value, typically pegged to the U.S. dollar, although some are backed by other assets like gold. The U.S. M2 money supply, which includes cash, savings accounts, and short-term investments, is a key measure of liquidity in the economy.
The authors of the report believe that “a move to 10% on each measure is feasible,” as stablecoins continue to gain mainstream adoption and regulatory legitimacy.
Regulation Seen as Key to Growth
The authors also identified U.S. regulation as a crucial factor in driving stablecoin adoption. They highlighted that cross-border payments and foreign exchange-equivalent transactions present substantial growth opportunities for stablecoins.
While three bills addressing stablecoin regulation were introduced during President Joe Biden’s tenure, the authors note that progress has been limited. However, they expect more significant regulatory advancements when Donald Trump assumes office in 2025, which could spur broader stablecoin adoption.
Stablecoins’ Growing Role in Global Finance
In a separate analysis, Bernstein reported that stablecoins are becoming increasingly important to the global financial system. They are now the 18th-largest holder of U.S. Treasuries, a sign of their expanding role in traditional finance.
The report concludes that, with favorable regulations and continued adoption, stablecoins could play a much larger role in both the U.S. money supply and the foreign exchange market in the coming years.
