A global investment bank expects stablecoins to explode dramatically reaching $1.9 trillion in issuance by 2030, up from a previous estimate of $1.6 trillion amid regulatory changes.
Citi Institute projects rapid growth in stablecoins, driven by digitally native companies and global American dollar demand. In a bullish case, Citi anticipates issuance of $4 trillion while a bear case sees the asset hovering around $1 trillion.
“We argue in our report that stablecoins are going to grow dramatically over the next five years, driven by the continued growth in the crypto ecosystem, but also existing corporate clients, merchants, particularly the smaller and medium sized ones looking to do cross border finance quicker and faster,” Ronit Ghose, Citi’s global head of future finance told BNNBloomberg.ca in a Thursday interview.
Stablecoin is a cryptocurrency that runs on a blockchain and is linked to currencies or commodities such as the U.S. dollar, euro or gold. It is different from other cryptocurrencies, such as Bitcoin, Ether and XRP which fluctuate based on supply and demand.
According to a report from McKinsey and Company, stablecoins can help smaller companies and merchants in emerging markets by addressing significant cross-border payment challenges. Currently, businesses face problems with international transactions in terms of speed and cost. Stablecoins offer a solution by running on blockchain technology, which can make cross-border finance quicker and faster.
High hopes follow regulatory changes from U.S. President Donald Trump after he signed the GENIUS Act into law. The act establishes federal rules and guidelines for cryptocurrency tokens pegged to traditional currencies such as U.S. dollars.
“This all means that for traditional financial institutions such as the banks, the payment companies and others, we can now get more involved in the space, and so can our clients,” said Ghose. “That’s why it’s a big deal.”
The European Union established its own framework into law. Markets in Crypto-Assets (MiCA) was established in 2023 to regulate stablecoins. Member states can issue licences and dubbed passports, that allow crypto companies to operate throughout the 27-nation bloc.
A critic of stablecoins however warns that weak oversight could trigger multi-billion dollar bailouts. Jean Triol, a Noble Prize-winning economist said a loss of confidence in reserves could lead to a financial crisis and trigger a rush of withdrawals undermining the peg to traditional assets.
Ghose is not worried as world governments establish frameworks to protect and control digital assets with hard funds.
“If you issue a stable coin in the U.S. under the GENIUS Act, or in Europe under MiCA, you have to follow the rules of MiCA in Europe or the GENIUS act in the U.S. and other jurisdictions around the world,” said Ghose.
“Those rules will require clear reserve assets, clear backing. In the U.S., there’ll be largely treasury bills. In Europe, bank deposits.”
Triol argues there is the potential for issuers to invest in riskier assets to chase higher returns, eroding confidence in their reserves and threaten the peg to real-world assets.
“In the past, it was a bit of a wild west,” said Ghose. “There were no clear rules. You were basically running on the back of what’s called in the crypto industry, “trust me, bro”, and that’s where industry came out of, the stablecoin industry. But this is changing really, really fast.”
Citi said stablecoins has grown to a $280 billion market cap from $200 billion this year alone.