Stablecoins Could Represent 10% of U.S. Money Supply and FX Transactions, Says Standard Chartered and Zodia Markets
Stablecoins could grow to represent 10% of both the U.S. money supply and foreign exchange transactions as the sector gains legitimacy, according to a new report from Standard Chartered (STAN) and Zodia Markets.
Currently, stablecoins account for about 1% of the U.S. M2 money supply and 1% of foreign exchange transactions, the report stated. However, as the sector becomes more regulated, the authors believe that achieving a 10% share in both areas is feasible.
Stablecoins and U.S. Money Supply
A stablecoin is a type of cryptocurrency designed to maintain a stable value, typically pegged to the U.S. dollar, though other assets such as gold are also used. The U.S. M2 money supply, which includes cash, savings, and short-term investments, serves as a key reference for assessing the role of stablecoins in the broader economy.
Geoff Kendrick and Nick Philpott, authors of the report, wrote, “As the sector becomes legitimized, a move to 10% on each measure is feasible,” highlighting the potential for stablecoins to gain a substantial foothold in both U.S. money supply and global foreign exchange markets.
Regulation as a Key Driver
The authors identified U.S. regulation of stablecoins as the primary catalyst for widespread adoption. They pointed out that cross-border payments and foreign exchange-equivalent transactions are key growth areas for stablecoins.
During President Joe Biden’s administration, three bills addressing stablecoin regulation were introduced, but little progress was made, the report noted. However, the authors anticipate more substantial advancements in stablecoin regulation once Donald Trump takes office in early 2025, potentially paving the way for greater sector growth.
Increasing Importance in the Global Financial System
Research from Bernstein, published in September, indicated that stablecoins are becoming an integral part of the global financial system. In fact, stablecoins are now the 18th-largest holder of U.S. Treasuries, further solidifying their increasing role in financial markets.
Overall, the report suggests that stablecoins, bolstered by regulatory clarity and growing adoption, could become a much larger part of both the U.S. economy and the global foreign exchange market in the near future.
