Stablecoins Could Represent 10% of U.S. Money Supply and FX Transactions, Says Standard Chartered and Zodia Markets
Standard Chartered (STAN) and Zodia Markets predict that stablecoins could eventually account for 10% of both the U.S. money supply and foreign exchange transactions as the sector becomes more regulated and integrated into the financial system.
Currently, stablecoins make up around 1% of the U.S. M2 money supply and 1% of global foreign exchange transactions. However, the authors of the report, Geoff Kendrick and Nick Philpott, believe that with increasing regulation and sector legitimization, stablecoins could see significant growth, potentially reaching 10% of each of these areas.
Stablecoins’ Role in the U.S. Money Supply
A stablecoin is a cryptocurrency designed to maintain a stable value, usually pegged to the U.S. dollar, although some stablecoins are backed by assets like gold. The U.S. M2 money supply includes cash, savings accounts, and other short-term liquid assets, and is a key indicator of money circulation in the economy.
Kendrick and Philpott argue that “a move to 10% on each measure is feasible” as stablecoins grow in popularity and regulatory oversight expands.
Regulatory Developments Are Critical for Expansion
The report emphasizes that the growth of stablecoins will heavily depend on clearer U.S. regulations. The authors point to cross-border payments and foreign exchange-equivalent transactions as key areas of potential growth.
Although three stablecoin regulation bills were proposed during the Biden administration, little progress was made. However, with Donald Trump expected to take office in 2025, the authors are optimistic that regulatory frameworks will become more favorable, potentially boosting the adoption of stablecoins.
Stablecoins’ Increasing Impact on Global Finance
In a separate report, Bernstein noted that stablecoins are becoming an increasingly important player in the global financial ecosystem. In fact, stablecoins are now the 18th-largest holder of U.S. Treasuries, underscoring their growing influence.
The report concludes that, with proper regulatory frameworks and continued adoption, stablecoins are likely to become a much larger component of both the U.S. money supply and foreign exchange transactions in the near future.
