Stablecoin US$2 trillion forecast is ‘optimistic’, JPMorgan says
Following the signing of the Genius Act into law last week, regulatory concern regarding stablecoins has mostly cleared
[NEW YORK] The eye-catching US$2 trillion projection for the potential growth of the stablecoin market that was often cited during the recent push to approve US regulation of the crypto market for the first time is “a little bit optimistic”, according to JPMorgan Chase.
Last month, Treasury Secretary Scott Bessent said during a Senate hearing that the sector could even exceed that estimate by 2028, provided there is legislative support. That would be almost roughly eight times the current US$260 billion market value of all stablecoins.
“We find it hard to believe that the market could grow substantially larger over the next few years as the infrastructure/ecosystem that supports stablecoins is far from developed and will take time to build out,” JPMorgan strategists led by Teresa Ho wrote in a note to clients on Wednesday (Jul 23). “While adoption is poised to grow further, it might be at a slower pace than what some might anticipate.”
Stablecoins have been touted as disruptive for traditional financial systems because of their potential use in almost-instantaneous cross-border payments and remittances. Unlike more volatile cryptocurrencies, stablecoins are usually pegged to fiat currencies, potentially making it easier to settle payments instantly and around the clock.
But despite the recent increase in interest for the assets, they still only account for less than 1 per cent of global money flows, suggesting the role of the digital asset in upending financial rails still has significant steps to take, the strategists wrote.
JPMorgan pointed out that given the current growth trajectory, it was more likely that the market would double or triple, which is far lower than other estimates. The stablecoin market has grown significantly over recent years, with Tether Holdings’ USDT and Circle Internet Group’s USDC accounting for more than 60 per cent of the market.
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Stablecoins have been marketed by some issuers as a means of bypassing card networks, though they are seen as being more attractive for merchants than consumers. While issuers are able to generate millions of US dollars from yield on their reserves, customers are usually only able to store and transfer value through the digital asset.
“We suspect liquidity investors, whether retail or institutional, are not going to immediately jump into payment stablecoins as a cash alternative given their conservative nature in terms of how they manage their cash as a source of liquidity,” the bank said.
Following the signing of the Genius Act into law last week, regulatory concern regarding stablecoins has mostly cleared. The law sets rules for US dollar-backed stablecoins, including a requirement for firms to hold equivalent US dollar amounts for their stablecoin reserves in Treasuries or similar products overseen by state or federal regulators. Bessent has hailed US dollar-pegged stablecoins for their potential to increase demand for US dollars and US debt globally. BLOOMBERG
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