Wall Street bank JPMorgan Chase & Co. (JPM) said stablecoin supply could reach $500 billion to $600 billion by 2028, a far cry from the most optimistic calls of $2 trillion to $4 trillion.
Stablecoin demand remains primarily a crypto market story, not a payments story, according to the largest U.S. bank by assets.
JPMorgan noted that the stablecoin market grew by about $100 billion this year to around $308 billion, led by Tether’s USDT and Circle’s USDC (CRCL).
Demand is still primarily driven by cryptocurrency trading and collateral needs in derivatives and decentralized finance (DeFi), with derivatives sites adding around $20 billion in stablecoins alongside an increase in perpetual futures activity, according to the report.
“The vast majority of demand for stablecoins comes from their use as cash or collateral in the crypto ecosystem to facilitate crypto trading, including derivatives trading, DeFi lending and borrowing,” wrote analysts led by Nikolaos Panigirtzoglou, in Wednesday’s report.
Stablecoins are cryptocurrencies pegged to assets such as fiat currencies or gold, but most commonly to the US dollar. They support much of the crypto economy, serving as payment channels and a tool for moving money across borders.
Analysts said payments are a smaller driver today, but could increase as more providers test stablecoin-based rails for cross-border transfers.
Nonetheless, the report states that broader use of payments does not automatically require a much larger stablecoin float, as velocity, i.e. how quickly tokens circulate, may increase as integration deepens.
Banks and payment networks are also working to protect their role in institutional flows through tokenized deposits and other blockchain initiatives, while central bank digital currency (CBDC) efforts could offer regulated alternatives that compete with private stablecoins, the report adds.
Learn more: Stablecoin Adoption “Explodes” – Here’s Why Wall Street Is Going All-In
