Citi (C) said stablecoins have grown in step with the broader crypto market since the GENIUS Act passed in July, prompting its analysts to raise their 2030 market capitalization outlook to $1.9 trillion last month.
Stablecoins remain primarily an on-ramp to crypto and have historically represented 5-10% of total market capitalization, the bank said in Friday’s report.
The bank’s analysts expect near-term growth to move in step with the broader digital asset market.
Stablecoins are cryptocurrencies whose value is tied to another asset, such as the US dollar or gold. They play a major role in cryptocurrency markets, providing payment infrastructure, and are also used to transfer money internationally. Tether’s USDT is the largest stablecoin, followed by Circle’s USDC.
Citi argued that the effect on bank deposits would likely be modest. Although funding costs and credit appetite may change, the report draws parallels with the rise of money market funds in the 1980s, which did not significantly disrupt overall lending.
The stablecoin boom has reignited activity on the Ethereum blockchain, but analysts have warned that dominance could fade as issuers develop their own networks.
Network effects could maintain blockchain’s position for now, but this is no longer guaranteed.
The bank sees the main driver of stablecoin adoption as its role as a “store of value” in emerging markets facing inflation or weak institutions. This could fuel increased demand for dollar assets, but could also trigger policy responses aimed at limiting dollarization. Payments, on the other hand, remains a niche use case with mostly small transactions.
The dollar continues to dominate the market, even as euro-denominated stablecoins gain on a modest basis. The new rules in Hong Kong highlight how regulation outside the United States could reshape the landscape, the report said.
Learn more: Stablecoins Reach Record Market Cap of $314 Billion as Institutional Race Intensifies: Canaccord
