Key Points:
- A report by Keyrock and Bitso predicts that stablecoins could facilitate payments exceeding $1 trillion annually by the end of the decade.
- The expansion will predominantly stem from institutional activities in business-to-business (B2B), peer-to-peer (P2P), and card payment channels, which have demonstrated swift adoption.
According to the report, the appeal of stablecoins in financial transactions lies in their ability to offer quicker and cheaper alternatives compared to conventional payment methods. For instance, transferring $200 via a bank may incur fees up to 13% and take several days to complete, while stablecoin transactions can be finalized in seconds at minimal costs.
Furthermore, foreign exchange (FX) settlements present a substantial untapped market. The FX market, which handles $7.5 trillion daily, continues to mainly operate on a T+2 settlement system through banking intermediaries. Utilizing on-chain FX with stablecoins could allow near-instant settlements and reduced counterparty risks.
Such advancements could also revolutionize cross-border payment systems, enabling stablecoins to manage up to 12% of all such flows by decade’s end, provided regulatory clarity, liquidity, and interoperability improve.
The authors of the report anticipate that major fintech companies will adopt stablecoin infrastructures over the coming years, similar to how software-as-a-service (SaaS) solutions became commonplace. This shift may involve digital wallets and payment platforms functioning on-chain, with treasury departments utilizing stablecoins for yields, and merchants swiftly settling in various currencies.
The rapid expansion of stablecoins, currently valued at about $260 billion, could also influence monetary policy. If successful, stablecoin distribution may grow to 10% of the U.S. M2 money supply from its current approximation of 1%, potentially impacting the Treasury bill market and influencing the Federal Reserve’s approach to controlling short-term interest rates.
Read More: JPMorgan Sees Stablecoin Market Hitting $500B by 2028, Far Below Bullish Forecasts
