In today's installment, Mick Roche from Zodia Markets provides insights into the stablecoin landscape for 2025.
Furthermore, Layne Nadeau from NVAL responds to queries regarding the role of cryptocurrencies in energy markets and AI in the segment 'Ask an Expert'.
Digital Asset Outlook for 2025
While 2024 may be recalled as the year Bitcoin became a household name, the spotlight in 2025 is expected to shift towards practical applications for digital assets, often viewed as a weakness in the crypto space. Stablecoins are anticipated to play a critical role in corporate adoption moving forward.
Stablecoins were initially designed for trading, lending, and borrowing within the digital asset realm, predominantly on centralized exchanges (CEXs). However, this focus is transitioning towards real-world applications, as highlighted by the increasing importance of the 'other' category within stablecoins.
Benefits of Stablecoins
Stablecoins provide several transformative advantages:
- Cross-border payments: They enable the swift transfer of USD assets internationally, rivaling email speed, a significant improvement over traditional SWIFT delays.
- Supply chain efficiencies: They can enhance supply chain operations and reduce costs, as exemplified by Tether's foray into trade finance.
- Facilitating remittances: With global remittance flows reaching $857 billion in 2023, stablecoins offer faster and more cost-effective fund transfers.
- On-chain FX: The expected rise of non-USD stablecoins may soon lead to a 24/7 foreign exchange market with immediate settlements, promising greater flexibility for global trade.
Challenges Ahead
Despite these benefits, stablecoins constitute just 1% of the global financial ecosystem, paralleling only 1% of FX transactions. Regulatory changes are critical to foster future growth, particularly in the U.S., where recent legislative initiatives aimed at creating a stablecoin regulation framework saw limited progress. The emerging Trump administration could bring about a more favorable regulatory environment.
Future Prospects
Expectations for 2025 include a marked increase in digital asset acceptance as their practical applications become more evident, especially among commodity traders and shipping companies facing payment challenges across underdeveloped markets. As skepticism fades, corporations will begin to recognize the tangible advantages of these digital assets, helping them integrate successfully into their operational frameworks.
Ask an Expert
Q. What connection does crypto share with energy markets? The evolution of global energy markets now includes monitoring generation, consumption, and carbon footprints. The carbon credit market, valued at around $2 trillion, is set to grow, fueled by global initiatives for carbon offsetting.
Q. Why is AI reliant on crypto? As AI's energy demands rise, blockchain technology's efficiency in managing renewable energy sources becomes increasingly relevant, serving the dual purpose of tracking sustainable energy use while supporting carbon credits to offset AI operational impacts.
