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As recently as 2019, the total value of stablecoins in circulation was just $1 billion. Today it’s nearly $300 billion, and forecasts suggest that figure could reach $4 trillion by 20301. Demand from Generation Z, active non-bank issuers, and a new payments paradigm mean that banks cannot ignore stablecoins. Where are we now, what’s next, and what does it mean for banks?
Stablecoin 101
Stablecoins store and transfer value, linking digital and traditional finance. This article focuses on payment stablecoins - digital tokens issued on a blockchain, with values pegged to fiat currencies, making them convertible at par. It is the currency peg that distinguishes payment stablecoins from other digital money like cryptocurrencies or CBDCs2, and also from stablecoins underpinned by commodities, cryptocurrencies or algorithms. Currently, 99% of stablecoins are pegged to the US dollar.
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