Stablecoins Could Make Up 10% of U.S. Money Supply and FX Transactions, Forecasts Standard Chartered and Zodia Markets

Stablecoins could eventually represent 10% of both the U.S. money supply and foreign exchange transactions as the sector matures and becomes more regulated, according to a new report by Standard Chartered (STAN) and Zodia Markets.

Currently, stablecoins make up around 1% of the U.S. M2 money supply and 1% of global foreign exchange transactions. However, the authors of the report, Geoff Kendrick and Nick Philpott, believe that as the market gains legitimacy and regulatory clarity, stablecoins could grow to 10% in each of these categories.

The Role of Stablecoins in the U.S. Money Supply

Stablecoins are cryptocurrencies designed to maintain a stable value, typically pegged to the U.S. dollar, although other assets such as gold are also used. The U.S. M2 money supply, which includes cash, savings, and other liquid assets, serves as a critical measure of the currency in circulation.

Kendrick and Philpott state that “a move to 10% on each measure is feasible” as stablecoins become more widely accepted and incorporated into mainstream financial systems.

Regulatory Clarity is Key to Growth

The authors highlight that the main catalyst for this growth will be clearer U.S. regulations for stablecoins. They identify cross-border payments and FX-equivalent transactions as areas with significant potential for expansion.

While the Biden administration proposed three bills to regulate stablecoins, progress was slow. However, the authors are optimistic that when Donald Trump takes office in 2025, regulatory momentum could increase, accelerating the adoption and use of stablecoins.

Stablecoins’ Growing Impact on Global Finance

In a separate report, Bernstein noted that stablecoins are increasingly playing a central role in global financial markets. Stablecoins are now the 18th-largest holder of U.S. Treasuries, illustrating their growing influence on the financial system.

The report concludes that as the regulatory environment improves and adoption increases, stablecoins are poised to have a much larger impact on both the U.S. money supply and global foreign exchange transactions in the near future.