Citi (C) said stablecoins have risen in tandem with the broader crypto market since the GENIUS Act was 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 cryptocurrencies and have consistently accounted for between 5% and 10% of the total market capitalization, the bank said in Friday’s report.
The bank’s analysts expect near-term growth to advance at the same pace as the broader digital asset market.
Stablecoins are cryptocurrencies whose value is pegged to another asset, such as the US dollar or gold. They play an important role in the cryptocurrency markets as they provide 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 will likely be modest. While financing costs and credit appetite could change, the report drew a parallel to the rise of money market funds in the 1980s, which did not significantly alter overall credit.
The rise of stablecoins has revived activity on the Ethereum blockchain, but analysts have warned that this dominance could fade as issuers develop their own networks.
Network effects could sustain blockchain’s position for now, but it is no longer guaranteed.
The bank sees the main driver of stablecoin adoption as their “store of value” role in emerging markets facing inflation or weak institutions. That could drive greater demand for dollar assets, but could also trigger policy responses to limit dollarization. Payments, on the other hand, remain a specialized use case with mostly small transactions.
The dollar continues to dominate the market, although euro-denominated stablecoins are gaining from a small base. The new rules in Hong Kong highlight how regulation outside the United States could reshape the landscape, the report said.
Read more: Stablecoins surge to record $314 billion market cap as institutional race heats up: Canaccord
