Over the past few years, stablecoins have been defined by a narrow reality: essentially a two-horse race between Tether’s USDT and Circle’s USDC (CRCL), with the most activity concentrated on crypto-native exchanges.
What comes next looks materially different, Alchemy co-founder and president Joe Lau told CoinDesk in an interview.
The near-term trajectory of stablecoins has many directions, Lau said, but one theme dominates: stablecoin adoption is “exploding.” The reason, he argued, is that stablecoins offer tangible advantages that traditional banking and payments systems struggle to match, particularly 24/7 settlement and digitally native money movement.
“Stablecoins and deposit tokens are rapidly becoming the consumer and business layers of the modern Internet-native financial system. With this foundation, money can move with the security of the banking system and the speed of the Internet,” Lau said.
Banks are increasingly evaluating stablecoins, he said, along with fintechs that create payment and money movement products.
Lau pointed to payment platforms and processors, highlighting Stripe’s activity in the space, as well as payroll providers and corporate treasury solutions that are now considering stablecoins as part of their operational stack.
Stablecoins are cryptocurrencies pegged to assets like fiat currencies or gold. They underpin much of the cryptoeconomy, serving as payment gateways and a tool for moving money across borders. USDT is the largest stablecoin, followed by USDC.
The total stablecoin market capitalization reached $300 billion in September, a 75% increase from a year earlier, according to a report from Morgan Stanley Investment Management.
Wall Street giant Citi (C) said the stablecoin market is growing faster than expected. This led the bank to recently raise its 2030 issuance forecast to $1.9 trillion in its base case and $4 trillion in a bull case, up from $1.6 trillion and $3.7 trillion, respectively.
Lau also said regulatory clarity is attracting more traditional players to the sector.
As the rules become clearer, expect broader adoption by traditional finance (banks, neobanks, fintechs focused on moving money, and large payments companies) because stablecoins connect directly to the types of use cases those companies already serve.
An important force
However, Lau sees another major force shaping the future: banks are launching tokenized deposits., which it describes as an “alternative” that complements stablecoins.
In this model, Lau said, banks can offer customers many of the same benefits associated with stablecoins, low transfer fees and faster settlement, but they do so under existing regulatory frameworks, and the funds remain with the bank.
Today, he said, moving money from a standard bank account can still mean wire transfers, fees and friction. With tokenized deposits, like JPM Coin, customers can get more stablecoin-like functionality without leaving the banking environment. Lau added that HSBC has also expressed interest in tokenized deposits and hopes more banks will follow suit.
In Lau’s view, tokenized deposits and stablecoins currently compete but are complementary as they tend to serve different users. Stablecoins are more open, he said, because they can reach agreements between any two parties. Tokenized deposits are more closed-loop, he said, because they are typically designed for a bank’s own customers. He noted that JPM Coin is limited to JPMorgan clients and will likely be used first by institutions and corporate clients.
Over time, however, Lau hopes the lines will blur.
He said banks are starting with tokenized deposits but are already thinking about building rails for other tokenized assets. Meanwhile, he said, stablecoin issuers are seeking to become more like banks, driven in part by capital efficiency. Lau argued that banks’ fractional banking model may be more capital efficient than stablecoin structures that require 1:1 backing, and that this gap is one reason why stablecoin issuers may want closer alignment with the banking model.
For now, Lau said, the two instruments remain complementary. However, he also framed tokenized deposits as an early-stage development: Only a handful of banks have seriously invested in this so far, he said, and as more do, adoption will grow and stablecoins and deposit tokens will begin to compete more directly.
“Tokenized deposits transform the banking system into a programmable infrastructure. Stablecoins modernize the dollar for consumers and global markets. As the two converge, money becomes fully compatible and instantly accessible,” he added.
Read more: S&P’s Tether downgrade revives ‘decoupling’ risk warning, HSBC says
