Regulatory changes could be the catalyst to spark significant adoption of stablecoins and blockchain tech in 2025, according to investment banking giant Citigroup.
“2025 has the potential to be blockchain’s ‘ChatGPT’ moment for adoption in the financial and public sector, driven by regulatory change,” a team of Citigroup financial analysts said in an April 23 report.
A combination of growing regulatory support and adoption by financial institutions has set the stage for the stablecoin market cap to fly as high as $3.7 trillion by 2030, or in a base case, $1.6 trillion.
“The main catalyst for their greater acceptance may be regulatory clarity in the US, which could enable greater integration of stablecoins specifically, and blockchain more widely, into the existing financial system,” Citi said in its report.
“The tailwinds of regulatory support and the increased integration of digital assets into incumbent financial institutions are setting the scene for increased usage of stablecoins.”
On the heels of US President Donald Trump’s crypto-friendly administration assuming power earlier this year, lawmakers are weighing stablecoin legislation, such as the GENIUS Act, which seeks to regulate US stablecoins, ensuring their legal use for payments.
A US regulatory framework for stablecoin would also support demand for dollar risk-free assets inside and outside the US, according to the report.
“The stablecoin issuers will have to buy US Treasuries, or comparable low risk assets, against each stablecoin as a measure of having safe underlying collateral,” Citi said.
“Stablecoin issuers could hold more US Treasuries by 2030 than any single jurisdiction today.”
US will continue to dominate stablecoins
In the future, Citi predicts the stablecoin supply will remain US dollar-denominated, with non-US countries promoting national currency or a central bank digital currency.
In April, the stablecoin market cap had crossed $230 billion, an increase of 54% since last year, with Tether (USDT) and USDC (USDC) dominating 90% of the market.
“While the dollar’s dominance may evolve over time, with the euro or other currencies being promoted by national regulations, stablecoins may be viewed by many non-US policy makers as an instrument of dollar hegemony,” Citi said.
“Geopolitics remain fluid. Should the world continue to drift into a multi-polar system it is likely that policymakers in China and Europe will be keen to promote central bank digital currencies (CBDCs) or stablecoins issued in their own currency.”
Related: Russia finance ministry official floats country making own stablecoins: Report
However, there are still some challenges ahead for the market. The stablecoin market cap could settle around $500 billion if “adoption and integration challenges persist.”
Depegging has also been flagged as a potential issue, with 1,900 instances in 2023, according to Citi, including the major USDC depeg following the collapse of Silicon Valley Bank.
“A major depegging event would likely dampen crypto market liquidity, trigger automated liquidations, impair trading platforms’ ability to meet redemptions, and potentially have broader contagion effects for the financial system,” the firm said.
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