According to (The Block) reports, analysts from Standard Chartered Bank and its digital asset brokerage Zodia Markets predict that the adoption rate of stablecoins will grow significantly and may account for 10% of U.S. M2 transactions in the future.
Geoff Kendrick, global head of digital asset research at Standard Chartered Bank, and Nick Philpott, co-founder of Zodia Markets, said in a report published on Thursday:
“Currently, stablecoins only account for 1% of U.S. M2 trading volume and 1% of FX trading volume, but as the space becomes legalized, reaching 10% of these metrics is feasible.”
M2 money supply is a key indicator that measures the total amount of money supply in an economy, including all circulating currency and other assets that can be easily converted to cash. Analysts believe that U.S. regulation of stablecoins will be a major driver of this growth.
During the Biden administration, the U.S. Congress proposed three main bills to establish a regulatory framework for bank-issued stablecoins, but progress has been limited. However, Kendrick and Philpott believe that the incoming Trump administration may achieve more substantial progress in stablecoin regulation, thus accelerating development in this area.
Opaque fee structures of traditional payment systems
Analysts also highlighted the limitations of the current global financial infrastructure. The correspondent banking system and SWIFT (which has changed little since adopting real-time gross settlement (RTGS) mechanisms in the early 1990s) charge fees based on membership, transaction volume, and discounts, and settlements are usually based on a value-time basis, which is opaque for many customers. Analysts stated, 'Settlements based on a value-time basis essentially create a queuing mechanism based on a 'first come, first served' principle.'
A report from Standard Chartered Bank on Thursday noted that the application of stablecoins has surpassed simple transaction collateral functions, with increasing applications in cross-border payments, payroll, trade settlement, and remittance. The report cited a YouGov survey that showed stablecoins are being increasingly adopted in emerging markets such as Brazil, Turkey, Nigeria, India, and Indonesia.
This survey of 500 adults across various countries reveals several key insights into the increasing use of stablecoins, with users valuing the tokenized form of fiat currency (primarily dollars) that they can directly hold and manage themselves, without relying on potentially unreliable or inaccessible bank accounts.
Stablecoins are becoming increasingly popular due to their uses in various areas including cross-border payments, currency substitution, and access to higher-yield financial products. In these markets, 69% of users reported that currency substitution is the most common reason for using stablecoins, 39% for paying for goods and services, and another 39% for cross-border payments.
According to data from DefiLlama, the total market value of stablecoins has reached a new high of $190 billion, surpassing the previous record of $188 billion set before the collapse of TerraUSD in April 2022. The market is primarily dominated by fiat-backed stablecoins, with the dollar stablecoin USDT accounting for 73% and USDC for 21%. USDT is now the third-largest digital asset after Bitcoin and Ethereum.
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