The stablecoin market has gone from promising to explosive in 2024. It started the year with a market cap of around $135 billion. By December, that figure had surpassed $200 billion, an increase of more than 50%. Since the November elections, it has risen another 15%.
But don’t think for a moment that this momentum is slowing down. With a pro-crypto administration poised to take the reins and Congress moving toward a long-awaited regulatory framework, 2025 is set to be an even better year for stablecoins.
The thing is, USDC and USDT have become the backbone of the global financial system. They are completely changing the way people trade, store and transact anywhere. Experts say the market value could double to $400 billion next year.
Regulations Could Double the Stablecoin Market
Stablecoins have been waiting for one thing to unleash their full potential: regulation. Matt Hogan, CIO of Bitwise Asset Management, suggests that 2025 will be the year that finally happens. “Clear answers to the big questions will spark massive new interest among issuers, consumers, and businesses,” he said.
It’s not just crypto traders who are happy. A proper regulatory framework would attract big banks like JP Morgan and traditional financial institutions. With the rules in place, they would be free to issue their own stablecoins, creating a wave of institutional adoption.
The implications would be huge. For example, Coinbase already has a 50/50 revenue-sharing deal with Circle, the company behind USDC. The more USDC grows, the more interest income Coinbase will earn from its reserves.
Meanwhile, Robinhood, Kraken, and Galaxy Digital have teamed up to launch USDG, a new dollar-backed stablecoin on what they call the “global dollar network.” And that’s just the beginning. Robinhood also literally acquired Bitstamp earlier this year.
Stablecoins and the US Dollar's Global Dominance
The rise of stablecoins is not just a crypto story. It’s a story of the US dollar. Stablecoins are pegged to fiat currencies, most of them the dollar. As they grow, so does global demand for the dollar. Michael Saylor, co-founder of MicroStrategy, describes this as a major opportunity for the US.
“If the US normalizes stablecoins, there is no reason why banks and companies cannot issue $10 trillion in digital dollars backed by cash reserves,” he said recently.
Currently, stablecoins are already facilitating access to dollars in countries with weak currencies or failed banking systems. In these markets, dollar-backed stablecoins are often used for retail payments through smartphone apps.
However, in advanced economies, they are expected to start as tools for commercial blockchain applications. But the US is lagging behind. Tether, the giant company behind USDT, has a 70% market share. However, it is headquartered in the British Virgin Islands because the US lacks clear rules for issuing cryptocurrencies.
Regulators like incoming House Financial Services Committee Chairman French Hill say fixing the problem is a top priority, and he believes stablecoins could boost the dollar’s reserve currency status and boost competition in cross-border payments.
Circle CEO Jeremy Allaire agrees. He is calling for federal laws to defi stablecoins as legal digital cash. “We need a full reserve of digital dollars like stablecoins to become a major export product for the United States,” he said.
Meanwhile, Ethereum has quietly become the backbone of stablecoins. Most of these digital dollars live on its blockchain, making it the most important network for issuing stablecoins at the moment.
With regulations on the horizon, Ethereum’s role is expected to grow. Stablecoins locked in Ethereum’s layer-2 solutions reached a record $13.5 billion before the end of this month.
Circle and Binance are working to expand USDC adoption by adding more trading pairs and promotions. This is important as USDC currently lags behind USDT in terms of liquidity and trading options.
Timing is everything. The Trump administration officially begins in January 2025, but analysts warn it could be months before any real policy changes occur. JPMorgan’s Kenneth Worthington expects key crypto-related appointments, such as the SEC and CFTC chairs, to come after more pressing cabinet roles.
Currently, stablecoins continue to grow, driven by rising trading volumes and increased adoption of decentralized finance. As of mid-December, stablecoin trading volume on centralized exchanges reached $1.48 trillion. USDT accounted for 86.3% of that trading volume. Its market cap is currently around $140 billion.
