Data Suggests Stablecoins Are Emerging as a Worldwide Asset Class
The adoption of stablecoins is rapidly increasing, according to data from research firm rwa.xyz. The number of addresses holding both dollar and crypto-pegged stablecoins has seen a 15% increase in 2024, the highest to date. In addition, a recent report from blockchain analysis firm Chainalysis highlights the growing prominence of stablecoins in overall on-chain transaction activity, indicating that stablecoins are becoming a true global asset.
Kim Grauer, Director of Research at Chainalysis, emphasizes the growing importance of stablecoins by comparing fiat purchases of stablecoins between countries. She states that stablecoins are becoming more significant, with various nations and regions contributing over $30 billion in purchases in January 2024 alone. Grauer notes that stablecoins have recently represented over half of all on-chain transaction volume, as collected from Chainalysis’ on-chain data.
Andrew O’Neill, Managing Director and Co-Chair of S&P Global’s Digital Assets Research Lab, agrees that stablecoins are rising in importance. He believes stablecoins have emerged as a solution to the challenge of money not moving at the same speed as information. O’Neill also suggests that stablecoins could become a key pillar of financial markets’ blockchain adoption by serving as a digital currency for fully on-chain payments.
Stablecoins are proving to be a critical bridge between traditional finance and cryptocurrency. The stablecoin market is currently valued at around $150 billion and is projected to exceed $2.8 trillion by 2028. The market has also become more competitive, with Ripple announcing plans to launch a United States dollar-backed stablecoin. Ripple’s spokesperson states that this move will generate more use cases, liquidity, and opportunities for developers, enhancing Ripple’s payment solution and enabling more cross-border payment demand.
Stablecoins also promote dollar dominance by increasing access to U.S. dollars. Most USD-pegged stablecoins are issued outside of the U.S., as highlighted by research from S&P Global. Stablecoin use cases, such as facilitating payments and cross-border transactions, are gaining traction, as seen with PayPal’s stablecoin PYUSD being used in Latin America and the Caribbean. Furthermore, U.S. Dollar-backed stablecoins hold a 98.9% share of the stablecoin market, according to CoinGecko.
David Pope, Commissioner of The Wyoming Stable Token Commission, explains that stablecoins simplify and expedite the transfer of ownership of U.S. dollars, catering to the strong global demand for dollars. He believes this is why stablecoins are becoming a true global asset class.
The growing demand for stablecoins has prompted lawmakers to focus on stablecoin legislation. United States Senators Kirsten Gillibrand and Cynthia Lummis introduced legislation to establish a regulatory framework for payment stablecoins, aiming to protect consumers and crack down on money laundering. Representative Maxine Waters also suggested progress toward passing stablecoin legislation in a recent interview. Although legislation may prohibit algorithmic stablecoins, experts believe that approving a stablecoin bill in the U.S. would accelerate institutional blockchain innovation.
While clear and definitive regulations on stablecoins are needed, Ripple’s spokesperson states that the U.S. risks losing technological innovation and user benefits without asserting its leadership in providing businesses and banks with the necessary certainty to proceed. Chainalysis Head of North America Policy Jason Somensatto suggests that stablecoin adoption will continue to thrive globally, regardless of regulations. Stablecoins are crucial for residents of countries facing currency volatility, offering stability and access to the U.S. dollar.
In conclusion, stablecoins are emerging as a worldwide asset class, with their adoption and prominence on the rise. The market value of stablecoins is growing, and they are becoming an essential part of the financial landscape. While stablecoin legislation is being considered, the global demand and use cases for stablecoins suggest that they will continue to flourish regardless of regulations.