Stablecoins May Approach $2 Trillion Market by 2028 Driven by Institutional Interest and Economic Dynamics

• The stablecoin market is projected to soar, with the US Treasury forecasting a staggering $2 trillion valuation by 2028, fueled by institutional interest and regulatory clarity.

• Market projections from MEXC’s COO suggest this benchmark could be reached even earlier, by 2026, amidst ongoing macroeconomic uncertainties.

• The expanding utility of stablecoins across decentralized finance, cross-border transactions, and as a trading medium is indispensable for mainstream adoption.

This article explores the meteoric rise of stablecoins, driven by market forecasts and the evolving landscape of digital finance.

The Stablecoin Market’s Potential: $2 Trillion by 2028

The US Department of the Treasury recently highlighted a robust prediction for the stablecoin market, estimating it could soar to a market capitalization of $2 trillion by 2028. This projection represents a substantial increase from the current market size of approximately $240 billion.

This optimistic outlook, detailed in the Treasury Borrowing Advisory Committee’s (TBAC) report, identified several key factors likely to propel stablecoin adoption and market growth. Notably, the increasing institutional interest in crypto products, alongside the rise of financial asset tokenization, positions stablecoins as pivotal players in blockchain transactions.

Moreover, integrations such as PayPal’s acceptance of various stablecoins are expanding their utility as a reliable payment method. The introduction of interest-bearing stablecoins bolsters their attractiveness as both a secure store of value and a yield-generating investment option.

Furthermore, a clearer regulatory framework, including measures that may incorporate stablecoins within liquidity management strategies and facilities for banks to use public blockchains, positions these digital assets for profound integration into traditional finance.

“Evolving market dynamics, structures, and incentives can accelerate stablecoins’ journey to a market cap of approximately $2 trillion by 2028,” states the report.

At present, USD-pegged stablecoins dominate the sector, making up over 99% of the total market cap. Tether (USDT) is the leading stablecoin, holding a market cap of around $145 billion, with Circle’s USDC trailing at about $60 billion.

Stablecoin Market Performance. Source: TBAC

The ongoing adoption of stablecoins is anticipated to disrupt traditional banking and Treasury markets significantly. Particularly, yield-bearing stablecoins could shift demand away from conventional bank deposits, pressuring banks to either increase interest rates or seek alternative funding methods.

The TBAC report further indicates a potential increase in demand for short-term Treasuries, contingent upon the passage of the GENIUS Act. This proposed legislation requires stablecoin issuers to hold US Treasuries as reserves, thus mitigating risks associated with de-pegging by reducing issuers’ reliance on the Federal Reserve in volatile moments.

“The demand within the stablecoin market could have a net neutral effect on the US money supply; however, the appeal of USD-pegged stablecoins could draw liquidity away from non-USD holdings into USD,” the report elaborates.

Insights from MEXC: A $2 Trillion Milestone by 2026

In contrasting predictions, Tracy Jin, COO of MEXC, asserts that the stablecoin market could achieve a $2 trillion valuation significantly sooner, possibly by 2026.

“With the exploration of stablecoin issuance by sovereign banks and corporations, alongside a governmental emphasis on regulatory clarity, we could see the stablecoin market cap surpassing $2 trillion by next year,” Jin shared with COINOTAG.

Furthermore, Jin noted that persistent macroeconomic uncertainties are likely to catalyze stronger growth in stablecoin market capitalization.

The resilience of stablecoin demand persists, having increased by over $38 billion year-to-date, now representing 1% of the global M2 USD money supply and processing over $33 trillion in trading volume in the last year, with $2.8 trillion processed in the preceding month alone.

According to Jin, the indispensable role these digital assets will play in decentralized finance (DeFi), cross-border payments, and digital asset trading will be critical during this next phase of cryptocurrency market growth, facilitating broader mainstream acceptance of digital finance.

Their ability to offer stability and liquidity during turbulent market conditions reinforces their position as essential assets for both institutional and retail investors.

Conclusion

The forecasts for the stablecoin market signal a transformative period in the financial landscape, marked by increasing institutional engagement and potential regulatory advancements. The projected $2 trillion valuation underscores the substantial role stablecoins may play in reshaping how individuals and institutions interact with digital assets. Stakeholders should closely monitor these developments, as they will likely influence the trajectory of traditional finance in the near future.