Stablecoin adoption is on the rise, with research data from rwa.xyz showing a 15% increase in the number of addresses holding both dollar and crypto-pegged stablecoins, the highest to date. Chainalysis has also emphasized the growing importance of stablecoins in overall on-chain transaction activity, with stablecoins becoming a true global asset. This increase in adoption is fueled by the accessibility that stablecoins offer, providing a gateway to the USD for anyone with an internet connection. The US leads in purchases, but global demand is high, with over $40 billion purchased in March alone across diverse nations and regions.
According to Kim Grauer, Director of Research at Chainalysis, stablecoins are growing in importance as evidenced by the diverse representation of nations and regions contributing to over $30 billion in purchases in January 2024. Stablecoins, cryptocurrencies pegged to an external reference such as the U.S. dollar, now represent over half of all on-chain transaction volume. Andrew O’Neill, Managing Director at S&P Global’s Digital Assets Research Lab, believes that stablecoins are becoming increasingly important due to their role in bridging traditional finance with cryptocurrency. The stablecoin market is currently valued at around $150 billion and is projected to exceed $2.8 trillion by 2028.
The stablecoin market has become more competitive, with companies like Ripple announcing plans to launch a United States dollar-backed stablecoin to increase use cases, liquidity, and opportunities for developers on the XRP Ledger. Pairing the new stablecoin with XRP will enable more crypto liquidity for additional cross-border payments demand. These stablecoin use cases also promote dollar dominance by increasing access, as most USD-pegged stablecoins are issued outside the US. Stablecoins like PayPal’s PYUSD are commonly used for facilitating payments and cross-border transactions in various regions worldwide. The stablecoin market is predominantly U.S. Dollar-backed, representing 98.9% of the stablecoin market.
The growing demand for stablecoins has prompted lawmakers to focus on stablecoin legislation. United States Senators Kirsten Gillibrand and Cynthia Lummis recently introduced legislation to establish a regulatory framework for payment stablecoins. This regulatory framework aims to maintain the U.S. dollar’s dominance, promote responsible innovation, protect consumers, and combat money laundering and illicit finance. The potential passage of stablecoin legislation could drive adoption, with S&P Global highlighting how regulatory certainty could boost confidence and lead to a surge in US stablecoin adoption. While the legislation may prohibit certain types of stablecoins, it could also accelerate institutional blockchain innovation and bring more banks into the stablecoin market.
Despite the potential impact of stablecoin legislation on the market, Chainalysis Head of North America Policy Jason Somensatto believes that stablecoin adoption will continue to thrive globally. Even without an independent stablecoin-specific regulatory regime in the US, stablecoins offer a crucial solution for residents of countries facing currency volatility, allowing them to access the stability of the U.S. dollar. Stablecoins have already surpassed all other types of cryptocurrencies in usage, representing over half of all transaction volume in recent months. Therefore, stablecoins are expected to continue to rise as a global asset regardless of regulations.
