Citi (C) said stablecoins have moved out of step with the broader crypto market since the Genius Act was passed in July, prompting its analysts to raise their 2030 market cap outlook to $1.9 trillion last month.
Stablecoins remain primarily an on-ramp to crypto and consistently account for 5%-10% of total market capitalization, the bank said in a report Friday.
Analysts at the bank expect near-term growth to be in line with the broader digital asset market.
Stablecoins are cryptocurrencies whose value is tied to another asset, such as the US dollar or gold. They play a major role in cryptocurrency markets, provide payment infrastructure, and are also used to transfer money internationally. Tether’s USDT is the largest stablecoin, followed by Circle’s USDC.
Citi argued that the impact on bank deposits would likely be minor. While there may have been changes in funding costs and appetite for lending, the report drew a parallel to the rise of money market funds in the 1980s, which did not significantly constrain overall lending.
The stablecoin boom has revived activity on the Ethereum blockchain, but analysts warn that this dominance could fade as issuers develop their own networks.
Network effects may preserve the state of the blockchain for the time being, but this is no longer guaranteed.
The Bank sees the main driver of stablecoin adoption as its “store of value” role in emerging markets facing inflation or weak institutions. This could lead to further demand for dollar assets, but could also trigger policy responses to limit dollarization. In contrast, payments remain a niche use case with mostly small transactions.
The dollar continues to dominate the market, although euro-denominated stablecoins are gaining from a smaller base. The report said the new rules in Hong Kong highlight how regulation outside the US could reshape the landscape.
Read more: Stablecoins record $314B market cap as institutional competition increases: Canaccord