“This groundbreaking technology will buttress the dollar’s status as the global reserve currency, expand access to the dollar economy for billions across the globe, and lead to a surge in demand for U.S. Treasuries, which back stablecoins. The GENIUS Act provides the fast-growing stablecoin market with the regulatory clarity it needs to grow into a multitrillion-dollar industry,” he said at the time.
So how big a deal will this be?
Goldman Sachs thinks we’re at the beginning of a stablecoin gold rush, according to a research paper published today by the bank’s Will Nance and others.
“Stablecoins are a $271bn global market, and we believe USDC [the stablecoin issued by Circle] benefits from market share gains on and off of partner Binance’s platform, as ongoing stablecoin legislation legitimizes the ecosystem, and the crypto ecosystem expands, also potentially catalyzed by legislation. Based on current trends and announced initiatives, we see $77bn of growth in USDC, or a 40% CAGR, from 2024-27E,” they wrote.
“As such, payments are the most obvious source of (total accessible market) expansion for stablecoins over the longer term. This opportunity is largely untapped so far, with the majority of stablecoin activity being driven by crypto trading activity and demand for dollar exposure outside of the U.S.”
Because stablecoins in the U.S. must be backed 1 to 1 with dollars or U.S. bonds, each stablecoin issued increases the demand for the bonds that back them. Some people think this will alter the bond market, especially for short-dated bonds with low interest yields.
UBS’s Paul Donovan is more skeptical: “U.S. Treasury Secretary Bessent is reportedly getting excited that stablecoins might increase demand for short-dated U.S. Treasuries, helping finance the unsustainable U.S. fiscal position. However, stablecoins are more about redistributing money supply. Someone selling Treasury bills to buy stablecoins, which invest the money in Treasury bills, does not change demand for U.S. debt instruments,” he told clients this morning.
Here’s a snapshot of the markets prior to the opening bell in New York:
