American banking giant Citigroup has shared a highly bullish forecast of the stablecoin market in its latest market perspective report. The investment bank predicts that the market will experience a staggering increase of at least sevenfold in supply over the next five years, significantly driven by the intentions of the current US administration to develop supportive policies for the digital asset sector.
In January 2025, a notable step was taken when US President Donald Trump mandated the formation of a crypto working group aimed at establishing a federal regulatory framework tailored to meet the growing demands of the cryptocurrency industry. Citigroup posits that with the adoption of a regulatory framework and greater integration of digital assets among traditional financial institutions, demand for stablecoins is expected to surge. Recent data from DefiLlama indicates that the stablecoin market has experienced a phenomenal growth of 30 times in recent years, correlating with an astounding 1400% increase in the overall cryptocurrency market.
While acknowledging that predicting future market dynamics can be challenging, Citigroup’s analysis suggests a base case scenario wherein stablecoin supply may rise by $1.6 trillion by 2030. In a more optimistic scenario, a growth of up to $3.7 trillion could occur, while a more cautious forecast indicates a modest increase of $0.5 trillion.
Moreover, a proposed US stablecoin regulatory framework might stimulate demand for dollar-denominated assets, both domestically and internationally. This is primarily because stablecoin issuers are obliged to hold US Treasuries or other safe assets as collateral backing their circulating stablecoins. In the base case scenario, Citigroup anticipates a resulting $1 trillion purchase of US Treasuries, further embedding stablecoins within the financial ecosystem.
Despite the optimistic growth outlook, Citigroup has also underscored potential challenges that could impede the widespread adoption of stablecoins. As a cryptocurrency designed to maintain a fixed value akin to a fiat currency, the dominance of US dollar-pegged stablecoins in the market may provoke other nations to retaliate by developing central bank digital currencies (CBDCs) or stablecoins pegged to their respective currencies. Such developments may reinforce US financial supremacy and could result in a scenario where 90% of the stablecoin market remains dollar-denominated by 2030.
Furthermore, the investment bank warns that stablecoins are subject to inherent risks, especially in the event of a significant de-pegging scenario. A major de-pegging event could lead to a drastic reduction in crypto liquidity, significantly influencing trading platforms and the broader financial markets.
With the current market valuation of stablecoins reaching approximately $237.25 billion, Tether (USDT) currently leads the market with a commanding 62.65% dominance. The growth trajectory indicated by Citigroup presents a compelling narrative for stakeholders in the financial sector, as the intersection of regulation, demand, and innovative financial products continues to evolve.
