According to a recent study by Citi Institute, a research institution of Citigroup, the global stablecoin market could reach up to $3.7 trillion by 2030. This was the most optimistic estimate, with the base scenario being $1.5 trillion.
While the report acknowledged several risks that could lead to a $0.5 trillion decline scenario, it was generally optimistic. This sector could have a significant impact on the global market.
Citigroup Forecasts Stablecoin Strength
Citigroup researchers cited globally favorable regulation as a reason for their optimistic view on stablecoins. The Citi Institute's report, titled "Digital Dollar", paid special attention to the increasing integration of stablecoins with the US dollar. This could be a driving force for long-term growth:
"Government blockchain adoption is divided into two categories: enabling new financial products and modernizing the system. Stablecoins have now become major holders of US Treasury and are beginning to impact global financial flows. Their increasing adoption reflects continued demand for US dollar-denominated assets." – Artem Korenyuk, Citi Managing Director
The organization was particularly interested in the mandate that stablecoin issuers must hold US Treasury. Non-dollar stablecoins, including CBDCs, will ultimately exist on the periphery, with 90% of the stablecoin market remaining in dollars.
This holding mandate will thus make issuers major holders of Treasury.
By doing so, regulators will force stablecoin issuers to significantly change their internal policies. Citigroup predicts this will better integrate stablecoins into the traditional financial ecosystem.
While stablecoins could pose some threat to traditional banks for various reasons, these regulations will instead encourage a collaborative model. Public sector blockchain spending will also help this dynamic.
Nevertheless, Citigroup acknowledged substantial risks to the rosy stablecoin outlook. While the most optimistic estimate is a $3.7 trillion global sector by 2030, the decline scenario is just $0.5 trillion.
This is a very significant difference. The biggest risks include fraud, contagion from de-pegging events, and confidentiality issues.
However, it's important to remember that Citigroup surprisingly has a long history with cryptocurrency. They began considering entry into this sector four years ago and continue to release new market research.
