The US Dollar-pegged stablecoins are projected to reach an astonishing aggregate market capitalization of approximately $2 trillion by 2028, as outlined in the recent report from the United States Department of the Treasury. Currently, the cumulative market cap of stablecoins hovers around $230 billion, but evolving market dynamics have the potential to accelerate their growth significantly, as stated in the Treasury’s Q1 2025 report released on April 30.
Stablecoins represent a new frontier in cryptocurrency, with their value typically pegged to a traditional asset like the US dollar. The Treasury report highlights that these tokens are already “ubiquitously utilized as ‘cash on-chain,’ effectively serving as a new payment mechanism.” Furthermore, the rise of tokenized money market funds has introduced an alternative option to stablecoins, particularly because of their yield-bearing properties.
The report serves as yet another indication of the US government’s increasing acceptance of blockchain technology, particularly after President Trump commenced his second term of office on January 20. The Treasury has previously acknowledged the potential of cryptocurrency to foster a new financial market infrastructure, which may further bolster global demand for US Treasury bills.
The adoption of dollar-pegged stablecoins, such as Tether (USDT) and USD Coin (USDC), has been primarily driven by their ability to invest fiat backing into yield-bearing instruments like US Treasurys. As noted in December, the growth of stablecoins has likely contributed to a modest increase in demand for short-dated Treasury securities, as a significant portion of stablecoin collateral comprises either Treasury bills or Treasury-backed repurchase agreement transactions.
In its April report, the Treasury also indicated that future stablecoin legislation would mandate stablecoin issuers to hold short-dated T-bills, thereby solidifying the connection between stablecoin adoption and the demand for US Treasury bills. It was further highlighted that the proliferation of stablecoins might exert pressure on retail banks to offer higher interest rates to depositors.
As of late April, Tether’s USDT remains the dominant stablecoin, holding approximately 66% of the market share, with a market capitalization nearing $150 billion. Circle’s USDC follows as the second most prominent stablecoin, with a market capitalization of about $60 billion.
The growth trajectory of stablecoins is an important development for both the cryptocurrency market and traditional financial sectors. As stablecoins continue to gain traction, they present opportunities and challenges that stakeholders must navigate carefully in an evolving economic landscape.
