Data Suggests Stablecoins Are Emerging as a Worldwide Asset Category

Data Indicates Stablecoins Are Emerging as a Global Asset Class


By Rachel Wolfson | Updated: April 26, 2024, 17:43 EDT | 5 min read


The adoption of stablecoins is rapidly increasing. According to data from research firm rwa.xyz, the number of addresses holding both dollar and crypto-pegged stablecoins has seen a 15% increase in 2024, the highest to date.
Blockchain analysis firm Chainalysis has also found evidence of the growing significance of stablecoins in overall on-chain transaction activity. Their “Crypto Spring Report” highlights that stablecoins are becoming a true global asset.
Stablecoins are Gaining Importance
Kim Grauer, Director of Research at Chainalysis, stated that by comparing fiat purchases of stablecoins between countries, it is evident that stablecoins are growing in importance.
“With a diverse representation of nations and regions—most notably the EU, Turkey, and Thailand—contributing to over $30 billion in purchases in January 2024 alone, and the high share of all transaction volume on-chain, it’s hard to ignore stablecoins’ prominence,” said Grauer.
Grauer further explained that stablecoins, which are cryptocurrencies with values pegged to an external reference like the U.S. dollar, have recently accounted for over half of all on-chain transaction volume.
“This data was collected through the on-chain data that Chainalysis analyzes,” Grauer added.
Andrew O’Neill, Managing Director and Co-Chair of S&P Global’s Digital Assets Research Lab, also believes that stablecoins are gaining importance.
“Money doesn’t move at the same speed as information does,” said O’Neill. “On-chain capabilities can help solve this challenge, and right now, stablecoins have emerged in the absence of other tools like central bank digital currencies.”
Stablecoin Use Cases Drive Adoption
O’Neill highlighted recent findings from credit rating firm S&P Global, which suggest that stablecoins could become a key component of financial markets’ blockchain adoption by acting as a digital currency for fully on-chain payments.
“For example, the tokenized fund managed by investment group Blackrock, which invests in U.S. treasuries using the Ethereum blockchain, has a liquidity pool denominated in the USDC stablecoin. Investors can redeem share tokens via a smart contract, instantly,” he pointed out.
Stablecoins are proving to be a crucial link between traditional finance and cryptocurrency. The stablecoin market is currently valued at approximately $150 billion and is projected to surpass $2.8 trillion by 2028.
Moreover, the stablecoin market has become more competitive. Ripple, the issuer of XRP, recently announced its plans to launch a stablecoin backed by the United States dollar.
A spokesperson from Ripple stated that introducing a trusted USD-backed stablecoin to the XRP Ledger will create more use cases, liquidity, and opportunities for developers.
“Ripple will leverage the stablecoin in its own payments solution to provide customers with the best payment experience, considering the region, time constraints, and associated fees,” the spokesperson said.
The spokesperson added that pairing the new stablecoin with XRP will enhance crypto liquidity to cater to additional cross-border payment demands.
This is significant because stablecoin use cases like this promote dollar dominance by increasing access to the U.S. dollar. Research from S&P Global reveals that most USD-pegged stablecoins are actually issued outside of the U.S.
“Stablecoin use cases are more related to cross-border payments and on/off ramping in relation to crypto,” O’Neill explained.
For example, PayPal’s stablecoin, PYUSD, is frequently used to facilitate payments and cross-border transactions in Latin America and the Caribbean.
“Another important use case for stablecoins is remittances. Tether is heavily used to send U.S. dollars to family and friends in emerging markets,” O’Neill added.
It is worth noting that U.S. Dollar-backed stablecoins represent a 98.9% share of the stablecoin market, according to data from CoinGecko.
David Pope, Commissioner of The Wyoming Stable Token Commission, stated that the global demand for dollars is strong, and stablecoins simplify and expedite the transfer of ownership of those dollars.
“This is why stablecoins are becoming a true, global asset class,” Pope said.
Growing Focus on Stablecoin Legislation
The increasing demand for stablecoins has prompted lawmakers to focus on enacting stablecoin legislation.
In an announcement on April 17, United States Senators Kirsten Gillibrand and Cynthia Lummis introduced legislation to establish a regulatory framework for payment stablecoins.
“Passing a regulatory framework for stablecoins is absolutely critical to maintaining the U.S. dollar’s dominance, promoting responsible innovation, protecting consumers, and cracking down on money laundering and illicit finance,” Senator Gillibrand emphasized.
The Lummis-Gillibrand Payment Stablecoin Act also states that it would “protect consumers by requiring stablecoin issuers to maintain one-to-one reserves and prohibiting unbacked, algorithmic stablecoins.”
Additionally, Representative Maxine Waters, the ranking member of the United States House Financial Services Committee, suggested in an interview with Bloomberg on April 24 that lawmakers were making progress towards passing stablecoin legislation.
During the interview, she mentioned that she had been working “very well together” with committee chair Patrick McHenry on legislation regarding stablecoins and bank clawbacks.
Stablecoin Legislation Could Drive Adoption
While such legislation would likely prohibit algorithmic stablecoins like TerraUSD (UST), which depegged from the U.S. dollar in 2022, O’Neill believes that approving a stablecoin bill in the U.S. would accelerate institutional blockchain innovation.
“A clear federal framework would provide more reassurance for institutions using stablecoins,” he said. “This may also give banks the confidence to issue stablecoins themselves, thereby bringing them into the stablecoin market.”
The spokesperson from Ripple also believes that now is the time for clear and definitive regulations on stablecoins.
“The U.S. needs to assert its leadership to provide businesses and banks with the certainty required to proceed,” the spokesperson said. “Without this, the U.S. risks losing technological innovation and user benefits to overseas markets.”
They added that Ripple is currently reviewing how this legislation may impact its business, but it is evident that a stablecoin bill represents a significant step.
However, Jason Somensatto, Head of North America Policy at Chainalysis, believes that the passage of such legislation will have little effect on stablecoin adoption in the U.S.
Somensatto mentioned that stablecoin adoption is thriving globally despite the absence of an independent stablecoin-specific regulatory regime in the U.S.
“This is likely due to the use case of stablecoins,” he explained. “By providing anyone in the world with an internet connection access to the stability of the U.S. dollar, stablecoins are a vital solution for residents of countries facing currency volatility, both for preserving savings and facilitating commerce.”
Given this, Somensatto believes that stablecoins will continue to rise as a global asset regardless of regulations.
“While major cryptocurrencies like Bitcoin and Ether tend to dominate the headlines and offer gains that stablecoins lack, stablecoins have surpassed all other types of cryptocurrencies in terms of usage, representing over half of all transaction volume in recent months,” Somensatto noted.
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