The stablecoin market could expand to $2T by 2028 with regulatory support, Treasury report says

The stablecoin market, mostly pegged to the U.S. dollar, could expand to $2 trillion by 2028 with regulatory support, according to a U.S. Treasury report.

In fact, the Treasury acknowledged the sector as a ‘new payment mechanism’ and ‘growing source’ of demand for treasury bills (government bonds).

“Reserve requirements outlined in proposed stablecoin legislation will provide an additional and growing source of demand for Treasuries.”

Source: U.S Treasury

But the report cautioned that yield-bearing stablecoins could rival traditional bank deposits.

Stablecoin growth — Impact on BTC, crypto

Overall, the stablecoin sector, led by Tether’s USDT and Circle’s USDC, is the hottest crypto segment, drawing interest even from banks amid the U.S push for regulatory clarity.

The sector’s market size is currently at $239 billion, per CoinMarketCap data. In April, stablecoin transaction volumes hit a record high of $1.82 trillion.

According to venture capital firm a16z, stablecoins are a ‘WhatsApp moment’ for money, citing growing use cases.

“And organic, non-speculative uses appear to be growing, even as crypto trading volume fluctuates.”

Source: a16z

Tracy Jin, COO of crypto exchange MEXC, shared a similar but slightly different outlook. Jin told AMBCrypto that the expected stablecoin growth could boost Bitcoin [BTC] prices. She said,

“Fiat inflows converted into Tether (USDT) and Circle (USUSD) are steadily flowing into Bitcoin, remaining the primary driver behind its price growth this year. Right now, every additional billion in stablecoins tends to push the BTC price up by 8-10%.”

This could be true from a long-term perspective, since growth in the stablecoin market has been positively correlated with BTC price.

Source: Coinglass

However, the USDT market grew from $137B to $148B ($11B) and USDC surged from $43B to $62B (+$20B).

Over the same YTD (year-to-date) basis, BTC was only up 1.7% despite the massive growth in top stablecoins.

Overall, stablecoin growth has the potential to impact BTC and the crypto market positively. However, the massive sector’s expansion could be due to other uses like cross-border payments.