Citigroup Raises Stablecoin Market Forecast to $1.9 Trillion by 2030
Citigroup recently revised its stablecoin market forecast upward to $1.9 trillion by 2030, showing a significant increase from its previous projection. Despite this optimistic outlook, the banking giant also highlighted the slow pace of institutional adoption, which currently stands at just 0.5 on a scale of 0 to 10.
The revised forecast took into account various factors driving the growth of stablecoins. Firstly, there has been a notable increase in stablecoin issuance volume, up by 40% this year alone. This growth has been attributed to factors such as regulatory clarity and the removal of friction in the payment network.
Three primary drivers were identified as key contributors to the projected growth of the stablecoin market. These include partial deposit substitution in the US and overseas, continued expansion of the crypto market, and banknote substitution. Citi predicts that 2.5% of US bank deposits will shift to stablecoins by 2030, contributing significantly to the overall market size.
Despite the current supply of stablecoins reaching $292 billion and transaction volumes nearing $1 trillion monthly, institutional adoption remains low. Catherine Gu, head of institutional client solutions at Visa, noted that interest in stablecoins among banks and asset managers is limited.
In addition to stablecoins, Citi believes that bank tokens, such as tokenized deposits and deposit tokens, may capture larger transaction volumes by 2030. These bank-issued tokenized instruments offer familiar regulatory frameworks and easier integration with existing treasury systems.
However, the stablecoin ecosystem still faces challenges such as fragmentation across multiple blockchains, privacy concerns, and uncertainty regarding accounting treatment. Without cash equivalent recognition under IAS7, stablecoins may not be as attractive to corporate treasurers.
In conclusion, while regulatory progress has been made, institutional adoption of stablecoins will require addressing issues related to interoperability, scalability, and trust. Despite the promising growth forecast for the stablecoin market, overcoming these challenges will be essential for enterprise-scale deployment.
Overall, the revised forecast by Citigroup paints a positive picture for the future of stablecoins, but it also highlights the work that still needs to be done to achieve widespread institutional adoption in the years to come.