Stablecoins are designed to maintain a stable value relative to a fiat currency and have moved from a niche used mainly for cryptocurrency trading to a cornerstone of the digital economy. The digital tokens blend the stability of government-backed money with the efficiency of blockchain technology.
Market data highlights their rapid ascent: by September 2025, the combined value of stablecoins in circulation reached roughly $300 billion, a 75% increase over the previous year. Analysts at Morgan Stanley anticipate that the market could exceed $2 trillion by 2028.
The expansion is not confined to dollar‑pegged tokens. A growing list of issuers including Tether, Circle, Ethena, and fintech firms like PayPal has diversified the market. Tether’s USDT remains dominant with more than $155 billion in circulation, but newcomers such as Ethena’s USDe, launched in early 2024, have captured market share by using delta‑neutral strategies to keep volatility low.
Moreover, Circle’s USDC has emphasised transparency and regulatory compliance, raising over $1 billion in an initial public offering and holding most reserves in cash and U.S. Treasury bills. This diversification signals broadening institutional interest in stablecoins.
Transaction volumes reveal how deeply stablecoins are embedding themselves in the financial system. Data from Visa and Allium Labs show that total stablecoin transfer value reached $27.6 trillion in 2024, surpassing the combined volume processed by Visa and Mastercard.
While researchers point out that less than 10% of on‑chain stablecoin transactions represent genuine payment flows, many are generated by automated trading.
Adjusting for “bot‑like” activity, legitimate stablecoin transaction volume rose from $3.29 trillion in 2021 to $5.68 trillion in 2024, an increase of around 80%. A report from TRM Labs estimates that stablecoins accounted for 30% of all on‑chain crypto transactions and recorded more than $4 trillion in transaction volume during the first eight months of 2025, an 83% year‑over‑year increase.
Related: Circle Expands Blockchain Reach with Arc Testnet and Major Institutional Partners
Drivers Behind Stablecoin Adoption
24/7 settlement and reduced costs
Stablecoins are becoming financial infrastructure with their ability to provide near‑instant settlement. Traditional cross‑border payments often take one to five business days and involve multiple intermediaries. World Bank surveys reveal that sending international remittances costs an average of 6.49% of the amount transferred, and card‑based international transfers include hidden foreign‑exchange spreads.
By contrast, stablecoin payments settle peer to peer on public blockchains in minutes or seconds and typically cost less than 1%. These efficiency gains are especially attractive for small businesses and freelancers who need to send cross‑border payments or receive funds outside regular banking hours.
Major payment networks are embracing these benefits. In December 2025 Visa announced that its U.S. partners can settle obligations using Circle’s USDC stablecoin, offering seven‑day settlement windows and faster liquidity management. Visa’s pilot program, which began in 2023, had reached a $3.5 billion annualised settlement run rate by November 2025.
The company notes that banks and fintechs want programmable settlement options that integrate with existing treasury operations. Mastercard is also developing stablecoin payment products and has partnered with MoonPay to let users link a stablecoin‑funded wallet to their Mastercard. These developments show that stablecoins are starting to underpin core payment networks.
Global reach and financial inclusion
Stablecoins offer global access because they operate on permissionless blockchains. Unlike fast payment systems such as FedNow or Zelle—which require both sender and receiver to have accounts at participating banks—stablecoins can be transferred between digital wallets anywhere in the world.
This borderless nature allows individuals in countries with volatile currencies or weak banking infrastructure to hold dollar‑pegged value and participate in global commerce. Analysts highlight that stablecoins enable unbanked and underbanked populations to receive payments using only a mobile phone, bypassing correspondent banking networks.
Stablecoin circulation doubled in the 18 months leading up to mid‑2025, yet it still facilitates less than 1 % of global money flows. This gap implies significant room for expansion if barriers such as liquidity off‑ramps and user experience are addressed.
Programmability and innovation
Beyond speed and cost, stablecoins enable programmable money. Smart contracts can automate escrow, supply‑chain finance, or conditional payments. Analysts emphasize three attributes of permissionless blockchains—universal access, unconstrained code, and innate composability that allow digital assets and contracts to interact seamlessly. Programmed payments could reduce administrative burdens and unlock new financial products.
For example, stablecoin protocols like Ethena’s USDe integrate yield generation through derivatives positions while maintaining price stability, while companies like Amazon and Walmart are exploring stablecoin technology to lower interchange fees and automate balance management.
Related: Bank of Canada Sets Strict Rules for Stablecoins Ahead of 2026 Law
Regulatory Frameworks and Institutional Legitimacy
The GENIUS Act and U.S. regulation
The transition of stablecoins into financial infrastructure has been accelerated by regulatory clarity. In July 2025, the United States enacted the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, the country’s first comprehensive stablecoin legislation.
The law restricts issuance to insured depository institutions or approved non-bank entities and mandates that payment stablecoins be fully backed by reserves consisting of U.S. dollars and short-term Treasury securities. It clarifies that permitted stablecoins are neither securities nor commodities and prohibits unlicensed entities from issuing them. Reserves must be held one‑to‑one, reported regularly, and subject to audits, and stablecoin issuers become “financial institutions” under the Bank Secrecy Act. In insolvency proceedings, stablecoin holders have priority over other creditors.
In addition, the World Economic Forum notes that the GENIUS Act requires issuers to hold high‑quality, liquid assets and comply with anti‑money‑laundering and counter‑terrorist financing rules. It also observes that fewer than ten major economies had adopted stablecoin‑specific legislation as of mid‑2025, highlighting the importance of U.S. leadership.
European and Asian approaches
Other jurisdictions are implementing their own frameworks. The Markets in Crypto‑Assets (MiCA) Regulation in the European Union, effective from December 2024, covers e‑money tokens and asset‑referenced tokens. It requires that only licensed e‑money institutions or credit institutions issue single‑currency stablecoins and mandates authorization for asset‑backed tokens.
In Hong Kong, the 2025 Stablecoin Ordinance requires issuers of Hong Kong dollar‑backed stablecoins to obtain a license and maintain fully backed reserves. These laws reflect a trend toward harmonised regulation that aims to mitigate risks while encouraging innovation.
Impact on banks and deposits
Regulators and academics are evaluating how stablecoins could affect traditional banking. A Federal Reserve analysis warns that rapid stablecoin growth could reshape bank deposit structures. Stablecoins can either reduce, recycle or restructure deposits depending on who demands them and how issuers manage reserves.
Domestic substitution—households moving funds from transaction accounts into stablecoins—could reduce core deposits, especially among younger, digital‑native customers. However, foreign demand for U.S. dollar stablecoins may increase deposits in U.S. banks if issuers hold their reserves domestically.
Issuers’ asset allocation choices also matter: if they hold reserves primarily as bank deposits, the overall size of the banking system may remain stable; if they invest heavily in Treasury bills or money market funds, banks could lose deposits. The Federal Reserve notes that granting stablecoin issuers access to master accounts could lead to the greatest deposit losses because funds would flow directly from bank customers to the central bank.
Integration with Payment Networks and Corporations
Card networks and fintech adoption
Stablecoins are no longer confined to cryptocurrency exchanges. Payment networks and large corporations are integrating them into mainstream financial rails. Visa’s U.S. stablecoin settlement program allows issuer and acquirer partners to settle transactions in USDC on the Solana blockchain.
This integration provides faster liquidity management, seven‑day settlement windows and interoperability between blockchains and traditional systems. Visa reports that banks are preparing to use stablecoin settlement because it improves treasury efficiency. Mastercard is testing stablecoin wallets that link directly to its network and has partnered with MoonPay to enable stablecoin spending.
Fintech companies are also deploying stablecoins. Stripe acquired the stablecoin firm Bridge in early 2025 for $1.1 billion and is developing financial accounts that allow businesses in more than 100 countries to hold and transact in stablecoins. PayPal launched PYUSD, a fully backed stablecoin, to facilitate person‑to‑person and merchant payments. Retail giants like Amazon and Walmart are exploring stablecoin solutions to bypass credit card networks and reduce interchange fees.
Early pilots by Visa and Mastercard demonstrate that stablecoin settlement can reduce operational complexity and deliver near‑instant settlement for global merchants.
Corporate treasury and institutional demand
Large corporations and financial institutions are using stablecoins for cross‑border settlements and treasury management. Multinational corporations, logistics companies and fintech firms increasingly use stablecoins for 24/7 cross‑border payments.
Some banks plan to issue their own coins; JPMorgan’s JPM Coin is used for interbank settlements, and Finastra integrates Circle’s USDC to enable banks to settle cross‑border payments instantly. According to data, stablecoins hold around $160 billion in U.S. Treasuries, creating a new private‑sector demand base for safe assets and reinforcing the dollar’s dominance. The firm projects that adjusted stablecoin transaction volumes could reach $100 trillion within five years, drawing liquidity from cash, deposits and other digital assets.
Institutional adoption is also influenced by improved compliance measures. Visa Consulting launched a stablecoin advisory practice in 2025 to guide banks and businesses through regulatory and technical questions.
Risks and Challenges
Financial stability and deposit displacement
Despite the opportunities, stablecoins pose risks. Regulators worry about runs on stablecoin issuers if reserves are perceived as unsafe. The International Monetary Fund observes that stablecoins’ value can fluctuate if backing assets lose value or if users doubt their ability to redeem. If large numbers of users redeem stablecoins simultaneously, issuers may be forced to sell reserve assets, potentially destabilising short‑term Treasury markets. A professor quoted by the World Economic Forum warns that forced sales of Treasuries could raise interest rates and disrupt financial markets.
The Federal Reserve notes that stablecoin adoption could reduce banks’ transaction deposits, increasing reliance on uninsured wholesale funding and raising liquidity risks. During stress periods, investors may perceive stablecoins as safer than bank deposits, especially if reserves consist mainly of Treasury bills. However, the liquidity advantage of stablecoins may be situational; redemption processes often take longer than withdrawing bank deposits.
Currency substitution and capital flow concerns
Stablecoins can facilitate currency substitution in countries with unstable currencies. The IMF warns that widespread use of dollar‑denominated stablecoins could diminish a country’s ability to conduct monetary policy and control capital flows. Stablecoins could also be used to circumvent capital controls, making it harder for regulators to monitor cross‑border transactions. International cooperation is therefore essential to harmonize regulations and close potential regulatory gaps.
Compliance, security and user experience
Stablecoin systems must prevent illicit activity and protect user privacy. Permissionless blockchains are transparent, making it difficult to provide transactional privacy. Users also face risks such as lost private keys or inadequate custody solutions. Ongoing efforts aim to improve account management and authentication standards, including on‑chain identity mechanisms like zk‑Login.
Regulators mandate that issuers implement know‑your‑customer and anti‑money‑laundering checks; the GENIUS Act and MiCA impose these requirements. However, differences in national approaches create arbitrage opportunities, which issuers may exploit by locating where oversight is weaker. Establishing common standards is crucial to mitigate these risks.
The Road Ahead
Stablecoins are evolving from speculative instruments into components of the global financial plumbing. They process trillions of dollars in value each year, offer instant and inexpensive payments, and provide a programmable platform for innovation.
Regulatory frameworks like the GENIUS Act and MiCA are giving issuers and investors clearer rules, encouraging institutional adoption. Payment networks, banks, fintechs and merchants are integrating stablecoins into their settlement and treasury systems. Multinational corporations are using them for cross‑border transactions, while individuals in emerging markets adopt stablecoins as a low‑cost alternative to traditional remittances.
The next phase will depend on balancing innovation with stability. Policymakers must craft regulations that mitigate run risk, prevent illicit use and ensure interoperability across systems. Banks need to manage the potential impact on deposits and liquidity, while embracing opportunities to modernise payment rails.
