According to broker Bernstein’s research report released on Wednesday, the stablecoin market will increase from its current $125 billion value to $2.8 trillion over the next five years.
Stablecoins, a type of cryptocurrency often linked to the U.S. dollar, will experience a “growth flywheel” as a result of integration with consumer platforms, allowing issuers to increase distribution outside crypto native platforms and gain new users.
According to analysts lead by Gautam Chhugani, “we expect major global financial and consumer platforms to issue co-branded stablecoins to power value-exchange on their platforms.”
PayPal (PYPL), a major player in payments, recently announced that it would be entering the cryptocurrency market with PayPal USD (PYUSD), a stablecoin tethered to the dollar. For a significant financial company, this is a first. The Ethereum-based currency, which can be converted into dollars at any moment, will initially be made available on PayPal and later on Venmo.
A “hyper-fast financial settlement layer (layer 2 or centralised consumer platforms)” on open blockchains like Ethereum would fuel stablecoins, according to the note.
Growth will be led by “regulated, onshore stablecoins,” the analysts wrote.
Multiple jurisdictions, including Singapore, Hong Kong, and Japan, have all started pilot programmes for stablecoins and central bank digital currencies, the research said. “Stablecoin regulation enjoys more political support than crypto regulation,” it added.