According to a report published last week by alternative asset manager Brevan Howard Digital, the market for stablecoins like tether (USDT) and USD Coin (USDC) is anticipated to expand to trillions of dollars in supply and hundreds of trillions of dollars in transaction value in the upcoming years as more and more people around the world use these cryptocurrencies to access U.S. currency.According to co-head of venture investments Peter Johnson and analyst Sai Nimmagadda, stablecoins will “increasingly provide financial services to the global unbanked and underbanked, provide an escape from high-inflation currencies, and ignite an explosion of innovation built upon these new global open-network money movement rails.”
According to the investment manager, the recent launch of PayPal USD (PYUSD), the company’s own stablecoin, by the payments giant Paypal (PYPL), “highlights the opportunity in stablecoins” and has the potential to “upend global financial services.”Stablecoins are a particular class of cryptocurrency whose value is tied to another asset, usually the dollar.
“In 2022, stablecoins settled over $11t on-chain, dwarfing the volumes processed by Paypal ($1.4t), almost surpassing the payment volume of Visa ($11.6t), and reaching 14% of the volume settled by ACH, and over 1% the volume settled by Fedwire,” the authors wrote.
A specific kind of computerized bank-to-bank transfer used in the US is called an ACH payment.Fedwire is a central bank money settlement mechanism run by American Federal Reserve institutions.
“It is remarkable that in just a few years, a new global money movement rail can be compared with some of the world’s largest and most important payment systems,” the asset manager said.
According to Brevan Howard Digital, there are over 25 million blockchain addresses that contain stablecoins worth over $1.A U.S. bank with 25 million accounts would be the fifth largest by number of accounts when compared to traditional finance.The high concentration of holdings of small-dollar stablecoins demonstrates the “potential for stablecoins to provide global financial services to customers underserved by traditional financial institutions.”
“Stablecoin usage has shown a low correlation with crypto exchange volumes,” which suggests that significant stablecoin transactions volumes are likely being used for non-speculative purposes, the report said.
Stablecoins have also demonstrated endurance throughout the recent crypto market collapse, with their overall market cap only declining by roughly 24% from its high, as opposed to a decline of 57% for the entire crypto market cap, the note continued.