As traditional financial firms increasingly explore the integration of stablecoins into their operations, Goldman Sachs has made a bold prediction: the stablecoin sector could soon reach valuations in the trillions.
This optimism comes on the heels of significant regulatory developments, most notably the recent introduction of the GENIUS Act, which aligns state and federal frameworks for stablecoin regulation.
‘Stablecoin Gold Rush’
US Treasury Secretary Scott Bessent expressed confidence in the role of stablecoins, suggesting they could significantly boost the market for US Treasuries.
According to a report from the Financial Times, Bessent has indicated that the government may increase the sale of short-term debt to meet the anticipated demand for these cryptocurrencies.
Goldman Sachs views this moment as the dawn of a “stablecoin gold rush.” In a recent research paper authored by Will Nance and his team, the bank noted that the global market for stablecoins currently stands at approximately $271 billion.
They anticipate significant growth, particularly for Circle’s USD Coin (USDC) stablecoin, which they believe will gain market share both on and off the Binance platform.
The report estimates that USDC could see an impressive $77 billion increase, representing a compound annual growth rate (CAGR) of 40% from 2024 to 2027.
The Potential Impact Of Dollar-Pegged Cryptocurrencies
The potential market for stablecoins is vast, with Goldman Sachs highlighting that Visa estimates the addressable market for payments at around $240 trillion in annual payment volume.
Consumer payments alone account for about $40 trillion, while business-to-business (B2B) payments and person-to-person (P2P) transactions make up the remainder.
The unique structure of stablecoins—requiring them to be backed one-to-one with US dollars or government bonds—means that each stablecoin issued directly increases demand for the bonds that back them.
Some market analysts believe this approach will have a profound impact on the bond market, particularly for short-dated bonds, which often yield low interest rates.
A research paper from the Bank for International Settlements also supports Goldman Sach’s view, suggesting that significant inflows into the stablecoin market could lower three-month Treasury yields by 2 to 2.5 basis points within a short time frame.
However, the bank’s paper also notes that the effects of stablecoin outflows are disproportionately greater, causing yields to rise by two to three times as much.
Amid significant regulatory progress from the Trump administration, including the passage of the GENIUS Act for stablecoins, the CLARITY Act, and the Anti-CBDC bill, there have been increased inflows in the broader crypto market.
Significant capital has entered Bitcoin and Ethereum exchange-traded funds (ETFs), and there is a new trend of adopting cryptocurrencies as treasury reserves. These factors have led to a new all-time high in total crypto market capitalization of $4.17 trillion.
As of this writing, the figure has dropped to $3.81 trillion, as the market’s largest cryptocurrencies have led the correction witnessed since last week.
Featured image from DALL-E, chart from TradingView.com
