The adoption of stablecoins could generate an additional US$1.4 trillion in demand for US dollars by 2027, if enough overseas investors wanted to own these digital assets, analysts at JPMorgan (JPM) said in a note on Tuesday.
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The potential increase in dollar demand underlines the importance of the burgeoning stablecoin market in traditional finance. JPMorgan believes that rather than accelerating de-dollarisation, the growth in stablecoin adoption has the potential to reinforce the dollar’s role in global finance.
The stablecoin market, which JPM said was currently worth US$260 billion, could grow to as much as US$2 trillion in their high-end scenario.
About 99 per cent of stablecoins, such as Tether, are pegged 1:1 to the dollar, meaning if foreign households or corporations convert holdings of their local currency into stablecoins, it would represent new US dollar demand.
Stablecoins are digital tokens that have a stable value against a regular currency, mainly the dollar, and are backed by reserves like the currency itself or other assets, such as Treasuries and T-bills.
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Euro zone finance ministers were scheduled to discuss on Thursday how they could support the development of euro-denominated stablecoins, a euro zone official said.