Goldman Sachs Forecasts 40% CAGR for USDC Amid Stablecoin Surge

Goldman Sachs has issued a report predicting a massive surge in the stablecoin market, with trillions of dollars expected to flow into the sector, potentially reshaping the role of USDC in the global financial landscape. The bank’s research highlights a “stablecoin gold rush” driven by regulatory clarity, increased adoption of digital assets, and the growing demand for U.S. Treasuries, particularly through stablecoins backed by cash and government securities [1].

According to the report, the global stablecoin market, currently valued at around $271 billion, is dominated by Tether’s USDT. However, Goldman Sachs forecasts that Circle’s USDC could see a $77 billion growth between 2024 and 2027, representing a compound annual growth rate of approximately 40%. This projection is based on the bank’s analysis of the evolving regulatory environment, including the recently passed GENIUS Act, which provides a federal framework for stablecoin operations and is expected to boost the legitimacy and adoption of these digital assets [1].

Circle, the issuer of USDC, is positioning itself for this expansion. The company, which went public earlier this year, has partnered with major financial platforms and is expanding its digital infrastructure, including the launch of its own Layer-1 blockchain. The regulatory clarity provided by the GENIUS Act aligns with Circle’s operations, particularly its practice of maintaining fully collateralized reserves. This has positioned USDC to benefit from growing demand for stablecoins in both crypto trading and broader financial systems [1].

U.S. Treasury Secretary Scott Bessent has publicly endorsed the role of stablecoins in reinforcing the dollar’s position as the global reserve currency and in driving demand for U.S. Treasuries. The Treasury Department has emphasized that stablecoins backed by U.S. dollars and Treasuries could serve as a multitrillion-dollar engine for U.S. debt. The GENIUS Act requires stablecoin issuers to maintain one-to-one reserves in highly liquid and ultra-safe assets, further reinforcing the link between stablecoins and traditional financial instruments [1].

The regulatory shift also creates a competitive landscape between USDC and USDT. Tether, with a market cap of $165 billion, faces questions about its reserve transparency. While the company has indicated it is working toward GENIUS Act compliance, the new standards appear to favor U.S.-based issuers with audited reserves, potentially giving Circle a long-term advantage. Goldman Sachs analysts suggest that this could tilt the balance of power in the stablecoin market, with USDC positioned to gain market share [1].

However, not all analysts are bullish on the scale of the impact. UBS’s Paul Donovan has noted that the trend might simply redistribute existing Treasury demand rather than generate entirely new buyers. Despite this, empirical evidence suggests that stablecoin flows already influence Treasury markets. A Bank for International Settlements study found that inflows of stablecoin-backed assets tend to lower three-month Treasury yields, while outflows trigger upward pressure [1].

As the compliance era takes hold, the contest between USDC and USDT is shaping not just the future of stablecoins but also the dynamics of U.S. Treasury demand, with implications stretching from Wall Street to Washington. The evolving landscape underscores the potential of stablecoins to become a critical component of the global financial system, driven by both innovation and regulation.

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Source: [1] Goldman Sachs Bombshell: ‘Trillions’ to Flood the Stablecoin Market – Is USDC Set to Explode? (https://cryptonews.com/news/goldman-sachs-bombshell-trillions-to-flood-the-stablecoin-market-is-usdc-set-to-explode/)