Stablecoin Supply May Surge 900% by 2028 With Genius Act Passage

Standard Chartered, a prominent investment bank, has released a research report predicting a significant growth in the stablecoin market. According to the report, the passage of the Guiding and Establishing National Innovation for U.S. Stablecoins (Genius) Act in the coming months could lead to an almost 10-fold increase in stablecoin supply. The analysts, led by Geoff Kendrick, estimate that this legislative move would elevate the total stablecoin supply from the current $230 billion to a staggering $2 trillion by the end of 2028.

Stablecoins, which are cryptocurrencies pegged to the value of another asset such as the U.S. dollar or gold, play a crucial role in cryptocurrency markets and are widely used for international money transfers. The proposed legislation, which was cleared by the Senate Banking Committee in March, is expected to be passed by Congress and signed into law by the President around the middle of the year. This legislative action would further legitimize the stablecoin industry, according to the report.

The report also highlights the implications of an increased stablecoin supply on U.S. Treasury buying and U.S. dollar hegemony. The estimated increase in stablecoin issuance would necessitate the additional purchase of $1.6 trillion in Treasury bills over the next four years. This amount is substantial enough to absorb all the fresh T-bill issuance planned for the remainder of the President's second term. Additionally, the increased demand for dollar-denominated stablecoin reserves would result in additional demand for U.S. dollars, thereby supporting dollar hegemony.

Standard Chartered anticipates that the industry will adopt the model used by Circle, the second-largest stablecoin issuer. Circle holds 88% of its reserves in Treasury bills with an average duration of 12 days. In comparison, Tether, the largest stablecoin issuer, holds 66% of its USDT reserves in Treasury bills. This shift towards holding reserves in Treasury bills is expected to further stabilize the market and enhance the reliability of stablecoins.