Stablecoins Surge to $260 Billion Market Cap, Driving Global Payments

Stablecoins, which are crypto tokens designed to maintain a steady value pegged 1:1 to a fiat currency like the US dollar, have significantly reshaped global payments over the past few years. These tokens have extended the utility of digital dollars beyond crypto trading, driving record volumes and attracting the attention of regulators worldwide who are trying to balance innovation with safety.

The total stablecoin market cap has surged to over $260 billion, a remarkable increase from about $5 billion in 2019. In 2024, stablecoins handled over $35 trillion in on-chain transactions, surpassing the annual volume of traditional payment giant Visa. Market commentators attribute their appeal to the combination of the stability of traditional money with the speed of crypto. User transfers can settle stablecoin transactions in minutes at a low cost, avoiding the delays associated with conventional payments. For instance, many users in emerging Asian markets use stablecoins for remittances to circumvent high fees and the volatility of local currencies.

Despite past failures, such as the TerraUSD collapse in 2022, today’s leading stablecoins have maintained their pegs through volatility by adhering to fully backed models. Issuers like Tether and Circle hold reserves of cash or short-term US Treasury bonds to maintain the dollar peg. Tether’s holdings of US treasuries are so substantial that it ranks among the top national creditors of the US government.

Between 2014 and 2017, stablecoin issuers such as USDC, DAI, and USDT chose Ethereum to launch because it was the most secure smart contract network and already thriving with DeFi applications. This decision created a feedback loop where every time people lent, traded, or paid with stablecoins, they paid Ethereum gas. Today, roughly one-third of all Ethereum fees originate from stablecoin activity, and these tokens serve as the default cash within lending pools and exchanges. However, high gas fees prompted everyday users to look for cheaper alternatives. One blockchain that has caught the attention of stablecoin issuers is Tron, which held over $80 billion in USDT, compared to Ethereum’s $63 billion. Solana also hosts large USDC volumes and even ran a Visa pilot for stablecoin settlements. Layer-2 networks on Ethereum are also increasingly handling stablecoin usage, offering lower fees while benefiting from Ethereum’s security. As a result, it’s becoming clear how stablecoins have transitioned to multi-chain ecosystems and are opting for networks that are relatively faster and cheaper.

Mainstream companies have integrated stablecoins into their core businesses. PayPal was one of the first companies to do this by releasing PYUSD, a dollar-backed token that moves across Ethereum and Solana. Early usage data showed that PYUSD was primarily used for international transfers, where it can significantly reduce remittance costs and times. To drive adoption, PayPal even introduced rewards (including an annual yield for holding PYUSD) and partnered with Coinbase to integrate the stablecoin into crypto trading and DeFi platforms. Similarly, Visa adopted stablecoins in its backend operations. The payments giant settled transactions with partners using Circle’s USDC stablecoin to boost its cross-border flows. Some banks have piloted their dollar tokens for institutional clients, and others hold stablecoins as liquidity on crypto exchanges. Fundstrat’s research suggests that in the near future, businesses ranging from credit card issuers to corporations may hold stablecoins as part of their treasury cash for instant payments.

In the US, lawmakers have advanced the first-ever stablecoin regulation through the GENIUS ACT to recognize the growing importance of these tokens. Adding to the bullish sentiment, US Treasury Secretary Scott Bessent stated that a robust legal framework could significantly expand the reach of stablecoins, potentially enabling the dollar stablecoin market to surpass $2 trillion by 2028.