tl;dr
A Coinbase report projects stablecoins could grow to a $1.2 trillion market by 2028, nearly five times their current $270 billion size. This expansion would require issuers to purchase about $5.3 billion in Treasury bills weekly, potentially lowering three-month Treasury yields by two to four basis ...
Stablecoins could balloon into a $1.2 trillion market by 2028, potentially putting pressure on U.S. debt markets, according to a recent Coinbase report. The forecast, based on extensive growth simulations, suggests the sector might expand nearly fivefold from its current valuation of $270 billion. This growth projection arrives amid rising regulatory scrutiny as stablecoins become more entwined with the broader financial system.
These digital tokens, primarily pegged to the U.S. dollar, are issued by companies like Circle and Tether, which back them with short-term government securities. Coinbase’s analysis indicates that continued expansion would require issuers to buy approximately $5.3 billion in Treasury bills weekly. Such demand could nudge down yields on three-month Treasuries by two to four basis points over time—a subtle yet impactful change given the $6 trillion money market’s sensitivity to yield fluctuations, which affects borrowing costs for banks and corporations.
The report also cautioned that fund flows might not be one-way. Rapid redemption events could force issuers to liquidate Treasury holdings quickly, risking liquidity strains in the short-term debt market. For instance, a modeled $3.5 billion outflow in under a week could trigger hurried sales and market stress.
Regulatory developments, especially the GENIUS Act slated to take effect in 2027, are pivotal for shaping stablecoin adoption. This legislation mandates full reserves, independent audits, and bankruptcy protections while barring access to Federal Reserve liquidity facilities. Coinbase analysts believe these rules will lessen the likelihood of destabilizing runs and encourage traditional financial institutions to engage more confidently with stablecoins, fostering steady growth over speculative spikes.
Importantly, stablecoins are moving beyond crypto trading, increasingly serving as settlement mechanisms and payment rails. As adoption accelerates, their influence may reach far beyond digital assets, potentially reshaping U.S. government debt market dynamics and the broader financial landscape.