The stablecoin market is projected to skyrocket to $2.8 trillion of tokenized digital currency in the next five years, according to a research report from broker Bernstein on Wednesday. This is a significant increase from the current market size of $125 billion. Integration with consumer platforms is expected to create a growth flywheel for stablecoins, allowing them to capture users and expand beyond crypto native platforms.
We expect major global financial and consumer platforms to issue co-branded stablecoins to power value-exchange on their platforms, said Gautam Chhugani, lead analyst of the report. This week, PayPal (PYPL) announced its own dollar-pegged stablecoin, PayPal USD (PYUSD), which is the first of its kind for a major financial company. The Ethereum-based token will be available on PayPal and Venmo, and can be exchanged for dollars at any time.
The report also noted that stablecoins will be powered by a hyper-fast financial settlement layer on public blockchains such as Ethereum. Growth will be driven by regulated, onshore stablecoins, as stablecoin regulation enjoys more political support than crypto regulation, with multiple jurisdictions launching pilot projects for stablecoins and CBDCs.