NEW YORK – Deutsche Bank forecasts that stablecoins, a type of digital currency whose value is stable because it is pegged to certain assets such as the US dollar or gold, will soon become part of the mainstream financial system.

This was stated by Deutsche Bank in a thematic research report authored by Marion Laboure, the bank’s thematic research director, and analyst Camilla Siazon.

In their presentation, they said stablecoin usage is expected to expand further this year, alongside efforts by the US to promote cryptocurrency market regulation through legislation currently being drafted.

According to markets.businessinsider.com on Thursday (15/5), stablecoins are decentralised digital currencies traded on blockchain networks—similar to cryptocurrencies like Bitcoin, Ethereum, and various “meme coins” such as Dogecoin and US$Trump.

However, what distinguishes stablecoins is that their value is pegged to stable assets such as the US dollar or gold.

For example, one stablecoin may be worth one US dollar, with its value tracking fluctuations of the underlying asset.

The most well-known stablecoin today is Tether, which has a market capitalisation of about US$150 billion according to CoinMarketCap data.

Deutsche Bank notes that the total market capitalisation of stablecoins overall has reached US$246 billion, with dozens of other stablecoins circulating in the market.

Two bills currently being drafted in the US Congress—the STABLE Act in the House and the GENIUS Act in the Senate—aim to create a clear legal framework for dollar-based stablecoins.

Yet the regulatory efforts are not without political controversy. Some Democratic senators oppose the GENIUS Act due to concerns over Donald Trump and his family’s connections to the crypto industry.

Trump and his wife Melania even hold crypto assets bearing their names, launched shortly after Trump became president.

Stablecoin market capitalisation has surged from US$20 billion in 2020 to over US$246 billion, a rise of more than 1,200% in less than five years.

In 2023, stablecoin transaction volume reached US$28 trillion, surpassing transaction volumes of major card providers such as Visa and Mastercard.

Deutsche Bank analysts say stablecoins currently underpin more than two-thirds of all cryptocurrency trading.

Moreover, 83% of fiat-backed stablecoins today are pegged to the US dollar.

Around US$120 billion of dollar reserves are held in stablecoins, and Deutsche Bank notes that US$99 billion in US Treasury Bills are owned by Tether, making it one of the largest holders of US government debt worldwide.

According to Laboure and Siazon, widespread adoption of stablecoins will drive increased demand for US debt and strengthen the digital dollar-based financial infrastructure.

Stablecoins are now seen as an integral part of the digital financial ecosystem, reshaping the dynamics of foreign exchange trading, global liquidity, capital flows, and payment system innovation.

“Stablecoins are now a crucial part of the digital dollar infrastructure,” they wrote.

“US regulation will bring legal clarity, pave the way for mainstream use, and deepen integration of the global financial system,” they added. (DK/ZH)