Stablecoins May Make Banks Jealous: $2 Trillion Market Cap In Sight, Says Treasury 😲

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In the waning light of a world bent on innovation—or at least, imitation—the mighty United States Treasury has produced her report once more. And lo, what bold prophecy! The hallowed stablecoin, daughter of the cryptic blockchain, shows every sign of swelling her coffers to the sumptuous tune of $2 trillion by the fateful year of 2028. Yes, dear reader, $2 trillion—or as the ancients called it, “a rather enormous heap of dollars.”

At present, the sum sits, well-behaved and quietly ambitious, near $230 billion. Yet the venerable Treasury, doubtless peering into her crystal abacus, sees “[e]volving market dynamics [have] the potential to accelerate stablecoins’ trajectory to reach ~$2tn in market cap by 2028.” It is difficult, in fact, to recall a coin more stable, or at least more optimistic.

A stablecoin—lest you’ve been summarily exiled to the provinces without internet—is a sort of digital chameleon: a cryptocurrency tethered faithfully to the venerable US dollar. The report notes their omnipresence as “cash on-chain.” One can almost sense the traditional banknotes brooding in their vaults, wondering where they went awry.

But the drama unfolds further: “tokenized [money market funds]” have swaggered onto the stage, offering the perk of yields. Bankers everywhere clutch their monocles.

Embracing tokenization

The Treasury’s report, delivered after the second inaugural ball for President Trump (still somewhat star-spangled), again assures us that blockchain technology is not, after all, a passing infatuation. In December, there was a whisper in those gilded corridors: perhaps—just perhaps—cryptocurrency will build a “new financial market infrastructure,” and, in the process, turn stuffy US Treasury bills into the Belle of the Global Ball.

Such Dollar-pegged stablecoins as Tether (USDT) and USDC (one must not confuse them, although one might) do invest their fiat treasures in yield-bearing instruments. Thus, stablecoins are now tangled in a delicious dance with Treasury bills, occasionally stepping on their toes but, nonetheless, making the music more lively.

In official Decemberese: “[B]ecause most stablecoin collateral reportedly consists of either Treasury bills or Treasury-backed repurchase agreement transactions, the growth in stablecoins has likely resulted in a modest increase in demand for short-dated Treasury securities.” (It’s really much livelier if read aloud with a Russian accent.)

Now, with the quill freshly dipped in April ink, the Treasury proposes that stablecoin issuers might—bless their compliance—be law-bound to hold short-dated T-bills, thus forever entwining their fates. One can only imagine the dinner conversations at the Federal Reserve: “Did you hear what Circle did with their T-bills?”

And what of the banks? The proliferation of minted digits threatens to coax them into something radical—paying higher interest rates. Oh, the indignity.

As of April 25, Tether’s USDT, like some overfed landlord, commands a solid 66% of the stablecoin market, according to the watchful souls at Nansen. Its market capitalization swells to $150 billion. Circle’s USDC, no mere footnote, musters an honorable $60 billion. That, gentle reader, is not small change (unless you’re JPMorgan and have lost it behind the sofa).

And so, the curtain closes, but the ledger remains open; in the coin-riddled bazaar of finance, we await 2028—and wonder: will the bankers finally develop a sense of humor?

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2025-05-01 00:28