The ability to settle payments globally in a fast, secure, and cost-effective way is being transformed by the proliferation of tokenized cash using blockchain technology. Based on multiple tailwinds, 2025 may witness a material shift across the payments industry, for which both incumbents and disruptors need to make urgent preparations. Stablecoins, a form of digital cash issued as tokens on a blockchain, have emerged as a global alternative to conventional payments infrastructure. Currently issued mostly in US dollars, stablecoin circulation has doubled over the past 18 months but still facilitates only about $30 billion of transactions daily—less than 1 percent of global money flows.
2025 could be an inflection point for stablecoins
Improving regulatory clarity in major jurisdictions
In 2023, the first wide-ranging regulatory frameworks were introduced, most notably the Regulation on Markets in Crypto-Assets (MiCA) rules for stablecoins in the European Union, the Financial Services and Markets Act in the United Kingdom, and similar licensing measures in Hong Kong, Japan, and Singapore. As of May 2025, multiple pieces of legislation are in progress globally that will seek to ensure stable and secure operation of tokenized cash, covering reserves, disclosures, AML and KYC compliance, and proper licensing. One example is the US Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act of 2025, which passed the Senate in June. The legislation stipulates conditions for reserves, stability, and oversight that enforce the validity and utility of stablecoins as digital cash.
Improving technology solutions
In the past few years, the infrastructure for tokenized cash, including blockchain, wallets, and on-chain analytics, has all matured, making the ecosystem more secure, scalable, and user-friendly. Blockchains such as Avalanche, Ethereum, and Solana have improved performance through Layer 2 scaling solutions (for example, Arbitrum and Optimism) and faster consensus mechanisms. These enhancements have reduced network congestion and fees while improving utility for real-world applications such as instant payments.
Growing circulation of stablecoins and demand for yield-bearing cash equivalents
In light of this maturing infrastructure, the circulation of stablecoins is growing. The total value of issued stablecoins has doubled to $250 billion today from $120 billion 18 months ago, and it is forecast to reach more than $400 billion by year-end and $2 trillion by 2028.
Parallel to this growth, a number of yield-bearing, cash-equivalent tokens have been issued, typically representing investment in underlying short-duration government securities, including the BlackRock USD Institutional Digital Liquidity Fund ($2.9 billion); the Franklin OnChain U.S. Government Money Fund—with shares represented by the BENJI token—($0.8 billion); and the Ondo Short-Term US Treasuries Fund ($0.7 billion).
Growing demand from practical applications
Demand for stablecoins comes principally from three sources:
- Settlement of crypto trading. Stablecoins act as the base pairs in the majority of crypto trading, lending, and yield farming. Estimates by the US Federal Reserve Board indicate that more than 80 percent of trade volume on major centralized crypto exchanges involves stablecoins as part of the traded pair. Therefore, as crypto trading continues to grow, there may be increasing demand for stablecoins.
- Cross-border payments and remittances. Where permitted by prevailing regulation, stablecoins offer a faster and cheaper alternative to traditional remittance rails. This is especially important in corridors supporting remittances by migrant workers and in solving perennial payment challenges experienced by small businesses.
- Emerging-market reserve currency. In countries historically suffering currency instability, dollar-backed stablecoins offer a hedge against inflation and are valued for secure peer-to-peer payments.
From evolving regulation to improving security technology, growing consumer expectations, and legitimate scaling of solutions, the emergence of stablecoins as a serious contender for global payments has spurred a paradigm shift in the delivery of financial services. How incumbent financial institutions respond and innovate could define their relevance in the globalization of instant value exchange and how value is stored. The way in which they engage could lay the foundation for development of further use cases of digital assets in the near future.
Leave a Reply