2024 was a great year for stablecoins. 2025 will be even better

The stablecoin market went from promising to explosive in 2024. It started the year with a market cap of around $135 billion. By December, that number shot past $200 billion—a more than 50% increase. And since the November elections, it’s grown another 15%.

But don’t think for a second this momentum is slowing down. With a pro-crypto administration set to take the reins and Congress inching toward a long-awaited regulatory framework, 2025 is set to be even better for stablecoins.

The thing is USDC and USDT are becoming the backbone of the global financial ecosystem. They’re completely changing how people trade, save, and transact anywhere. Experts say the market’s value could double and hit $400 billion next year.

Regulations could double the stablecoin market

Stablecoins have been waiting for one thing to unlock their full potential: regulation. Matt Hougan, CIO at Bitwise Asset Management, points out that 2025 will be the year it finally happens. “Clear answers to big questions will spark massive new interest among issuers, consumers, and businesses,” he said.

This isn’t just about making crypto traders happy. A proper regulatory framework could bring in the big dogs—banks like J.P. Morgan and traditional financial institutions. With rules in place, they’d be free to issue their own stablecoins, creating a tidal wave of institutional adoption.

And the effects would be massive. Coinbase, for example, already has a 50/50 revenue-sharing deal with Circle, the company behind USDC. The more USDC grows, the more Coinbase cashs in on interest income from its reserves.

Meanwhile, Robinhood, Kraken, and Galaxy Digital have teamed up to launch USDG, a new dollar-backed stablecoin on what they’re calling the “Global Dollar Network.” And that’s just the beginning. Robinhood literally also acquired Bitstamp earlier this year.

Stablecoins and the US dollar’s global dominance

The rise of stablecoins isn’t just a crypto story. It’s a US dollar story. Stablecoins are pegged to fiat currencies, mostly the dollar. And as they grow, so does global demand for dollars. Michael Saylor, MicroStrategy co-founder, calls this the US’s big opportunity.

“If the US normalizes stablecoins, there’s no reason why banks and companies can’t issue $10 trillion of digital dollars backed by cash reserves,” he said recently.

Right now, stablecoins are already making the dollar more accessible in countries with weak currencies or failing banking systems. In these markets, dollar-backed stablecoins are often used for retail payments through smartphone apps.

In developed economies, however, they’re expected to start as tools for commercial blockchain applications. But the US is falling behind. Tether, the giant behind USDT, holds a 70% market share. Yet, it’s headquartered in the British Virgin Islands because the US lacks clear rules for issuing cryptos.

Regulators like incoming House Financial Services Committee Chair French Hill say fixing this is a top priority. He believes stablecoins could extend the dollar’s reserve currency status and boost competition in cross-border payments.

Circle CEO Jeremy Allaire agrees. He’s calling for federal laws to define stablecoins as legal digital cash. “We need full-reserve digital dollars like stablecoins to become a major export product of the United States,” he said.

Ethereum, partnerships, and the next phase of growth

Meanwhile, Ethereum has quietly become the backbone of stablecoins. Most of these digital dollars live on its blockchain, making it the most critical network for stablecoin issuance right now.

With regulations in sight, Ethereum’s role is only expected to grow. Stablecoins locked into Ethereum’s layer-2 solutions hit a record $13.5 billion before this month is over.

Circle and Binance are working to expand USDC adoption by adding more trading pairs and promotions. This is a big deal since USDC currently trails behind USDT in terms of liquidity and trading options.

Tether, though, has taken a different approach. It’s winding down its euro-pegged stablecoin, EURT, due to low demand and compliance challenges.

The clock is ticking for stablecoin legislation

Timing is everything. The Trump administration officially begins in January 2025, but analysts warn it could take months before any real policy changes happen. Kenneth Worthington from JPMorgan expects key crypto-related appointments, like chairs for the SEC and CFTC, to come after more urgent cabinet roles.

That means real action on stablecoins might not kick in until late 2025. Still, the groundwork is already being laid. House Majority Leader Steve Scalise has made digital asset regulation a top priority for his first 100 days. If stablecoin legislation makes it to the finish line, it could be the breakthrough the industry has been waiting for.

For now, stablecoins continue to grow, driven by rising trading volumes and increased adoption in decentralized finance. As of mid-December, stablecoin trading volumes on centralized exchanges hit $1.48 trillion. USDT accounted for 86.3% of those trades. Right now, its market capitalization is around $140 billion.

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