The US Department of the Treasury predicts that the stablecoin market could reach a market capitalization of $2 trillion by 2028. This marks a sevenfold increase from its current level of approximately $240 billion.

Meanwhile, MEXC COO has stated that this milestone may be achieved sooner, possibly by next year. 

Why the Stablecoin Market is Set to Explode by 2028

The Treasury Department shared its optimistic outlook in the Treasury Borrowing Advisory Committee’s (TBAC) report released on April 30. The report outlined several key drivers for rapid adoption and market growth for stablecoins. 

Institutional interest in crypto products, such as Bitcoin (BTC) and Ethereum (ETH) ETFs, is increasing. Notably, stablecoins play a central role in blockchain-based transactions, especially as the tokenization of financial assets expands. 

Merchant integrations, like PayPal’s acceptance of stablecoins, further broaden their practical use as a payment mechanism. The rise of interest-bearing stablecoins enhances their appeal as a store of value and yield-generating asset. 

Additionally, clearer regulatory frameworks, including the potential inclusion of stablecoins in liquidity management strategies and allowing banks to access public blockchains, would integrate stablecoins into traditional financial systems. The developments position these assets for significant market expansion.

“Evolving market dynamics, structures, and incentives have the potential to accelerate stablecoins’ trajectory to reach ~$2 trillion in market cap by 2028,” the report read.

Currently, USD-pegged stablecoins dominate the market, accounting for over 99% of the market cap. Tether (USDT) is the leading player, with a capitalization of $145 billion. Circle’s USDC (USDC) comes in second with a market cap of $60 billion.

Thus, their growing adoption could significantly impact the banking and Treasury markets. Stablecoins, particularly those that are yield-bearing or offer unique payment features, could lead to a shift in demand from traditional bank deposits to stablecoins. This, in turn, could force banks to raise interest rates or find alternative funding sources.

Additionally, the report noted that stablecoin adoption could increase demand for short-term Treasuries. This is contingent on the passing of the GENIUS Act. The proposed bill mandates that stablecoin issuers hold US Treasuries as reserves.

Additionally, the reserve requirements outlined in the bill could help mitigate the risk of de-pegging. This would reduce the need for issuers to rely on the Federal Reserve during times of stress or volatility.

“Demand in stablecoins could have a net neutral impact on the US money supply, however the attractiveness of USD-pegged stablecoins could drive currently non-USD liquidity holdings into USD,” the report added.

MEXC COO Predicts $2 Trillion Stablecoin Market by 2026

Nonetheless, Tracy Jin, COO of cryptocurrency exchange MEXC, believes a $2 trillion market may be closer.

“With many sovereign banks and corporations exploring stablecoin issuance, particularly in other fiat currencies, and governments prioritizing regulation clarity, the stablecoin market cap could exceed $2 trillion by 2026,” Jin told BeInCrypto.

Jin highlighted that ongoing macroeconomic uncertainty will likely drive further growth in stablecoin market capitalization.

“Despite the recent volatile market landscape, stablecoin demand has remained resilient, growing over $38 billion year-to-date. Stablecoins now account for 1% of the global M2 USD money supply, processing over $33 trillion in volume in the last year, including $2.8 trillion in the last month alone,” she said.

According to Jin, the expanding role of these assets in decentralized finance (DeFi), cross-border payments, and digital asset trading is expected to be crucial in the next phase of cryptocurrency market growth and the broader mainstream adoption of digital assets. 

Their capacity to provide stability and liquidity, particularly during times of market volatility and liquidity shortages, solidifies their importance as a core asset for institutional and retail investors.