The stablecoin market, once a niche utility for crypto traders, is on the cusp of a dramatic transformation. According to a recent report by Citi’s Future of Finance division, these digital tokens - primarily pegged to fiat currencies like the U.S. dollar - are rapidly evolving from their trading roots and moving into the broader financial system.
Backed by supportive regulation, Citi estimates that the stablecoin sector could reach a market cap of $1.6 trillion by 2030 under its base case, with an upside projection of $3.7 trillion.
This transition reflects a shift in how stablecoins are used and who is using them. Once confined to crypto exchanges and DeFi protocols, stablecoins are now making inroads into global payments, cross-border remittances, merchant settlement, and potentially even into the institutional liquidity stack of banks and asset managers.
From Trading Tools to Financial Infrastructure
Initially conceived as a way to stabilize value in the volatile crypto markets, stablecoins such as USDT (Tether) and USDC (Circle) became essential instruments for traders needing a dollar equivalent without exiting the crypto ecosystem. Today, that utility is expanding rapidly.
Large-scale digital asset platforms like Fireblocks are reporting a material increase in stablecoin usage from payment service providers. Over the past 90 days, Fireblocks processed $517 billion in stablecoin transfers - $82 billion of which came directly from payment companies. That segment alone grew over 38% quarter-over-quarter. With current trends, Fireblocks expects payment providers to account for half of all stablecoin activity within a year.
This is significant not only in scale but in impact. Stablecoins are now being used to facilitate real-world transactions like B2B settlements, e-commerce payments, and payroll remittances - use cases traditionally dominated by SWIFT wires, correspondent banking networks, and cash-based remittance corridors. The low cost, speed, and interoperability of stablecoins are helping them undercut legacy payment rails, particularly in high-friction environments such as emerging markets or cross-border SME transactions.
Integration with Mainstream Banking
Citi’s report anticipates that the adoption of stablecoins will not only continue but deepen within the traditional financial sector. Over the next five years, the report suggests stablecoins could begin to substitute for both domestic and offshore dollar holdings, providing businesses and households with an accessible, low-cost alternative to physical currency and bank deposits.
Ronit Ghose, head of Citi’s Future of Finance team, emphasized this point: “Stablecoins could be the cash leg for tokenized financial assets or for payments by SMEs and large corporates. They make it easier and cheaper for people around the world to hold dollars or euros.”
The future of stablecoin adoption, however, depends on their regulatory integration. Banks and payment institutions will need legal clarity to handle stablecoins as liabilities, process them as client funds, and manage associated risks such as reserve backing and counterparty exposure. That’s where the global regulatory debate enters the picture.
Regulatory Momentum - and Fragmentation
The possibility of stablecoins becoming a pillar of global finance is attracting attention from regulators worldwide. While the U.S. has taken incremental steps - such as proposing stablecoin-specific legislation and empowering the Federal Reserve to oversee issuers - Europe has moved faster. The EU’s Markets in Crypto-Assets (MiCA) framework, which includes stablecoin-specific provisions, is already drawing in compliant issuers.
In Citi’s projections, regulatory clarity is the critical enabler. Under its base case, with moderate regulatory support and growing institutional use, the stablecoin market could rise from around $240 billion today to $1.6 trillion by the end of the decade. But if regulation actively supports innovation and interoperability, a more aggressive $3.7 trillion market cap becomes feasible.
Still, there are major jurisdictional differences in how policymakers view stablecoins. While U.S. regulators debate their systemic impact and legal status, the EU prefers more tightly controlled, bank-issued digital tokens. Meanwhile, emerging markets and regional blocs in Asia and Latin America are exploring how stablecoins could address inefficiencies in domestic and cross-border payments. The global landscape remains fractured.
CBDCs: Cooperation, Competition, or Conflict?
The expansion of stablecoins also raises fundamental questions about the future of central bank money. Central Bank Digital Currencies (CBDCs) - government-issued digital cash - are being piloted in over 130 countries. In some ways, they mirror the functionality of stablecoins, promising instant settlement, programmability, and lower transaction costs.
Citi’s report explicitly draws the comparison. In it, Ghose notes that stablecoins and CBDCs will likely coexist, but their interplay will differ by region. “Depending on the country, there may be a stablecoin option or a CBDC option,” he said. Banks, he added, will adapt to whichever forms of digital value their regulatory environments support - be it wholesale CBDCs for interbank transfers or retail tokens for customer use.
The ideological tension between decentralized finance (DeFi) and state-backed CBDCs persists. Many crypto advocates view CBDCs as a centralized alternative designed to undercut the freedoms associated with stablecoins and cryptocurrencies. The comparison was colorfully illustrated by Ghose using a “Star Wars” analogy: “From a crypto perspective, it’s like Star Wars, where the CBDCs are the evil Empire, as opposed to the crypto guys, who see themselves as Luke Skywalker.”
This view is shared by some political actors as well, including former U.S. President Donald Trump, who has criticized CBDCs for their potential to enable financial surveillance. That political angle could shape the U.S. regulatory approach in the coming years, especially if stablecoins are framed as the more privacy-preserving, private-sector alternative.
Institutionalization, Yield, and Beyond
One of the most promising areas for stablecoin evolution lies in their potential to bear yield. At present, most stablecoins are passive representations of fiat currency held in reserve, earning interest for the issuer but not the user. However, there is growing interest in regulated, yield-bearing stablecoins that could serve as alternatives to money market funds or term deposits.
Such products would further integrate stablecoins into mainstream capital markets, especially if issued under the supervision of licensed banks or regulated tokenization platforms. They could also provide an on-ramp for institutions seeking dollar exposure in jurisdictions with underdeveloped banking infrastructure.
The same applies to tokenized treasury instruments, which some crypto firms are already piloting. By embedding short-term U.S. Treasury yield into a blockchain-based asset, these instruments blur the line between stablecoins and traditional securities. If these hybrid tokens gain regulatory approval, they could form part of liquidity management tools used by treasurers, asset managers, and even pension funds.
Stablecoins and the Next Stage of Digital Finance
The Citi report makes it clear: stablecoins are not just crypto tools anymore. They are becoming foundational components of a new digital financial architecture - one in which value moves instantly, globally, and under programmable logic.
Their role as settlement assets, remittance tools, and potentially even interest-bearing instruments places them at the heart of a rapidly evolving global economy. But much of this promise hinges on what regulators decide. Will they permit stablecoins to compete with CBDCs? Will they impose strict reserve and auditing standards? And will banks be allowed to issue and hold them?
Citi’s report doesn’t answer all of these questions, but it does frame the stakes. With a potential multi-trillion-dollar market emerging in just a few years, the decisions made now by policymakers and financial institutions will shape the trajectory of stablecoins- and perhaps the next iteration of global money itself.