A scenario with both a clear regulatory framework and full integration of stablecoins into existing payment systems would provide fertile ground for meaningful adoption in payments. However, the extent of such uptake depends on the third variable: the attractiveness of other payment systems (new and existing ones).
The existence and development of alternatives such as tokenised deposits and central bank digital currencies might limit the relative attractiveness of stablecoins. Even though payment systems in Europe remain relatively cheap and fast, that experience is far from universal internationally. For regions where payments are costly and slow, introducing new technologies such as tokenisation into existing systems could allow them to rapidly close the gap with the advantages stablecoins offer, and potentially emerge as direct competitors to the crypto asset.
There is also a potential political push toward adopting central bank digital currencies, a dynamic relevant not only for jurisdictions with high payment costs but for the EU as well. The digital euro has become a central topic in the ‘strategic payment autonomy’ discussion and could directly compete with stablecoins for day-to-day payment use.
When it comes to the use of stablecoins as a store of value, a significant uptake would depend on two points:
- Whether direct remuneration by stablecoin issuers is allowed. The current ban on direct remuneration in major jurisdictions does little to support the use of stablecoins as deposit‑like instruments, except in countries where real interest rates are negative. However, we can’t exclude regulatory changes in coming years, especially as the topic is currently under discussion in the US with the upcoming Clarity Act. Read more on this in our regulatory footnotes below.
- The interest rate level paid on alternative deposit accounts (such as traditional bank deposits), as stablecoins could become more of a competitor to traditional deposit accounts in an environment where interest rates are zero or close to zero (which has been the case in the EU in recent years and is still the case in the US).
Only if, and with the right combination of these factors, could we foresee the adoption of stablecoins growing significantly to become broadly adopted. Yet, at present, it remains difficult to estimate the direction the crypto asset will follow in the years ahead.
Potential implications of stablecoins
Although stablecoins are not yet widely adopted and their future trajectory remains hard to pin down, our forthcoming articles will explore a scenario in which they scale enough to become a meaningful payment system. We see this as a necessary exercise: broad stablecoin adoption could carry significant and far‑reaching implications for the financial system – spanning the banking sector, emerging market stability, safe asset demand, monetary policy transmission, and even geopolitical and cyber‑risk dynamics.
Indeed, research has found that upon broad adoption, stablecoins could drive significant changes in banks’ funding. Depending on the required reserves, this could translate into either a net drop in retail deposits or a switch from retail into wholesale deposits (as MiCAR requires stablecoin issuers to hold part of the reserves in EU commercial banks). Overall, it could make banks’ funding structure more volatile as wholesale deposits are known to be less steady funding sources than retail ones (which are rarely moved across institutions). Also, wholesale deposits are costlier to hold for banks as the regulation imposes higher capital requirements, reflecting their higher volatility and general risk level.
Stablecoins could also have implications in emerging markets through currency substitution. It could amplify depreciation pressures under stress episodes by lowering friction around moving local currency into USD stablecoins. Countries with weak monetary credibility (i.e. high inflation, low interest rates) make stablecoins an attractive store of value and payment means, even outside stress episodes. The outflow to stablecoins could further undermine monetary policy transmission.
USD stablecoins also have the potential to boost demand for short-term US treasuries as issuers look for safe asset reserves. In principle, quick changes in transaction-driven demand could then amplify volatility in rates under a stress scenario. The proliferation of stablecoins (regardless of the currency) may also shift the composition of the overall monetary base with an asset reallocation from bank deposits into treasury/government bonds. This means potentially weaker monetary policy transmission through both the credit and interest rate channels.
While all these points remain theoretical implications of stablecoins, regulators are increasingly concerned and estimates on those impacts are developing. In future reports, we aim to contribute to the growing body of literature on this subject by diving deeper into each of these potential implications, seriously considering a scenario where stablecoins become a broadly adopted payment system.