Morningstar estimates the stablecoin market could grow to $1.45 trillion by 2035, from just $300.0 billion today. The most promising uses that drive this growth include cryptocurrency trading, business-to-business payments, emerging-market deposits, and remittances.
Despite those growth expectations, our projections arrive well below some of our peers, who appear to be extrapolating too much from the strong growth seen in 2025. We believe that more infrastructure needs to be built to drive adoption, and that the benefits of stablecoins are not as universal as some proponents suggest.
The Possible Impact of Stablecoins
So, who stands to benefit from this growing but generally uninsured segment of the digital asset market?
Let’s define them first. Stablecoins are a type of cryptocurrency that’s most frequently tied to stable assets like the US dollar, although they can also be pegged to other financial instruments, commodities, or even algorithmically managed (although these have a poor track record). Stablecoins are designed to be far less volatile than traditional cryptocurrencies. Some people use them for fast, inexpensive cross-border transactions and as collateral in crypto lending.
In a scenario of widespread adoption, the key beneficiaries would likely include:
The US government, in the form of higher demand for its debt securities and commensurately lower borrowing costs.
Stablecoin issuers themselves, because they earn interest on their reserves, which is the core of their revenue model.
The effect of broad stablecoin adoption is expected to be mixed for other groups:
For consumers, higher yields on idle cash—a modest benefit for most—may be offset in part or in full by higher borrowing costs and higher bank fees as lenders seek to recoup lost net interest income. The benefits are the highest in emerging markets, where consumers could benefit from the relative stability of assets that peg to the US dollar.
For retail investors, stablecoins are likely to compete with established cash alternatives like money market funds, certificates of deposit, and high-yield savings accounts. Those already meet most consumers’ yield and liquidity needs and offer advantages like FDIC insurance.
For banks, broad adoption of stablecoins would threaten their lowest-cost funding source: retail deposits, while increasing their holdings of higher-cost, uninsured commercial deposits from stablecoin issuers themselves. This is a serious risk, as even if banks were able to increase loan prices (yields) to offset upward pressure on the cost of funding, the likely outcome would be lower loan demand and, overall, lower net interest income across the board.
For consumer payments firms, we don’t expect major disruption from stablecoins at this point. Credit card networks have better rewards and fraud protection, and they’re broadly accepted. One vulnerability is remittances because stablecoins can facilitate less expensive and faster transfers, which could hurt Western Union, for example.
The Genius Act: A Turning Point for Stablecoins
The passage of the Genius Act has served as a flashpoint for stablecoins, which had previously been confined almost exclusively to cryptocurrency applications. The Genius Act provided an official regulatory framework for recognized stablecoins, including considerations like which companies can issue stablecoins, what sort of assets they are allowed to hold as reserves, and regulatory and reporting requirements. Together, these help reduce uncertainty around the asset class and pave the way toward more widespread institutional adoption.
With a clearer regulatory framework in place, financial-services firms are considering ways they can benefit from the promises of stablecoin-enabled transactions, like nearly instant settlement speeds and low transaction costs, while industry insiders continue to wrestle with the potential for those assets to meaningfully replace low-cost bank deposits that represent the lifeblood of the banking industry.
Why Banks Should Be Paying Attention
The bottom line for financial institutions: The stablecoin threat should be taken seriously, given what appears to be increasing household sensitivity to yield earned on cash and cash-equivalent balances.
Overall, banks appear to be in a solid position, with strong deposit growth and with historically low deposit costs relative to the still-elevated federal-funds rate, the short-term interest rate benchmark in the US. From a cash-allocation perspective, balances remain slightly below what we would expect given long-term historical trends and higher short-term interest rates, but no more than would be considered normal given an outstanding, practically uninterrupted 15-year period for equity market returns in the US.
The three areas we’d draw investor and bank management’s attention to are rising deposit betas (the degree to which banks pass interest rate changes through to depositors), declining customer balances in no- and low-interest checking accounts over the past few decades, and strong growth among a small but rapidly growing cadre of fintech firms that offer far more competitive yields than traditional banking peers.
These factors may point toward a retail consumer who has grown savvier in maximizing yield on idle cash and could be more amenable to a low-friction, high-yield solution like stablecoins if appropriately designed and marketed, to the detriment of banks.
What can the banks do to compete? Provide high enough deposit yields to deter customer switching and deepen customer relationships by making their banking offerings better for consumers who tap into more of their platform.
Stablecoins’ Impact on Consumer Payments Firms
While the appeal of lower fees relative to credit and debit card interchange is obvious to merchants, consumer preference has always driven the evolution of the industry. And consumer preference is heavily driven by rewards, where cards have a significant advantage. Any stablecoin rewards are necessarily bounded by short-term US Treasury yields, and our analysis suggests that credit card providers have a significant structural advantage that protects the ecosystem (and the credit card networks, Visa and Mastercard), even if 100% of idle consumer cash was held in stablecoin assets.
Where we do envision meaningful disruption is in remittance payments, leading us to cut our fair value estimate for Western Union to $11 from $16 as we recognize the significant potential for stablecoins to reduce the cost of remittance payments, at least in higher-volume currencies.
Michael Miller, Brett Horn, and Maoyuan Chen contributed to this article.