Source: Cointelegraph Original: "{title}"
Last week, media reports indicated that Fidelity Investments, a U.S. asset management company, is testing a stablecoin, but there are currently no immediate plans for its launch. Additionally, the Trump family's cryptocurrency project, World Liberty Financial, announced plans to launch a USD-pegged stablecoin called USD1.
Stablecoins are cryptocurrencies designed to maintain a constant value, typically pegged to the U.S. dollar at a 1:1 ratio, making it easier for traders to transfer funds between different cryptocurrencies.
Current State of the Stablecoin Market
In recent years, the usage of stablecoins has surged, with the average supply of stablecoins in circulation growing by approximately 28% annually. Meanwhile, the total transfer volume of stablecoins reached $27.6 trillion in 2024, surpassing the combined transaction volume of Visa and Mastercard for that year.
Currently, Tether (USDT) remains the largest stablecoin in the market. Launched in 2014, USDT is pegged to the U.S. dollar at a 1:1 ratio and can be used across several major blockchains, including Ethereum, Solana, and Tron. This stablecoin dominates the industry with a market capitalization exceeding $140 billion.
The second-largest stablecoin is USD Coin (USDC), issued by Circle, with a market capitalization of over $60 billion.
The significant gap in global market capitalization between USDT and USDC can be partly attributed to their adoption in different regions. Most of USDT's trading volume is concentrated in Asia and Europe, while USDC is primarily traded in North America.
In addition to USDT and USDC, there are other stablecoins in circulation. For example, USDP is issued by the Web3 native company Paxos, while PYUSD is issued by traditional payment giant PayPal.
As of April 2, the top five stablecoins by market capitalization. Source: CoinGecko
Why Are Stablecoins Becoming More Popular?
Reducing Risk
One of the main reasons stablecoins were created and have gained such high popularity is that they are designed to reduce the risks associated with cryptocurrencies and create a digital currency that is usable and backed by real currency.
As a result, stablecoins can serve as a liquidity indicator, as they are intended to maintain stable prices. Market participants use stablecoins to purchase other cryptocurrencies in markets that do not accept fiat currencies and to store funds as stablecoins in response to significant fluctuations in the value of other cryptocurrencies.
Filling Key Gaps in Cryptocurrency Trading
Many globally recognized cryptocurrency exchanges face the issue that investors cannot use hard currencies (such as the U.S. dollar, euro, etc.) to purchase the cryptocurrencies they want.
Due to concerns about money laundering, many institutions have avoided using cryptocurrency exchanges. However, with the rise of stablecoins, they may become a savior for investors, as they will allow them to communicate and collaborate directly with banks, making transactions more transparent and efficient.
Regulatory Environment Releases Easing
In August 2023, the Monetary Authority of Singapore (MAS) established a comprehensive regulatory framework for stablecoins, clearly stating that issuing institutions must maintain minimum capital requirements and allocate reserves to low-risk assets. The framework also sets up strict redemption mechanisms and information disclosure systems.
The White House plans to submit a stablecoin bill to the Senate for review in April, marking an important step forward in the ongoing efforts to establish clear road rules for stablecoins. The White House stated that if the Senate version of the stablecoin bill receives sufficient support, it may be signed into law in its current form.
In addition, Hong Kong and the European Union are also set to release regulatory frameworks related to crypto assets in 2024, striving to balance promoting financial innovation and maintaining financial stability.
What’s Next for the Billion-Dollar Market?
Guy Young, founder of the decentralized stablecoin protocol Ethena, predicted in an interview with Cointelegraph last year that USDT will continue to be the leading stablecoin this year, with the total market capitalization of stablecoins rising to $300 billion.
"I expect the total amount of stablecoins in circulation to exceed $300 billion, with Tether continuing to dominate due to its existing moat, while other market participants will face challenges from emerging fintech companies and Web2 enterprises launching their own stablecoin products."
Cuy Sheffield, head of Visa's cryptocurrency division, stated that the widespread application of stablecoins could modernize and optimize global payments, but currently, the consumption opportunities for stablecoins remain limited.
"If 2024 is a year of recovery for stablecoin demand, then 2025 will bring the next key opportunity: the rise of stablecoins linked to bank cards."
While stablecoins provide investors with a relatively safe and low-volatility option, in recent years, they have become the most commonly used type in cryptocurrency criminal transactions.
According to Chainalysis's "2025 Crypto Crime Report," 63% of cryptocurrency transactions related to criminal activities last year involved stablecoins.
On-chain crime classified by asset. Source: Chainalysis
The report noted: "This new phenomenon is part of a broader ecosystem trend, with stablecoins also accounting for a significant share of all crypto activities, with an annual growth rate of approximately 77%."
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