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Stablecoins not a threat to banks in the near-term: Moody's analyst
TL;DR
Moody's analyst states that stablecoins currently have a limited impact on banks, with a market cap exceeding $300 billion. However, as stablecoins and tokenized real-world assets grow, banks may face increased competition and market share erosion.
Key points
- Stablecoins have a limited impact on banks currently
- Market capitalization of stablecoins exceeded $300 billion
- Stablecoins could increase competition for banks in the future
The impact of stablecoins on the banking sector appears “limited” at the current phase of the adoption cycle, but banks could face increasing competition and an erosion of market share as the stablecoin sector and tokenized real-world assets (RWAs) grow in market capitalization.
“So far, the use of stablecoins remains limited, but their market capitalization exceeded $300 billion at the end of last year,” Abhi Srivastava, associate vice president of Moody’s Investors Service Digital Economy Group, told Cointelegraph.
The stablecoin market cap has surged past $300 billion. Source: RWA.xyz
The role of stablecoins in payments, cross-border commerce and onchain finance is “expanding,” despite their currently limited role, Srivastava said, adding that existing payment systems in the US are already “fast, low-cost and trusted.” He said:
“For the banking sector, at this stage, disruption risk appears limited. In the near term, US rules that prohibit stablecoins from paying yield mean they are unlikely to replace traditional deposits at scale domestically.”
However, over time, growing adoption of stablecoins and tokenized RWAs, traditional or physical financial assets represented on a blockchain by a token, could place “pressure” on the banking sector, leading to deposit outflows and reduced lending capacity, he said.
Stablecoin regulatory policy has become a hot-button issue among crypto industry executives and those in the banking sector, with fears that yield-bearing stablecoins could erode banking market share proving to be a stumbling block for the CLARITY crypto market structure bill in Congress.
Related: Stablecoins behave like FX markets as liquidity splits: Eco CEO
CLARITY Act stalled, as banks fight yield-bearing stablecoins
Q&A
What is the current market capitalization of stablecoins?
The market capitalization of stablecoins has exceeded $300 billion.
How might stablecoins affect banks in the future?
While stablecoins have a limited impact now, they could increase competition and erode banks' market share as their adoption grows.
What role do stablecoins play in payments and finance?
Stablecoins are expanding their role in payments, cross-border commerce, and onchain finance, despite their limited current usage.
