Citigroup predicts stablecoin market will reach $3.7 trillion by 2030

A recent study from the Citi Institute, Citigroup's research organization, suggests that the global stablecoin market could reach $3.7 trillion by 2030. This is their most optimistic estimate, with the base scenario being $1.5 trillion.

The study acknowledges several risks that could lead to a pessimistic scenario of $0.5 trillion, but the report remains largely optimistic. Nonetheless, this sector could significantly impact the global market.

Citigroup is extremely optimistic about stablecoins

Citigroup researchers have a clear reason to be optimistic about stablecoins: friendly global regulations. The Citi Institute's report, titled "Digital Dollars," pays special attention to the increasing integration of stablecoins with the USD. This could be a driver for long-term growth:

"Government blockchain adoption falls into two categories: enabling new financial tools and modernizing systems. Stablecoins are now large holders of US Government Bonds, beginning to influence global financial flows. Their increasing acceptance reflects a sustained demand for USD-denominated assets," according to Artem Korenyuk, Managing Director at Citi.

The organization is particularly interested in regulations requiring stablecoin issuers to hold US Government Bond reserves. They predict that non-USD stablecoins, including CBDCs, will ultimately exist on the periphery, with 90% of the stablecoin market tied to the USD.

These reserve regulations will make issuers large holders of government bonds.

In this way, regulators will compel stablecoin issuers to significantly change their internal policies. Citigroup predicts this could better integrate stablecoins with the TradFi ecosystem.

Although stablecoins "pose some threats to traditional banks" for various reasons, these regulations will encourage an alternative collaborative model. Public spending on blockchain will also support this momentum.

However, Citigroup acknowledges significant risks in this rosy stablecoin picture. While their most optimistic estimate is a global industry worth $3.7 trillion by 2030, the pessimistic scenario is only $0.5 trillion.

That's a vast difference. The biggest risks include fraud, contagion from price collapses, and security concerns.

Nevertheless, it's important to remember that Citigroup has a surprisingly long history with cryptocurrencies. They have been considering entering this field four years ago and continue to publish new research about the market.