In April, its market capitalization exceeded $230 billion, marking an extraordinary 54% jump compared to last year. The financial analysts at Citigroup have estimated that growth may shoot up to $3.7 trillion by 2030. This increase will be driven by regulatory clarity, along with the mass adoption of blockchain technology. Unfortunately, challenges still remain. In a base case, it’s a more conservative projection of $1.6 trillion market cap though that could fall to around $500 billion should any meaningful adoption hurdles persist.

Tether (USDT) and USDC currently control the stablecoin market with a share of 90% of the whole market. Many analysts think stablecoins to be the key catalyst that unlocks widespread adoption of blockchain technology and digitized currencies and regulations in the U.S. would certainty accelerate that process. That clarity could set the stage for meaningful adoption in the financial system by 2025.

"2025 has the potential to be blockchain’s ‘ChatGPT’ moment for adoption in the financial and public sector, driven by regulatory change," - Citigroup financial analysts

Citigroup’s April 23 wrap also makes the point that regulatory developments, especially at the federal and state level, could significantly shape what is held in stablecoin reserves. The collateral requirement means that stablecoin issuers must be backed one-to-one by US Treasuries, or another similarly risk-free asset. By 2030, their holdings may even surpass those of the largest individual jurisdictions.

"Stablecoin issuers could hold more US Treasuries by 2030 than any single jurisdiction today," - Citi

While touting the potential of stablecoins, the report does not shy away from discussion of risks, including 1,900 cases of depegging in 2023. The recent collapse of USDC’s peg in the wake of Silicon Valley Bank’s collapse underlines these risks.

"A major depegging event would likely dampen crypto market liquidity, trigger automated liquidations, impair trading platforms’ ability to meet redemptions, and potentially have broader contagion effects for the financial system," - Citi

As part of this shift, Russia is working on developing their own stablecoins. Citigroup analysts recently sounded alarms about the potential end of the U.S. dollar’s dominance. Their thinking is that non-U.S. policymakers might view stablecoins as just more dollar hegemony reinforcing tools.

"Geopolitics remain fluid. Should the world continue to drift into a multi-polar system it is likely that policymakers in China and Europe will be keen to promote central bank digital currencies (CBDCs) or stablecoins issued in their own currency," - Citi

Russia is also considering the development of its own stablecoins. Citigroup analysts suggest that while the U.S. dollar's dominance may evolve, stablecoins could be viewed by non-U.S. policymakers as an instrument of dollar hegemony.

"While the dollar’s dominance may evolve over time, with the euro or other currencies being promoted by national regulations, stablecoins may be viewed by many non-US policy makers as an instrument of dollar hegemony," - Citi

"The tailwinds of regulatory support and the increased integration of digital assets into incumbent financial institutions are setting the scene for increased usage of stablecoins," - Citi