Standard Chartered expects stablecoin supply to surge to $2 trillion by 2028

Total stablecoin supply could rise nearly tenfold to $2 trillion by the end of 2028, up from around $230 billion today, driven by expected U.S. legislation that would formalize rules for the sector, according to Standard Chartered analysts.

The Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act — a stablecoin-focused bill that passed the Senate Banking Committee last month — is planned to become law by the summer, analysts led by Geoffrey Kendrick, Standard Chartered's global head of digital assets research, wrote in a report published Tuesday. The analysts said the legislation would legitimize the sector and accelerate stablecoin adoption.

"We estimate that this would cause total stablecoin supply to rise from $230 billion today to $2 trillion by end-2028," the analysts noted. "This has implications for both U.S. Treasury buying (for reserve purposes) and USD hegemony."

That level of growth would spur demand for $1.6 trillion worth of U.S. Treasury bills over the next four years, the analysts said — enough to absorb all new T-bill issuance expected during President Donald Trump's second term.

"Our estimate that the stablecoin industry will need to buy $1.6 trillion of T-bills over the next four years ($400 billion a year) suggests that the industry could well account for the largest buying flow of any sector across all U.S. Treasuries," the analysts said. "Based on the post-COVID trends of the past four years, the only similar-sized demand was from foreign buyers, but this was spread across T-bills, notes and bonds."

Circle's reserve model could set the industry standard

Once the legislation passes, the stablecoin industry — including Tether — would likely adopt the reserve approach used by Circle, which holds 88% of USDC's backing in short-term U.S. government bonds with an average duration of just 12 days, according to the analysts. Based on that model, stablecoin issuers would collectively hold around $1.75 trillion in T-bills by 2028, up from about $150 billion today, the analysts said.

"The GENIUS Act requires holdings to have a duration of 93 days or less," the analysts said. "Given that stablecoin issuers would likely prefer to avoid risk around the time of FOMC [the Federal Open Market Committee] meetings, we see Circle's shorter-duration holdings as a good indication of what the industry will adopt going forward."

The expected rise in stablecoin reserves would boost demand for U.S. dollars, according to the analysts. It could also support "USD hegemony" — that is, maintain the dollar's position as the leading currency for trade and payments even as trade tensions pose risks to its status, the analysts said.

"The holy grail of international finance is finding an alternative to the USD that offers the same flexibility and liquidity as the USD," the analysts wrote. "On the face of it, stablecoin development could initially increase the attractiveness of USD assets if innovation were concentrated in USD stablecoins."

However, a long-term risk for the dollar, the analysts said, would be if stablecoin development moves away from USD-backed tokens to ones tied to other currencies or a mix of currencies.

"The IMF's [International Monetary Fund's] SDR [Special Drawing Rights] basket never became accepted outside of a very narrow range of transactions, but it is possible that a flexible, liquid stablecoin basket could become popular over time," according to the analysts. "This type of diversified basket could attract reserve managers if holding reserves in digital assets ever became accepted."