Stablecoins, a type of cryptocurrency pegged to a reserve asset, have seen a rapid surge in adoption and market capitalisation over the past five years.
Total stablecoin market capitalisation is now roughly US$250 billion, according to an LSEG report, up from $180 billion at the start of 2024. Citi has projected that the stablecoin market will be at least $1.9 trillion by 2030, and possibly as much as $4 trillion.
While stablecoin use is set to keep rising as cryptocurrency grows more popular, several countries are introducing new regulations that could steer the course of the market in 2026.
What are stablecoins?
Stablecoins’ value is backed by a reserve asset, such as a fiat currency, a commodity, or another cryptocurrency.
The vast majority of popular stablecoins are backed by the U.S. dollar, representing around 99% of stablecoins’ market capitalisation. More than 80% of stablecoin transactions occur outside the U.S., however, according to a Brookings Institution report.
A stablecoin can be fully reserved, with the price of each coin supported by its underlying asset, or algorithmic, where coins are automatically created or destroyed to control prices.
Because their value is pegged to a reserve asset, stablecoins are typically less volatile than other cryptocurrencies, and are often used as a bridge from fiat currencies when buying crypto.
Stablecoins are also frequently used for cross-border payments. “They are easy to self-custody and transact, and they are also fast, particularly in the context of cross-border money movement,” said J.P. Morgan Brokers, Asset Managers and Exchanges equity analyst Kenneth Worthington.
“One could even consider them a better form than fiat, as they can move quicker and less expensively across existing financial infrastructure in certain circumstances.”
What’s behind the surge?
Stablecoin adoption has risen as cryptocurrency becomes more popular, and has also been spurred by growth in developing countries and increased interest from traditional financial institutions.
As stablecoins are frequently used when buying other forms of cryptocurrency, stablecoin transactions have risen in tandem with a wider crypto surge. Cryptocurrency ownership in the U.S. has nearly doubled over the past three years, and crypto transaction volume in the Asia Pacific rose by nearly $1 trillion in the twelve months to June.
For this reason, stablecoin market capitalisation also grows as the number of U.S. dollars in circulation rises. Stablecoin growth was between 15% and 26% during periods of monetary expansion, per LSEG.
In developing countries, stablecoins are being adopted as a way to access foreign currencies during currency devaluations or foreign exchange shortages. Sub-Saharan Africa’s monthly publicly visible crypto transactions reached almost $25 billion in March 2025, driven mainly by growing activity in Nigeria as its currency was abruptly devalued.
“Such devaluations typically drive volumes higher in two ways: more users move into crypto to hedge against inflation, and existing purchases appear larger in local currency terms as it takes more fiat to buy the same amount of crypto,” according to a Chainalysis report.
The stablecoin surge has also led to traditional financial institutions expanding their stablecoin-related offerings, potentially boosting adoption further. Citigroup, JPMorgan, and Bank of America have said this year they are considering launching stablecoins.
What does the near future hold for stablecoins?
Rafts of new regulatory legislation in countries like the U.S., the United Kingdom, and Australia are set to take effect over the next two years.
The U.S.' GENIUS Act requires 100% reserve backing by liquid assets for stablecoins. Signed into law in July, it will take effect by at least January 2027.
It also orders issuers to regularly disclose the composition of these reserves, and to form anti-money laundering and sanctions compliance programs. El Salvador-based Tether, the world’s largest stablecoin issuer, had its S&P Global rating downgraded in November due to a lack of disclosures.
Newly-appointed Federal Reserve Governor Stephen Miran has said that demand for U.S. dollar-backed stablecoins could help lower interest rates. Miran, who has argued that the neutral rate of interest is lower than most other Fed Governors say, claimed that stablecoins could further push it down.
“Stablecoins may become a multitrillion-dollar elephant in the room for central bankers,” said Miran. “Stablecoins are already increasing demand for U.S. Treasury bills and other dollar-denominated liquid assets by purchasers outside the United States, and this demand will continue growing.”
Meanwhile, the United Kingdom’s Bank of England proposed in November that stablecoin issuers be allowed to invest part of the assets backing them in government debt, with full rules due next year. It also plans to cap the amount of stablecoins that can be held at UK£20,000 for individuals and £10,000,000 for businesses, however.
Australia’s ASIC said in October that stablecoins will now be considered a financial product, and it has begun offering financial services licences to issuers.
The Treasury also released draft legislation that month that would form the basis of new rules for payment services providers, including defining APRA powers to regulate stablecoin issuers. The government aims to introduce full legislation to Parliament in 2026.
Azzet has contacted the industry body Stablecoin Standard for comment.
