Stablecoin Adoption Soars Going Into 2025
The stablecoin market is set to close 2024 with remarkable milestones and achievements.
As we look ahead to 2025, the stage is set for even greater progress as mass adoption begins to take shape.
Before exploring the future, it’s essential to review the developments of 2024. Throughout 2024, trends from previous years persisted.
Major issuers like Tether and Circle explored stablecoins pegged to currencies other than the US dollar, but adoption has been slow.
Euro-backed stablecoins remain a niche product with relatively small market capitalizations, even as high-profile issuers have struggled to gain traction.
The market has shown a clear preference for Tether’s USDT and Circle’s USDC, with limited willingness to experiment with new options.
This hesitancy may stem from past events like the 2022 collapse of Terraform Labs and its TerraUSD (UST) stablecoin, which caused substantial financial losses and eroded trust in algorithmic and decentralized stablecoins.
As a result, these alternatives maintain only a minor share of the market compared to USDT and USDC, though they continue to have dedicated supporters.
Despite these challenges, 2024 has been a positive year for the crypto industry overall.
Bitcoin reached $100,000, regulatory frameworks have been advancing globally, and traditional financial institutions have begun exploring the market.
Stablecoin issuance has grown steadily, setting new records.
In Singapore, stablecoin payments exceeded $1 billion in value, and usage is expected to expand globally.
In the coming year, more stablecoins are likely to be issued by financial institutions.
Tether has already demonstrated the profitability of this model, earning $5.2 billion in the first half of 2024 by investing reserves in US Treasury bonds.
The strategy is straightforward: launch a regulated stablecoin, partner with a prominent exchange to promote it, and earn consistent yields from fiat reserves.
Exchanges often incentivize adoption by removing fees on the stablecoin, attracting clients to use it.
This model is becoming increasingly appealing to traditional financial players.
The European Union’s Markets in Crypto-Assets (MiCA) regulation, scheduled to take full effect in January 2025, will play a pivotal role.
MiCA requires stablecoin issuers to obtain licenses and provides a clear regulatory framework for financial institutions to enter the crypto market.
This regulatory clarity will pave the way for banks to offer custody services, enabling them to securely store digital assets for institutional investors and cautious retail users.
Such services are vital for integrating crypto into the broader financial ecosystem.
However, concerns remain around Tether’s USDT.
While it dominates the market, USDT lacks the licensing required for MiCA compliance.
Reports suggest that exchanges may delist USDT for European users if Tether does not secure a license, potentially opening the door for regulated alternatives like USDC, which has already obtained European approvals.
MiCA could also encourage local players to issue euro-backed stablecoins, increasing competition and potentially reducing the dominance of dollar-centric options.
Another significant trend in 2025 will be the rise of stablecoins tied to local currencies.
In 2024, the Central Bank of the United Arab Emirates approved the dirham-backed stablecoin AE Coin, marking the first stablecoin regulated by the central bank.
As countries digitize their economies, local stablecoins will become increasingly integrated into traditional banking systems.
These localized options could challenge the dollar’s dominance while diversifying the stablecoin market.
The stablecoin market is on a promising trajectory. In 2025, it will not only grow but also mature.
Clearer regulations, new participants, and broader adoption will transition stablecoins from a niche financial tool to a mainstream asset class.
They will offer faster, cheaper, and more inclusive financial services while integrating seamlessly with traditional finance.
The year will mark the beginning of mass adoption. The market, once dominated by semi-professional players, will see an influx of new participants as MiCA in Europe and President-elect Donald Trump in the United States bring regulatory changes and favorable cryptocurrency laws.
The combined market capitalization of USDT and USDC could double or even triple, with the overall stablecoin market size expected to expand significantly.
Local stablecoins will play a larger role, diversifying the market and challenging the dominance of the dollar.
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