Prediction: Stablecoins Are About to Soar. Here’s Why. | The Motley Fool

The stablecoin market has grown dramatically in recent years. According to data compiled by Visa, stablecoin supply increased from about $12 billion in 2020 to $220 billion in 2025. Some insiders think that’s only the start, with Galaxy Digital Holdings predicting stablecoin supply will exceed $400 billion this year. Treasury Secretary Scott Bessent thinks it could reach $2 trillion by 2028.

Stablecoins are cryptocurrencies that are pegged to real-world assets such as the U.S. dollar. They offer users the benefits of the blockchain — such as speedy, low-cost transactions — without the volatility of other cryptocurrencies like Bitcoin or Ethereum (ETH -0.42%).

Let’s look at why stablecoins are set to soar, what might hold them back, and how investors can take advantage of this emerging trend.

Why stablecoins are about to soar

Stablecoins have been gaining traction for several years. Various companies, including cryptocurrency exchanges, payment processors, and banks, have made big strides in integrating stablecoins into their operations.

Two promising stablecoin use cases are international money transfers and payments. The World Bank says the average cost of remittances is about 6.4% of the transfer amount right now. Coinbase estimates that stablecoins could cut this to between 0.5% and 3%.

But the reason stablecoins could take off now is that lawmakers have given them a launchpad. In June, the U.S. government passed the Genius Act, legislation that gives a clear framework for stablecoins. It contains guidelines for stablecoin issuers about reserve requirements, audits, and anti-money laundering practices. It paves the way for both banks and non-banks to issue stablecoins.

Not only does the new legislation remove roadblocks that had made companies hesitant about pursuing this emerging technology, but it also goes a long way toward building consumer confidence. Investors lost billions of dollars after the collapse of the TerraUSD stablecoin in 2022. Now, people want to be sure that stablecoins will retain their value and that issuers have enough reserves to support their tokens.

How investors can ride the stablecoin wave

Right now, stablecoins only account for 1% of global money flows, according to consulting firm McKinsey. Recent regulatory changes could well unlock further growth, but to do so, there will also need to be further technical development and a shift in consumer habits. It isn’t yet clear how the market will evolve. For example, we may see big companies issuing their own stablecoins or existing players dominating the stablecoin spectrum.

Here are two approaches investors might take:

1. Invest in listed companies that may profit from a stablecoin explosion

Many of the businesses in the crypto industry remain privately held, which somewhat limits the stablecoin plays available to investors. However, there are opportunities in crypto exchanges, stablecoin issuers, and payment infrastructure.

These include:

• Circle (CRCL 3.92%): Circle, which issues the popular stablecoin USD Coin (USDC -0.00%), went public in June with a dramatic initial public offering (IPO). Its share price initially rose by 700%. It has fallen since then, and some see it as still overvalued.
• Coinbase: The first crypto exchange listed in the U.S. joined the S&P 500 earlier this year. However, its stock fell recently on the back of disappointing Q2 earnings and mounting concerns that competitors will take market share.
• Robinhood (HOOD 3.06%): The pioneer of low-cost investing has also been at the forefront of making digital assets more accessible. In terms of stablecoins, Robinhood is part of the consortium that is behind the Global Dollar (USDG 0.01%).
• PayPal (PYPL -0.84%): The payment giant launched its own stablecoin, PayPal USD (PYUSD -0.02%), in 2023. It says that the dollar-pegged coin will be “pivotal” in growing global commerce. It also plans to pay rewards to PayPal USD holders, even though the Genius Act explicitly prohibits issuers from paying interest.

Bear in mind that some think speculation around cryptocurrency and stablecoin growth has already pushed the prices of several of these companies to unsustainable highs. Go beyond short-term trends and research the long-term outlook before investing.

2. Invest in the cryptocurrency ecosystems where stablecoins are being built

Stablecoins run on smart-contract blockchains, which can host self-executing pieces of code and act as ecosystems for other projects. If stablecoins take off, that could mean an increase in transactions for programmable blockchains like Ethereum, Tron (TRX 1.06%), and Solana (SOL -1.39%). That would mean more transaction fees, more assets on those networks, and — ultimately — a more secure future.

Leading the pack right now is Ethereum. CoinGecko research shows that almost 50% of stablecoins are built on Ethereum. And a Galaxy report reveals that 50 non-crypto companies, including Louis Vuitton, Adidas, and Deutsche Bank, are using Ethereum to build products. It says the total value of stablecoins on Ethereum has increased by 70% during the past year.

There is one caveat: Some companies may build their own blockchains rather than rely on existing networks. That could give them more control and potentially be a more profitable way to enter the stablecoin sector, but it would mean today’s cryptocurrencies don’t benefit as much from stablecoin development.

It is still early days for stablecoins

The recent legislative changes come after years of stablecoin development work, meaning some projects may be able to storm ahead now that the regulatory road is clear. A soaring stablecoin market could transform our financial infrastructure, but there are still significant risks worth understanding.

For example, there are security, consumer protections, and privacy concerns that have yet to fully play out. Plus, while the Genius Act reduces the danger that a stablecoin will lose its peg or collapse completely, it is not impossible. It’s important to ensure crypto investments make up only a small part of a diversified portfolio.

Nonetheless, mainstream adoption of stablecoins may be the biggest real-world use of crypto so far. If even a small percentage of that usage takes place on existing blockchains, that could be another major step toward mainstream adoption.