Stablecoin Market Could Hit $1.2T by 2028, Maybe Affecting U.S. Government Debt Yields: Coinbase

Stablecoins, digital tokens tied to predominantly fiat currencies like the U.S. dollar, will balloon to a $1.2 trillion market by 2028 and even have an impact on U.S. debt markets, Coinbase analysts projected in a Thursday report.

The forecast, published by the exchange’s research arm led by David Duong, is based on a stochastic model simulating thousands of growth paths for the stablecoin sector.

To swell almost five-fold from the current market size of $270 billion, the asset class "relies on incremental, policy-enabled adoption compounding over time," the report said.

Stablecoin issuers such as USDC$1.0000 issuer Circle (CRCL) and Tether, the firm behind USDT USDT$1.0003, typically hold large portfolios of U.S. Treasury bills to back the tokens' value. The growth to $1.2 trillion would translate into roughly $5.3 billion in new T-bill purchases every week, the report projected.

Such inflows could shave 2-4 basis points off of the three-month Treasury yield over time, a small but noticeable effect in the $6 trillion money market where marginal moves can sway institutional funding costs, the analysts said.

Redemption surges, on the other hand, could have an adverse effect. A $3.5 billion outflow in five days could lead to a cascade of forced selling, tightening liquidity on the T-bill market, the report noted.

Coinbase analysts pointed to the recently passed stablecoin regulation, dubbed GENIUS Act, as critical to containing that risk. The law, which will come into effect in 2027 for issuers and tokens, mandates one-to-one reserves, audits and bankruptcy protections for holders.

While the law doesn’t grant stablecoin issuers direct access to Federal Reserve facilities, it could reduce the likelihood of a destabilizing run, the report said.

Read more: Stablecoins, Tokenization Put Pressure on Money Market Funds: Bank of America