Thahbib Rahman, Research Analyst at Block Scholes, the institutional crypto derivatives data and analytics firm.
Stablecoins were the first proven use case and layer of tokenisation, which laid the foundations for the plethora of real-world asset tokenisation that we currently see in the market. Since 2024, the size of the stablecoin market has more than doubled to $300B and some policymakers and industry observers have suggested the stablecoin market could expand significantly over the coming years, reflecting growing institutional interest in tokenized forms of digital value.
Fed Governor Christopher Waller argued last week that the global spread of stablecoins effectively "broadens the reach of US monetary policy". Earlier in the year he argued stablecoins would "likely to propagate the US dollar's status as a reserve currency". Ultimately, stablecoin supply is shifting beyond just a crypto-specific metric and US-dollar based stablecoins (the bulk of circulating supply) could over time become a strong channel for global dollar or fiat demand.
The International Monetary Fund (IMF) has noted that stablecoins could play an increasingly important role in cross-border payments and digital financial ecosystems, while also highlighting the need for appropriate regulatory frameworks to address financial stability, consumer protection, and monetary sovereignty concerns.
The Commonwealth's Model Law on Stablecoins is a non-binding template for how to approach stablecoins. It converges on some of the rules set out by the GENIUS and CLARITY Act, such as 1:1 backing of assets, segregated and bankruptcy-remote reserves and regular audit.
However, it diverges from the GENIUS and CLARITY Act in the recognition of yield-bearing stablecoins as a regulated category. Allowing balances to earn bank-linked interest would put any real-world implementation squarely in the path of the banking lobby, as it has for the twin Acts in the US. If “bank-like interest” is prohibited, then stablecoin balances will be pushed to seek yield on-chain, resulting in a large increase in supply of onchain cash balances.
The Bank for International Settlements (BIS) has similarly observed that stablecoins are becoming an increasingly important part of the broader digital asset landscape. While acknowledging their potential to improve payment efficiency and settlement speed, the BIS has emphasized the importance of reserve transparency, governance standards, and interoperability with existing financial infrastructure.
Once stablecoins exist at scale on-chain, holders need something to do with them, and we are seeing products such as onchain credit markets and tokenised equities emerge as popular narratives for that use case.
