Is This the Year of the Stablecoin?

Remember stablecoins? Some experts lately have been pointing to 2025 as a breakthrough year for this digital currency, which is generated by a blockchain but carries a value tied to a national currency, such as the dollar. That link allows users to deploy digital dollars without fearing the wild swings in value that Bitcoin and other cryptocurrencies are subject to.

The roster of stablecoins has grown to at least 195 since the first such token, BitUSD, emerged in 2014. That’s the number of coins ranked by Coinmarketcap, an online reference on digital currencies. More are coming soon, experts have told us. “I’ve noticed a uptick in interest in the past year,” Aaron McPherson, a payments consultant who follows cryptocurrency, told us. And major payments platforms are jumping into the game. The most recent example is the PYUSD token launched by PayPal Holdings Inc.

Even stodgy old financial institutions are starting to get into the game. “There’s work being done by major banks on deposit tokens,” McPherson said. “If you have money on deposit, you create a token and put it on the blockchain. It can be traded, mediated on the blockchain.”

Crypto platforms like Circle Internet Group, meanwhile, are putting out digital guides to buying, managing, and selling this currency. Circle’s entry, USDC, ranks second among stablecoins, with a market capitalization of $45.8 billion as of mid-January. The top coin, Tether, is way ahead at $137 billion.

And Ripple, an early exponent of this breed, was expected last month to issue a new coin, ripple USD, after months of legal wrangling with the Securities and Exchange Commission over a prior coin, XRP. “Ripple has been reinvigorated, they’re well-positioned,” noted McPherson.

Looming in the background is a new administration that many view as more open to cryptocurrency than the old one. “There’s an expectation that [the Trump administration] will be much more friendly to crypto,” said McPherson. “We can expect a more permissive regulatory environment.”

But there may be clouds on the horizon. Competition from players like Circle and the increasing capital demands the market is likely to generate could put pressure on lesser coins. “We’ve got a profusion of stablecoins now, which means a shakeout at some point,” warns McPherson.

And in the United States, where the national government has looked at the potential for a form of federally issued stablecoin called a US digital dollar (USDC), not all officials are enthusiastic about private-sector rivals. These coins “could pose significant risks to financial stability, monetary policy, and the U.S. payments system,” a Fed official warned at a conference in 2023.

For now, though, stablecoins are on a roll.

—John Stewart, Editor john@digitaltransactions.net