In recent years, stablecoins have primarily revolved around a limited landscape, predominantly a competition between Tether’s USDT and Circle’s USDC, with a majority of the activity occurring on crypto-native exchanges.
However, the future appears significantly different, as noted by Alchemy co-founder and President Joe Lau during an interview with CoinDesk.
The immediate outlook for stablecoins presents numerous possibilities, according to Lau, with one prevailing theme: stablecoin adoption is “exploding.” He attributes this phenomenon to the clear benefits that stablecoins offer over traditional payment and banking systems, particularly their capability for 24/7 settlement and efficient digital money transfer.
“Stablecoins and deposit tokens are quickly evolving into the consumer and enterprise foundational layers of the internet-native financial system. With this base, money can transfer with the security of traditional banks and the speed of the internet,” Lau stated.
Banks are progressively assessing stablecoins, he mentioned, in tandem with fintechs developing payment and money-movement solutions.
Lau cited payment platforms and processors, emphasizing Stripe’s initiatives in this area, along with payroll providers and corporate treasury solutions now contemplating stablecoins within their operational frameworks.
Stablecoins are cryptocurrencies tied to assets such as fiat currencies or gold. They play a crucial role in the crypto ecosystem, functioning as means of payment and allowing cross-border transactions. USDT remains the largest stablecoin, followed by USDC.
The overall market capitalization of stablecoins reached $300 billion in September, marking a 75% rise from the previous year, according to a Morgan Stanley Investment Management report.
Citi, the Wall Street giant, noted that the stablecoin market is progressing more quickly than anticipated. Consequently, the bank has recently adjusted its 2030 issuance forecast to $1.9 trillion in its base scenario and $4 trillion in a bull scenario, an increase from $1.6 trillion and $3.7 trillion, respectively.
Lau also remarked that enhanced regulatory clarity is attracting more traditional participants into the arena.
With clearer guidelines in place, he anticipates broader uptake from established financial institutions—including banks, neobanks, fintech firms oriented toward money movement, and large payment companies—since stablecoins integrate seamlessly with the usage scenarios these entities already cater to.
A major force
Nonetheless, Lau identifies another significant driving force for the future: banks are initiating tokenized deposits, which he considers an “alternative” that complements stablecoins.
In this structure, Lau explains, banks can provide clients with benefits akin to stablecoins, including low transfer costs and expedited settlement, all while adhering to existing regulatory frameworks and keeping the funds within the bank.
Currently, he mentioned, transferring money from a traditional bank account often comes with wires, fees, and complexity. With tokenized deposits, like JPM Coin, customers can enjoy stablecoin-like features without exiting the banking ecosystem. Lau also highlighted that HSBC has expressed interest in tokenized deposits, and he foresees more banks following suit.
In Lau’s perspective, while tokenized deposits and stablecoins are currently in a competitive landscape, they are also complementary, as they typically appeal to different user groups. Stablecoins are more versatile, he noted, because they can facilitate transactions between any two parties. In contrast, tokenized deposits are generally more closed-loop, designed for a bank’s clientele. He pointed out that JPM Coin is exclusive to JPMorgan clients and is likely to be first utilized by institutional and corporate customers.
Over time, however, Lau predicts that the distinction will become less pronounced.
He asserts that while banks are starting with tokenized deposits, they are already contemplating the creation of frameworks for other tokenized assets. Concurrently, he indicated, stablecoin issuers are aiming to adopt a more bank-like structure, partly due to capital efficiency considerations. Lau contended that the fractional banking model employed by banks can be more capital efficient compared to the 1:1 backing typical of stablecoins, suggesting that this disparity could motivate stablecoin issuers to seek closer alignment with banking practices.
For the time being, Lau concluded, the two instruments are complementary. Yet, he also characterized tokenized deposits as an early-stage innovation, noting that only a limited number of banks have seriously engaged in this initiative so far. As more institutions invest, adoption is expected to rise, leading to a more direct competition between stablecoins and deposit tokens.
“Tokenized deposits transform the banking system into programmable infrastructure. Stablecoins modernize the dollar for consumers and global markets. As these two areas converge, money becomes both fully compliant and instantly accessible,” he added.
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