Coinbase's platform predicted in a recent report published on August 21 that the stablecoin market will witness massive growth in the coming years, nearly quadrupling in size to about $1.2 trillion by 2028, compared to its current level of $270 billion.
The report notes that this expansion will not be limited to the cryptocurrency ecosystem, but its impact will extend to the U.S. debt markets, as issuers like Circle and Tether heavily rely on purchasing short-term treasury bonds to support their currencies.
Potential pressures on treasury bonds
Estimates suggest that issuers will need to purchase around $5.3 billion weekly in U.S. bonds if the market continues to grow at the expected pace. Although the direct impact on bond yields may seem limited (a decrease of between two and four basis points on three-month bonds), these movements are significant within a cash market exceeding $6 trillion.
However, Coinbase warned of the risks of reverse flows; in the event of mass withdrawals, issuers may be forced to sell large amounts of bonds quickly, causing liquidity disruptions. It referred to a hypothetical scenario where $3.5 billion exited in less than a week, causing a noticeable market shake.
The new regulatory framework
The report believes that the future of the market will be significantly influenced by the anticipated legal framework, especially with the GENIUS Act set to take effect in 2027. The law outlines strict obligations, including:
Maintaining full reserves.
Submission to independent audits.
Providing legal protection for stablecoin holders against bankruptcy.
Although the legislation does not allow stablecoin providers to benefit from Federal Reserve liquidity, Coinbase believes that these rules will enhance stability and mitigate risks, in addition to potentially opening the door for traditional financial institutions to engage in the market with greater confidence.
Post-digital trading
The report concluded that stablecoins are no longer just a tool for trading cryptocurrencies; they are increasingly being used in global payments and settlements. As their role expands, they are likely to become a key player in the dynamics of the U.S. government debt market, potentially reshaping the balance between supply and demand for treasury bonds in the long term.
