The "GPT Moment" of stablecoins: The application of Blockchain in the financial and public sectors

1. Why is the mass adoption of Blockchain happening now?

The year 2025 may become the "ChatGPT moment" for the application of Blockchain in the financial and public sectors. There are two main reasons:

1. The supportive stance of U.S. regulators towards Blockchain is expected to be a year that changes the landscape of the industry. This could lead to broader adoption of Blockchain-based currencies and stimulate other use cases in the financial and other sectors in both the private and public sectors in the U.S.

2. Continuously monitor the transparency and accountability of public spending.

These changes are built on the developments over the past 12-15 months, including the EU's regulatory market for crypto assets (MiCA), the growth in user demand reflected by the issuance of cryptocurrency ETFs, the institutionalization of cryptocurrency trading and custody, and the U.S. government's establishment of a strategic Bitcoin reserve.

The government's adoption of Blockchain is divided into two categories: empowering new financial tools and system modernization. The system is upgraded by integrating shared ledgers to enhance data synchronization, transparency, and efficiency.

Stablecoins are currently the main holders of U.S. Treasury bonds and are beginning to influence global financial flows. The increasing popularity of stablecoins reflects the ongoing demand for dollar-denominated assets.

1.1 Stablecoin is on the rise

Stablecoins are cryptocurrencies that are pegged to stable assets such as the US dollar (, and a key catalyst for their wider acceptance may be the clarity of US regulations. This could allow stablecoins and Blockchain ) to better integrate into the existing financial system from a broader perspective.

Given the dominant position of the US dollar in international finance, changes in the stablecoin landscape in the United States will impact the broader global system.

The U.S. government seems keen to promote the development of the onshore digital asset industry, which is one of its key focuses for enhancing innovation and efficiency. In January 2025, an executive order by the U.S. President titled "Strengthening America's Leadership in Digital Financial Technologies" established a Digital Asset Working Group responsible for formulating a federal regulatory framework for the industry.

In a regulation-friendly environment, the integration of digital assets with existing financial institutions is increasingly laying the groundwork for the growth in the usage of stablecoins, while macroeconomic factors such as the demand for the US dollar in emerging and frontier markets further support this trend.

According to DefiLlama data, as of the end of March 2025, the total value of stablecoins exceeds $230 billion, which is 30 times that of five years ago. This partially reflects the growth of the total value of cryptocurrencies, which increased by 1400% over the five years leading up to the end of March 2025, as well as the growth in institutional demand. Our analysis indicates that, under the baseline scenario, the total supply of stablecoins could reach $1.6 trillion, with bear and bull market scenarios reaching approximately $0.5 trillion to $3.7 trillion, respectively.

Demand for U.S. Treasury Bonds: Establishing a regulatory framework for U.S. stablecoins will support the demand for USD risk-free assets both domestically and internationally. Stablecoin issuers must purchase U.S. Treasury Bonds or similar low-risk assets as a measure of their safe underlying collateral. In the baseline scenario, we expect the amount of U.S. Treasury purchases to exceed $1 trillion. By 2030, the amount of U.S. Treasury Bonds held by stablecoin issuers may surpass the total held by any current jurisdiction.

( 1.2 Future Challenges

The development of stablecoins also faces resistance and challenges. Although the dominance of the US dollar may evolve over time, and the euro or other currencies may be driven by regulations from various countries, many non-US policymakers may view stablecoins as tools of dollar hegemony.

The geopolitical situation remains turbulent. If the world continues to move towards a multipolar system, policymakers in China and Europe are likely to be keen on promoting central bank digital currencies ) CBDC ( or stablecoins issued in their own currencies. Policymakers in emerging markets and frontier markets will also remain vigilant about the local risks brought by dollarization.

Stablecoins and central bank digital currencies ) CBDC ### are both attempts to create digital currencies, but they differ in their technical architecture and governance. The issuer of CBDC is the central bank, while private entities can issue stablecoins. CBDCs are often inspired by the principles of Blockchain but are not based on public chains. Given the demand for the dollar in wholesale and financial transactions, especially in jurisdictions with high currency volatility, stablecoins may play the role of Eurodollar 2.0.

Therefore, we expect that the stablecoin market will still be dominated by the US dollar in the coming years. In the baseline scenario, we anticipate that by 2030, approximately 90% of the stablecoin supply will be denominated in US dollars, although this is lower than the current nearly 100%.

Stablecoins face the risk of a run and may trigger a contagion effect. In 2023, stablecoins decoupled approximately 1900 times, with about 600 instances involving large stablecoins. Large-scale decoupling events could suppress liquidity in the crypto market, trigger automatic liquidations, weaken the redemption capability of trading platforms, and potentially have a broader contagion effect on the financial system. For example, in March 2023, the news of the collapse of Silicon Valley Bank triggered a massive redemption of USDC.

A recent report by Galaxy Digital pointed out that Tether provided approximately $8 billion in funding, accounting for about 25% of the total in the crypto lending business, and noted that if Tether uses depositors' funds to issue these loans, "it would violate certain banking regulations and face serious systemic risks."

( Does the public sector need Blockchain?

Trust and transparency are essential for maintaining public support for governments and institutions.

Blockchain introduces a trust-based decentralized method for managing public sector data. In traditional systems, trust is derived from authoritative entities—such as governments verifying their own records—whereas blockchain allows for cryptographic proofs of authenticity. Trust is rooted in the technology itself.

The immutability of Blockchain ensures that once information is recorded, it cannot be changed, thereby providing tamper-proof records for sensitive public data ) such as land registries, voting systems, and financial transactions (. Although other technologies can also achieve immutability, they often require a trusted party to execute.

Cross-border activities, especially paying international funds through institutions like the World Bank or humanitarian aid projects, are important use cases for Blockchain. The flow of international funds may be opaque, making it difficult to effectively verify whether resources reach the intended recipients. Blockchain can provide transparency for complex transactions, even in remote or unstable areas where financial institutions are not functioning smoothly.

2. The GPT Moment of Stablecoins

) How do stablecoins work?

A stablecoin is a type of cryptocurrency that aims to stabilize its value by pegging its market value to underlying assets. The underlying assets can be fiat currencies like the US dollar ###, commodities like gold (, or a basket of financial instruments.

Key components of the stablecoin ecosystem include:

• Stablecoin Issuer: An entity that issues stablecoins and is responsible for managing the underlying assets, typically holding a value equivalent to the circulating supply of stablecoins in the underlying assets.
• Blockchain ledger: After the stablecoin is issued to the public, transactions will be recorded on the blockchain ledger. This ledger provides transparency and security by tracking the ownership and movement of the stablecoin among users.
• Reserves and Collateral: Reserves ensure that each token can be redeemed at its pegged value. For fiat-collateralized stablecoins, these reserves typically include cash, short-term government bonds, and other liquid assets.
• Digital wallet providers: Provide digital wallets, which can be mobile applications, hardware devices, or software interfaces, allowing stablecoin holders to store, send, and receive their coins.

How do stablecoins maintain their peg?

Stablecoins rely on different mechanisms to ensure that their value remains consistent with the underlying assets. Fiat-backed stablecoins maintain their peg by ensuring that each issued token can be redeemed for an equivalent amount of fiat currency.

![Citibank 20,000-word research report: The "GPT Moment" of stablecoins])https://img-cdn.gateio.im/webp-social/moments-ba4b0d48fa766db5b6835fafb81db2b6.webp###

The main stablecoins in the market

As of April 2025, the total circulation of stablecoins has exceeded $230 billion, an increase of 54% since April 2024. The top two stablecoins dominate the ecosystem, accounting for over 90% of the market share in terms of value and trading volume, with Tether (USDT) leading, followed by USD Coin (USDC).

In recent years, the trading volume of stablecoins has rapidly increased. According to Visa Onchain Analytics, the trading volume of stablecoins is expected to reach $650 billion to $700 billion per month in the first quarter of 2025, approximately twice the level seen from the second half of 2021 to the first half of 2024. Transactions supporting the crypto ecosystem have always been a primary use case for stablecoins.

The largest stablecoin by market capitalization, USDT, was launched on the Bitcoin Blockchain in 2014 and expanded to the Ethereum Blockchain in 2017, enabling its application in decentralized finance ( DeFi ). In 2019, USDT further expanded to the Tron network, which is widely used in Asia, due to faster speeds and lower costs. USDT mainly operates overseas, but times are changing.

( 2.2 Factors Driving the Adoption of Stablecoins

The channel factors of stablecoins are as follows:

• The practical advantages of stablecoins ) are fast speed, low cost, and availability around the clock ( creating demand in developed and emerging economies. Especially in countries where instant payments are not yet widely adopted, small and medium-sized businesses ) SMB ( are not adequately served by existing enterprises, while multinational companies wish to facilitate global fund transfers more easily. The costs of cross-border transactions in these countries remain high, with banking technology being underdeveloped and/or financial inclusion lagging.

• Macroeconomic demand ) inflation hedging, financial inclusion ### are driving the adoption of stablecoins in regions facing severe inflation. Consumers in countries like Argentina, Turkey, Nigeria, Kenya, and Venezuela use stablecoins to protect their funds. Nowadays, an increasing amount of remittances is being sent in the form of stablecoins, and consumers without bank accounts can now use digital dollars.

• The recognition and integration of existing banks and payment providers are key to the legitimization of stablecoins (, especially for institutional and corporate users ), and can quickly expand their scope and applicability. Mature and large-scale payment network operators and core processors can enhance transparency and facilitate integration with the digital solutions that businesses and merchants rely on. The clearing mechanisms between various stablecoins among banks and non-bank institutions are also crucial for achieving scalability. Consumer-facing ( user-friendly wallets ) and merchants ( integrating stablecoin acceptance into technology improvements of acquiring platforms accessible via API ) are eliminating the barriers that once confined stablecoins to the fringes of cryptocurrency.

• The long-awaited regulatory clarity will allow banks and the broader financial services industry to introduce stablecoins in both retail and wholesale sectors. Transparency ( audit requirements ) and consistent liquidity management ( reliable face value ) will also simplify operational integration.

( 2.3 The Potential Market for Stablecoins

We have constructed a forecast range based on the following factors driving the growth of stablecoin demand:

• Will transfer some of the US local