Stablecoin may reshape global liquidity and payment amid 100,000-issuer 'super cycle'

Polygon’s Global Head of Payments and RWA, Aishwary Gupta, noted that the digital asset industry is in a “super cycle” that could see more than 100,000 stablecoins issuers emerge over the next five years.

His projection follows governments, banks, and corporates reevaluating the role of tokenized money and its ability to shape the allocation of capital, as well as settlement processes and financial flows between countries.

Banks battle liquidity shifts as atablecoin adoption expands

Gupta cited developments in Japan as evidence that digital tokens can be used in formal economic systems without undermining the power of monetary authorities. By using stablecoins like JPYC to purchase government bonds and distribute stimulus, Japan has shown that central banks can maintain control of the situation using traditional macroeconomic tools, including interest rate adjustments.

Gupta stated that these mechanisms continue to influence the behavior of stablecoins in the same manner as they affect national currencies.

The forecast explosion in new issuers, however, presents difficulties for banking models based on cheap deposits. According to Gupta, yields on offer in digital-asset markets are attracting capital away from traditional accounts, increasing the cost of funding for banks, which limits their ability to extend credit. He said that this shift is relative to a structural pressure point that will intensify as more stablecoins enter circulation.

In response, Gupta envisions the broadening of deposit token applications, which will enable customers to operate in the digital space without withdrawing actual money from financial institutions. He referred to the system developed by J.P. Morgan, where one can borrow a deposit token and utilize it elsewhere. Meanwhile, the actual balance is maintained under the bank’s custody, thereby maintaining balance-sheet stability without hindering blockchain-based transactions.

Neutral settlement layers expected to manage high fragmentation

Gupta predicted that a failure would occur with tens of thousands of stablecoins expected. He identified neutral settlement layers as the most probable method of linking several tokens, allowing payments to be made when the sender uses a particular stablecoin and the recipient uses a different one.

This method is similar to the current payment-network infrastructure, in which the complexity is concealed from the consumer.

Corporate adoption strengthens as infrastructure matures

Standard Chartered’s recent analysis supports the view that stablecoins are becoming increasingly integrated into mainstream financial activity. The bank reported an increase in corporate use of dollar-linked tokens in treasury management, cross-border payments, currency hedging, and access to U.S. dollar-equivalent liquidity.

It showcased the upcoming partnership between StraitsX, Ant International, and Grab in 2024, which utilizes a regulated Singapore-dollar stablecoin to enable merchants to receive instant payments, regardless of the customer’s currency.

The bank also noted that stablecoins are gaining ground in regions of the world with currency volatility, where businesses and individuals are using the coins as an alternative store of value. According to Standard Chartered, the ongoing regulatory discussions and revised accounting guidelines are leading to a greater institutional involvement as companies explore efficiency gains from blockchain-based settlement.

With a stronger infrastructure in place, the bank stated that corporates are increasingly exploring ways to integrate stablecoins into payment processes and treasury systems, particularly in areas where conventional cross-border systems are either slow or costly.

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