The US Treasury Secretary, Scott Bessent, has predicted that the US dollar-backed stablecoin market can reach over $2 trillion in 2028. However, his positive forecast is subject to the condition that Congress will enact a strong bill to provide regulation for the rapidly expanding industry. Bessent believes that, with a full backing of liquid US assets such as Treasuries, stablecoins can become a massive addition to global dollar demand. 

The stablecoin market is also growing imminently as traditional financial institutions adopt stablecoins. In particular, American banking institutions are flocking the stablecoin market with an aim of leveraging the potential of these digital assets. 

Stablecoins Could Preserve US Dollar Supremacy

In a Senate hearing on Wednesday, Bessent singled out stablecoins as a means of ensuring US dollar supremacy in the changing global financial ecosystem. He also sounded an alarm that unless the US regulates stablecoins, other countries will issue these digital assets which might chip away the reserve currency status of the US dollar. His remarks follow the larger effort by the Treasury and the Trump administration to officialize a US-led stablecoin system.

“Stablecoin legislation backed by US treasuries will create a market that will expand US dollar usage via these stablecoins all round the world,” Bessent said. “I think that $2 trillion is a very reasonable number and I can see it greatly exceeding that.” His remarks came as the Senate passed a cloture vote to advance the GENIUS Act, indicating growing bipartisan momentum behind the initiative. 

Bessent identified the bipartisan GENIUS Act as the legislative base that would be required to make stablecoins legitimate. The Act requires all stablecoins to be fully collateralized by the US dollars or other highly liquid assets. It is also set to impose annual audits for issuers with market capitalizations exceeding $50 billion. All this while outlining restrictions on foreign stablecoins in US market.

Additionally, U.S President Donald Trump has reportedly voiced strong support for the legislation. Trump wants the bill signed into law before Congress adjourns for summer. According to Bessent, the measure could become a milestone in the long-standing history of the US dollar. This will defend its position as the world’s primary reserve currency. 

TradFi Institutions Flock to the Stablecoin Market 

The stablecoin market has a total market capitalization of $251.25 billion, as per data by DefiLlama. More than 96% of it is linked to the US dollar and the market is also picking up steam. The total stablecoin market cap has increased by $1.59 billion over the last 7 days. Additionally, it has surged by 3.51% over the last 30 days. 

Additionally, the stablecoin market is set to grow further with big financial participants moving into the arena. For instance, the Bank of America is supposedly developing its own dollar-pegged stablecoin. This is indicative of extensive adoption of blockchain technology by mainstream financial institutions (TradFi). Stablecoins have proven to act as the intermediary between the old banking infrastructure and web3.

Stablecoins are also playing a crucial role in other fields like cross-border transactions and decentralized finance (DeFi). They offer quicker, cheaper, and more stable transactions without jurisdictional restrictions. The crypto community is convinced that approval of the GENIUS Act may pave the way for greater institutional participation. This could make stablecoins a mainstream financial tool.