According to French fintech Next Generation, the stablecoin market is expected to “grow exponentially” over the course of the next five years.
By 2029, Next Generation anticipates that stablecoins will become the dominant settlement and payment instrument, with a total market capitalization exceeding $3.4trn.
Much of this bold prediction can be attributed to the market’s growth over the past year, which has seen more and more outside payment companies facilitating stablecoin payments, as well as the launch of native tokens such as PayPal’s PYUSD.
The market has reached a new milestone, with total market capitalization setting a new all-time high record. This achievement is driven by a combination of new technologies, regulatory clarity, and soaring institutional adoption.
President of Next Generation, Suren Hayriyan, commented: “2024 has become a turning point for the entire fintech industry, and for stablecoins in particular. Major growth drivers have been determined in the current year, and for at least the next five year period.
“It is 2024 when the financial sector realises that the technological centre of gravity of its development will increasingly move towards blockchain. Blockchain is the only technology that provides the maximum possible transaction speed, universal accessibility as well as the lowest costs.”
Fuelling the growth of stablecoins is the ability for financial entities to freely create their own stablecoins. By 2026, Next Generations believes that this will become a “routine phenomenon” for large banks and fintechs.
Euro-backed stablecoins will become central to the market’s growth. With more regulatory clarity coming in the form of the Markets in Crypto Assets (MiCA) guidelines, financial companies are now becoming more aware of what constitutes a stablecoin that is compliant with the rules.
“The locomotive of growth will be Euro-coins. The reason is a significant impetus that MiCA gave to the Euro-pegged stablecoins in 2024,” added Hayriyan.
“In addition, the demand for Euro-coins will be exceeding supply due to a strong gap between trading volumes of the fiat currency and Euro-coins over the next 5 years. The segment’s current potential exceeds 99%.”
Despite the incremental growth of stablecoins, Next Generation warned that there could be market saturation and that competition will become overheated.
Also in the near future, significant changes will occur in the structure of stablecoin transactions. Regulatory clarity and increasing regulation-related stability and predictability will rapidly increase the use of stablecoins by financial institutions.
While the overwhelming majority of transactions are Peer-to-Peer nowadays, in 2026, institutional stablecoin transactions will account for 60% of the volume, and in 2029, more than 90%, asserts Next Generation.
