Stablecoins, Decentralized Finance and Credit Creation: Reshaping the Global Financial Landscape

With the global stablecoin asset scale experiencing a significant decline over the past 18 months, the adoption of stablecoins is accelerating again. This trend is primarily driven by three long-term factors: the use of stablecoins as a savings tool, the use as a payment tool, and the higher-than-market yields offered by Decentralized Finance. It is expected that by the end of 2025, the supply of stablecoins will reach $300 billion, and by 2030, it will further grow to $1 trillion.

This scale of growth will bring new opportunities and transformations to the financial markets. Some changes are foreseeable, such as the shift of bank deposits from emerging markets to developed markets, and regional banks transforming into Global Systemically Important Banks (GSIB). However, stablecoins and Decentralized Finance, as foundational innovations, may fundamentally change credit intermediation in unpredictable ways.

Three Major Trends Driving Adoption

stablecoin as a savings tool

In emerging market economies like Argentina, Turkey, and Nigeria, stablecoins are being widely used as a savings tool due to weak local currencies and inflationary pressures. Unlike traditional dollars, which are subject to circulation restrictions, stablecoins provide individuals and businesses with a convenient channel to access dollar-backed liquidity.

One of the primary reasons emerging market users are adopting cryptocurrencies is to acquire US dollars. While the exact scale is difficult to estimate accurately, this trend is rapidly growing. The stablecoin settlement card services launched by multiple companies align with this trend, allowing consumers to use their stablecoin savings at local merchants through credit card networks.

Taking Argentina as an example, the fintech application Lemoncash reported that its $125 million "deposits" account for 30% of the country's centralized crypto application market share. This means that the asset management scale of crypto applications in Argentina is approximately $417 million, accounting for 1.1% of the country's M1 money supply. Considering the balance of stablecoin in non-custodial wallets, the actual scale may be larger.

( stablecoin as a payment tool

Stablecoins are becoming a powerful alternative for cross-border payments. Compared to traditional cross-border transactions, stablecoins offer faster and lower-cost solutions. In the long run, stablecoins may develop into a meta-platform connecting various payment systems.

According to the Artemis report, B2B payment use cases alone contributed an annualized payment volume of $36 billion. Galaxy estimates that this figure exceeds $100 billion annually among all non-cryptocurrency market participants. More importantly, B2B payment volume increased fourfold year-on-year from February 2024 to February 2025, demonstrating strong growth momentum.

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( Decentralized Finance成为高收益来源

Over the past five years, DeFi has consistently generated dollar-denominated returns above the market, allowing users to achieve returns of 5% to 10% with relatively low risk. This trend has driven the popularity of stablecoins.

In the DeFi ecosystem, the underlying "risk-free" interest rate reflects the broader demand for crypto capital markets. As new trading opportunities arise, such as yield farming and basis trading, the foundational yield rates of DeFi have also increased. As long as blockchain continues to generate innovations, the foundational yield rates of DeFi are expected to remain higher than traditional government bond yields.

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Bank Deposit Issues

The widespread adoption of stablecoins may lead to the disintermediation of traditional banks. Consumers can directly access dollar-denominated savings accounts and cross-border payments, reducing the deposit base that traditional banks use for credit creation and generating interest spreads.

( bank deposit alternative

Stablecoins are typically backed by government bonds and bank deposits. Taking Circle as an example, its USDC reserves consist of $8 billion in cash and $53 billion in short-term government bonds or repurchase agreements. When users transfer funds from traditional banks to stablecoins, they are essentially transferring deposits from regional/commercial banks to U.S. government bonds and major financial institutions.

This transfer will lead to a more concentrated deposit base, reducing the deposits available for lending by commercial banks and regional banks, while making stablecoin issuers important participants in the government debt market.

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( forced credit contraction

Banks create credit through a fractional reserve system, and the widespread use of stablecoins may limit this process. Take Argentina as an example: converting a $20,000 deposit into USDC would transform the local $24,000 credit creation into $17,500 in government bonds and $8,250 in U.S. credit creation.

When stablecoins occupy a significant market share, this impact will become apparent. Regional banking regulators may be compelled to take measures to maintain credit creation and financial stability.

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( excessive allocation of credit by the U.S. government

Stablecoin issuers have become important buyers of U.S. Treasury bonds and are expected to become one of the top five buyers. This is good news for the U.S. government, but it may affect the yield curve, particularly in the short-term Treasury bond market.

The new proposal requires that stablecoin reserves be held entirely in the form of short-term government bonds or repurchase agreements, which will further increase liquidity support for critical components of the U.S. financial system. However, this may also lead to the concentration of global capital in the U.S. market, affecting other markets.

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( New asset management channels

The rise of stablecoins has created new asset management opportunities. As funds shift from the traditional banking system, stablecoin issuers may become significant non-bank lenders. This trend is similar to the transformation from bank loans to non-bank financial institutions )NBFI### loans after the financial crisis.

Large asset management companies may benefit from this shift and become asset management partners for stablecoin issuers.

( Effective Frontier of On-chain Yield

Stablecoins not only represent a claim against the underlying dollar but also serve as a unit of value on the blockchain. Various DeFi protocols will provide users with yield opportunities denominated in stablecoins, such as Aave-USDC, Morpho-USDC, etc.

These "vaults" will provide consumers with on-chain yield opportunities, opening up new asset management channels. In the future, there may be on-chain vaults specifically designed to provide credit for certain regions, forming an "effective frontier of on-chain yield."

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Conclusion

The integration of stablecoins, Decentralized Finance, and traditional finance is reshaping the global credit intermediary system. By 2030, the asset management scale of stablecoins is expected to approach $1 trillion, which will have a profound impact on traditional bank deposits, credit creation, and asset management models.

This transformation brings opportunities and risks: stablecoin issuers will become important credit intermediaries, while regional banks may face credit tightening. Ultimately, a new asset management and banking model will emerge, with stablecoins serving as a bridge to the forefront of efficient digital dollar investment.

This trend will have far-reaching implications for monetary policy, financial stability, and the global financial architecture, marking a significant transformation of the financial system in the digital age.