"Dollar Weak Now, Demand Could Increase If Stablecoins Expand"

Korea Economic Daily

Summary

JPMorgan said that if the stablecoin market expands, additional demand for the U.S. dollar of 1.4 trillion dollars could arise by 2027.
About 99% of stablecoins are pegged 1:1 to the dollar, and market expansion would directly lead to increased dollar demand.
JPMorgan explained that if the stablecoin growth trend continues, related dollar demand could grow cumulatively.

JPMorgan "Additional demand of 1.4 trillion dollars by 2027"

Stablecoins pegged 99% to the dollar instead of government bonds

Although the dollar's safe-haven status is currently being challenged by gold, JPMorgan analysts predict that dollar demand will increase as the stablecoin market grows.

On the 8th (local time), Reuters reported that JPMorgan analysts said in a report released the previous day that if the stablecoin market expands, additional demand for the U.S. dollar of 1.4 trillion dollars (about KRW 1,994 trillion) could arise by 2027.

They argued that the adoption of stablecoins therefore has the potential to strengthen the dollar's role rather than accelerate dollar weakness.

JPMorgan estimated that the stablecoin market, currently sized at 260 billion dollars (about KRW 370 trillion), could grow to as much as 2 trillion dollars (about KRW 2,850 trillion) in the best-case scenario.

About 99% of stablecoins, such as Tether, are pegged to the dollar at a 1:1 ratio. In other words, if foreign households or companies convert their local currency into stablecoins, new demand for U.S. dollars is created.

Stablecoins are typically backed by reserves such as currencies like the dollar or assets like government bonds and short-term Treasury bills, and are considered more value-stable tokens than typical digital assets. The Trump administration is promoting stablecoin issuance to boost demand for U.S. Treasuries, but currently most stablecoins are pegged to the dollar.

Eurozone finance ministers are reported to meet on the 9th to discuss ways to support the development of euro-denominated stablecoins.

JPMorgan said, "Given that 99% of the total stablecoin supply is pegged to the dollar at a 1:1 ratio, growth in the stablecoin market inevitably implies dollar demand." Therefore, "if the stablecoin market experiences high growth, dollar demand related to stablecoins could cumulatively increase," it explained.

Kim Jeong-ah, guest reporter kja@hankyung.com