Stablecoins Represent 1% of U.S. Money Supply and Growing
U.S. dollar stablecoins have reached a significant milestone, now constituting about 1% of the U.S. money supply (M2). Their growth rate stands at approximately 55% per year, with projections suggesting they could represent around 10% of M1 (cash and easily accessible digital money) within a decade.
- Stablecoins are increasingly resembling standard banking services but offer faster and cheaper transactions.
- Companies currently manage cash across various locations to handle expenses, but reduced transaction costs may allow them to minimize local cash buffers.
- Global firms could rebalance cash holdings frequently, leading to lower working capital requirements.
- This shift might enable daily payments for employees and quicker billing cycles for utilities, enhancing cash flow efficiency.
- Transaction costs on Ethereum Layer 2 networks are dropping below $0.01, making frequent small transactions economically viable.
- Transitioning to a financial streaming model could free up trillions in capital for investments.
- Immediate rewards for actions could alter consumer behavior positively, enhancing engagement with services.
Overall, stablecoins could significantly transform the economy by streamlining payment processes and reducing the need for large cash reserves.