The future of stablecoins is AI-ready

One thing is certain: stablecoins are currently a subject of very much interest. Where the market is heading, however, feels more uncertain. As the “stablecoin summer” comes to an end, this post argues that the breakthrough use case for stablecoins is yet to come.[1]

On the one hand, it seems that stablecoins will shake the financial system. Part of the story is booming crypto trading and decentralised finance, which fuels the demand for a stable-value digital asset. Momentum accelerated over the summer with the Genius Act, the first US regulatory framework for stablecoins, which is expected to trigger wide institutional adoption by granting them legal clarity and legitimacy.[2] With 99% of the $250 billion stablecoin market capitalisation pegged to the US dollar, such widespread adoption risks intensifying dollarisation and undermining monetary sovereignty in other currency areas.[3] Even in the US, large banks that initially welcomed the Genius Act now worry about major deposit outflows, as crypto platforms are beginning to find ways to pay interest to stablecoin holders, a practice forbidden to issuers in the existing regulatory frameworks.[4]

On the other hand, the rise of tokenisation and the failure of stablecoins so far to deliver on the payments use case cast serious doubt on their expected dominance. Indeed, tokenised money market funds and tokenised Treasury funds – the market cap of which has risen by about 90% since the start of the year – are attracting a growing share of crypto traders and investors as they earn a yield, unlike stablecoins.[5] Moreover, these highly liquid tokenised assets can also be used for collateral management in the crypto space.

Yet, all this debate focuses on human users – crypto traders, institutional investors, or online consumers. The real breakthrough use case for stablecoins may instead come from machines. The rapid progress in AI agent research makes this more than just science fiction. Agentic AI refers to AI systems that do not just generate outputs when prompted but which can autonomously make decisions, take actions and pursue goals in dynamic environments. Soon enough these agents will have to make payments on behalf of individuals and companies. The flaw is that traditional online payments rely on human intervention and layers of security checks. AI agents need payment rails that are programmable and whose security and validity are guaranteed by the underlying technology, not by trust in a central authority. This is exactly what blockchains are designed for, and this is where stablecoins come in. Stablecoins may not yet dominate the world of human payments, but they are perfectly fit for machine payments. Where the market is heading, then, may well depend on AI wallets.

[1] Term first coined by Goldman Sachs Research, see https://www.goldmansachs.com/insights/top-of-mind/stablecoin-summer

[2] The Genius Act is considered to be an opening for traditional banks to enter the digital space and offer their own solutions. Several major US banks such as JP Morgan, Bank of America, Morgan Stanley and Citi have already stated they will launch (or are considering launching) stablecoins.

[3] The ECB has reportedly accelerated its plan for a digital euro and is even considering launching the digital currency on a public blockchain (see https://www.ft.com/content/8ad60169-d1e5-4d2c-b928-d53d668f0ec6). The BoE has stated it will relax its restrictive stance on stablecoin rules (see https://www.ft.com/content/d882e2dc-add6-4dc5-bf63-9e34732d56b3)

[4] This is true in the US according to the Genius Act, and in the EU according to MiCAR.

[5] Market capitalisation data from https://app.rwa.xyz/treasuries.