Stablecoins Now Hold $210 Billion. Here's How That Compares to Your Bank and Brokerage.

Key Points

• Stablecoin deposits have soared, but banks and brokerages are still by far the dominant players.

• If stablecoin transaction volume maintains this growth rate, they could overtake existing payment systems in a decade.

• There are still a lot of unknowns about how the industry will develop and which approach will dominate.

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A decade ago, many people hadn't even heard of stablecoins. Now Standard Chartered (LSE: STAN) predicts the market could reach $2 trillion in the next three years -- a 10-fold surge. One big growth driver is the passing of a regulatory framework for stablecoins in the form of July's Genius Act.

The easiest way to understand stablecoins is as a form of digital cash. More accurately, they are a blockchain-based currency that's usually pegged to a form of traditional money, such as the U.S. dollar. The big appeal is that they offer a fast and low-cost way to process payments and transfer money -- with no time zone or global border constraints.

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They initially gained traction as a bridge between traditional money and cryptocurrencies. But stablecoins are no longer solely the purview of the cryptocurrency world. Banks, retailers, and other entities are all exploring ways to integrate stablecoins into their operations.

Read on to find out how stablecoin balances compare to your bank and brokerage, and what it all means for investors.

Comparing stablecoins, banks, and brokerages

The combined volume of all stablecoins in circulation is more than $210 billion per recent research from The Motley Fool. That's more than several brokerages have in their customer payables accounts.

The research shows there's about $150 billion in Tether (CRYPTO: USDT), while Circle (NYSE: CRCL) has issued almost $63 billion in USD Coin (CRYPTO: USDC). In contrast, Robinhood (NASDAQ: HOOD) holds a fraction of that in liquid assets with just over $7 billion payable to users. Morgan Stanley (NYSE: MS) holds more than $200 billion in customer and other payables.

But liquid assets are only one part of the picture. After all, Robinhood's latest quarterly results show it has $279 billion in total platform assets. Morgan Stanley says it has more than $1.7 trillion in assets under management.

And while there's a lot of speculation about stablecoins' potential to disrupt banks, the Motley Fool research shows bank deposits still blow stablecoins out of the water. JPMorgan Chase (NYSE: JPM) alone has $2.1 trillion in total deposits, while Bank of America (NYSE: BAC) and Wells Fargo (NYSE: WFC) have another $3.3 trillion between them.

It's certainly true that stablecoin deposits have grown dramatically. And there's a good chance that new legislation and changing attitudes will boost their usage even further. However, right now, $210 billion in the stablecoin industry is only a fraction of what U.S. consumers have deposited in banks and brokerages.

Moreover, in terms of payment processing -- one of the promising uses of stablecoins -- the transaction volume remains low. McKinsey points out that stablecoins only account for about $30 million in transactions each day, which is less than 1% of global money flows. Even so, the report also points out that if stablecoin transaction volumes continue to grow at the same rate, they will overtake existing systems such as the Swift network for international bank transfers within a decade.

How banks and brokerages are approaching stablecoins

Given that banks and brokerage firms still dominate, the question is not how total deposits compare, but rather how these financial giants plan to integrate stablecoins into their operations.

Several big players in banking, including JPMorgan, Bank of America, and Citigroup (NYSE: C), mentioned stablecoin projects in recent earnings calls. Top banks may also wind up working to issue a joint stablecoin.

JPMorgan and Citi have both launched deposit tokens, which are blockchain-based tokens that represent money held with the banks. JPMorgan also announced a partnership with Coinbase (NASDAQ: COIN) in July. This will make it easier for customers to use a credit card to fund their crypto accounts and redeem Chase Ultimate Rewards Points in crypto rewards.

Major brokerages such as Charles Schwab (NYSE: SCHW) and Fidelity are reported to be testing out stablecoin possibilities, but it is early days. Robinhood is part of a consortium of various digital asset and fintech firms that have already launched the Global Dollar (CRYPTO: USDG) in Europe. It is also developing its own blockchain.

Investing in the stablecoin industry

It looks like stablecoins are here to stay, though exactly what shape they will take is still unclear. If you're looking to invest in stablecoins, here are some approaches to consider.

• Stablecoin issuers: Circle stock initially soared in its initial public offering (IPO) in June reflecting optimism about both stablecoin growth and USDC's role in the industry. However, that incredible growth has since faltered, and some still see it as overpriced.
• Cryptocurrency ecosystems: Many stablecoins are being built on existing smart-contract blockchains, such as Ethereum (CRYPTO: ETH) and Solana (CRYPTO: SOL).
• Banks and brokerages that are leading the stablecoin charge: This article shows the different approaches key players are taking toward stablecoins. Blockchain and stablecoins shouldn't be the sole factors in your evaluation of financial-sector stocks, but they are worth taking into account.

Bear in mind that the stablecoin market is evolving quickly, and a lot of things are unclear. For example, critics worry that there aren't enough safeguards in place to protect consumers, particularly if any popular stablecoins lose their peg. Stablecoins may also be threatened if many countries choose to develop their own central bank digital currencies (CBDCs).

Stablecoins mark a convergence of a number of industries and interests. As with any cryptocurrency or high-risk investment, make sure your stablecoin investments are part of a diversified portfolio and fit with your overall investment strategy. It's easy to get caught up in exciting new trends and lose sight of the bigger picture.

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JPMorgan Chase is an advertising partner of Motley Fool Money. Citigroup is an advertising partner of Motley Fool Money. Wells Fargo is an advertising partner of Motley Fool Money. Charles Schwab is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Emma Newbery has positions in Ethereum and Solana. The Motley Fool has positions in and recommends Ethereum, JPMorgan Chase, and Solana. The Motley Fool recommends Charles Schwab, Coinbase Global, and Standard Chartered Plc and recommends the following options: short September 2025 $92.50 calls on Charles Schwab. The Motley Fool has a disclosure policy.