Stablecoin Market Booms but Regulatory Concerns Remain

Key Takeaways

• Stablecoins experienced significant growth in 2024, reaching a record $187.5 billion total supply.
• USDT and USDC dominate the stablecoin market, accounting for most holders and transaction volume.
• Stablecoins are increasingly popular in emerging markets like Latin America and Africa, providing access to dollars.
• However, concerns remain on their regulatory status and their use in illicit transactions.

The stablecoin market experienced explosive growth in 2024, driven by increased demand in emerging markets and adoption as a hedge against volatility.

However, this growth has also coincided with a rise in illicit activity, prompting calls for increased regulation.

Stablecoins Reach Record High Supply

New Digital Dollar

In emerging markets, stablecoins are becoming increasingly popular for purposes beyond cryptocurrency trading.

A survey of 2,500 users across India, Indonesia, Nigeria, Turkey and Brazil revealed that many individuals use stablecoins to gain access to dollars. They also secure better currency conversion rates and send money internationally.

Tether CEO Paolo Ardoino emphasized this shift during the 2024 Token2049 conference, noting that USDT has evolved from a tool for cryptocurrency trading to the most widely used digital dollar globally.

He highlighted its significant adoption in regions like Turkey, Vietnam, Brazil, Argentina and various African nations where access to dollars can be limited.

Stablecoins account for 43% of crypto transactions in Sub-Saharan Africa. | Credit: Chainalysis

In Sub-Saharan Africa, stablecoins now account for 43% of cryptocurrency transaction volume, demonstrating their vital role in the region’s economy.

Ethiopia has emerged as the fastest-growing market for retail-sized stablecoin transfers, with a 180% year-over-year growth. Nigeria also stands out, with stablecoins representing 40% of all crypto inflows in the country, the highest in the region.

Account for Majority of Illicit Transactions

The rise in stablecoin activity has not come without challenges, as detailed in the Chainalysis Crypto Crime report .

The report reveals that stablecoins have become the preferred medium for illicit transactions. In fact, cybercriminals are increasingly moving away from Bitcoin (BTC) to exploit these digital assets.

Stablecoins are used for the majority of illicit transactions. | Credit: Chainalysis

From 2018 to 2021, Bitcoin dominated as the “cryptocurrency of choice” for criminal activity . However, this shifted in 2022 and 2023, with stablecoins surpassing Bitcoin in illicit transaction volumes.

While this shift highlights the expanding adoption and utility of stablecoins, it also underscores the urgent need for robust regulatory frameworks and enforcement to counter their misuse.

As we look back on 2024’s milestones, this development serves as a critical reminder: Alongside the immense potential of stablecoins comes a responsibility to address emerging challenges, ensuring their use aligns with ethical and legal standards.

Significant Market Shifts

As 2025 kicks off, financial markets are experiencing notable shifts, especially in cryptocurrency.

Many investors are moving from volatile assets, like Bitcoin, to safer options such as real-world asset (RWA) tokens —blockchain-based representations of tangible assets—and stablecoins, which are pegged to traditional currencies like the U.S. dollar.

According to National Law Review’s experts, stablecoins, now considered critical financial infrastructure, are increasingly popular for generating yield on decentralized finance (DeFi) platforms, often forming part of fixed-income strategies.

Investor demand for leveraging is rising, with DeFi platforms enabling borrowing of stablecoins, like USDC, against crypto holdings. These loans can yield interest rates exceeding 10%.

Synthetic dollar products, which combine USD-pegged derivatives with market exposure, offer even higher returns, sometimes reaching 25%, and have quickly amassed $4 billion in assets.

The stablecoin market could grow to $500 billion or even $1 trillion by 2025. This will be driven by increasing adoption in retail and institutional finance.

Still, regulatory challenges and inefficiencies in the crypto market persist, as the sector reshapes financial markets and narrows the gap with traditional finance.