Boston Federal Reserve President Urges: Stablecoin Growth Cannot Be Ignored, Could Become a Disruptor in the Short-Term Credit Market

Boston Federal Reserve President Eric Rosengren recently pointed out in a virtual panel discussion that the rapid growth of stablecoins is concerning and could even become disruptive to the short-term credit market.

Rosengren: We Should Be Concerned About the Rapid Growth of the Stablecoin Market

According to data from Coingecko, the total market capitalization of all centralized and decentralized stablecoins has reached approximately $111 billion.

Additionally, at the time of writing this article, the global cryptocurrency market had a 24-hour trading volume of $96 billion, with stablecoin transactions accounting for $63 billion. Boston Federal Reserve Bank President Rosengren has taken note of the growth in the stablecoin market and pointed out that this could have certain impacts on the short-term money and credit markets.

"Indeed, through stablecoins, people can earn annualized returns of 10-20% on platforms such as peer-to-peer lending, CeFi, DeFi, which are rates that most banks and financial institutions cannot offer. From this perspective, stablecoins have significant competitiveness and growth potential in the traditional financial system."

The chart above shows the relative size of the stablecoin market compared to the assets under management of major money market funds. It can be seen from this chart that the stablecoin market size is already equivalent to over 20% of major money market funds. Rosengren claims that the Federal Reserve and regulatory agencies need to think more broadly about what events could disrupt the short-term credit markets, with stablecoins being one of the factors. Finally, Rosengren emphasizes:

"Just as major money market funds have caused serious disruptions to the credit markets, if we do not start seriously considering what impact things like stablecoins will have on the next macroeconomic turmoil in the market, then future financial stability issues are likely to occur."