Stablecoin, Decentralized Finance and Credit Creation: The Rise of a New Financial Landscape

The global stablecoin market is re-entering a phase of accelerated growth after experiencing 18 months of contraction. This trend is mainly driven by three long-term factors: the use of stablecoins as a savings tool, the application of stablecoins in the payment sector, and the returns provided by DeFi that exceed the market average. It is expected that by the end of 2025, the supply of stablecoins will reach $300 billion, and it is projected to surpass $1 trillion by 2030.

The rapid expansion of stablecoin asset size will bring new opportunities and transformations to the financial market. Some changes are already foreseeable, such as the shift of bank deposits from emerging markets to developed markets, and regional banks transforming into globally systemically important banks (GSIB). However, as foundational innovations rather than marginal innovations, the long-term impact of stablecoins and DeFi may exceed our imagination and could fundamentally reshape the operation model of credit intermediation.

The three major trends driving stablecoin adoption

Stablecoin as a savings tool

Stablecoins are increasingly becoming an important savings tool for emerging market countries. In economies such as Argentina, Turkey, and Nigeria, local currencies continue to weaken, and inflation and depreciation pressures have led to a rising demand for the US dollar. In the past, the circulation of US dollars in these markets faced many restrictions. However, stablecoins have broken through these barriers, allowing individuals and businesses to conveniently access dollar-backed liquidity through the internet.

Although it is currently difficult to accurately measure the scale of savings based on stablecoins in emerging markets, this trend is developing rapidly. Several companies have launched stablecoin settlement card services, allowing consumers to spend their savings at local merchants through the Visa and Mastercard networks.

Taking Argentina as an example, the fintech application Lemoncash reports that its managed $125 million "deposits" account for 30% of the market share of centralized crypto applications in Argentina, second only to a certain trading platform's 34%. This data indicates that the asset management scale of crypto applications in Argentina is approximately $417 million, accounting for 1.1% of the country's M1 money supply. Considering the balance of stablecoins in non-custodial wallets, the actual scale may be larger.

(# stablecoin as a payment tool

Stablecoins are becoming a viable alternative payment method, especially in the field of cross-border payments. Compared to traditional cross-border transactions, stablecoins have significant advantages. Over time, stablecoins may evolve into a meta-platform connecting various payment systems.

Research shows that B2B payment use cases contributed $3 billion in monthly payments among 31 surveyed companies (annualized at $36 billion). In fact, among all non-cryptocurrency market participants, this figure could be annualized to over $100 billion. From February 2024 to February 2025, B2B payment volumes grew fourfold year-on-year, indicating a sustained growth momentum.

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(# Decentralized Finance提供高于市场的收益

In the past five years, DeFi has consistently generated structural dollar-denominated yields higher than the market, allowing technically skilled users to achieve returns of 5% to 10% with lower risk. This has already fueled and will continue to drive the adoption of stablecoins.

DeFi is a unique capital ecosystem, and its underlying "risk-free" interest rate reflects the broader conditions of the crypto capital market. As long as blockchain continues to generate new ideas, the base yield of DeFi should remain higher than the yield on U.S. Treasury bonds.

Since the "native language" of DeFi is stablecoin rather than US dollars, any "arbitrage" behavior attempting to provide low-cost US dollar capital to meet this specific market demand will drive the expansion of stablecoin supply.

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( The transformation of bank deposits

The widespread adoption of stablecoins may lead to the disintermediation of traditional banking. Consumers can directly access dollar-denominated savings accounts and cross-border payment services without relying on traditional banking infrastructure, which reduces the deposit base that banks use to drive credit creation and generate interest income.

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(# bank deposit substitution effect

When users transfer savings from traditional bank accounts to stablecoin accounts such as USDC or USDT, they are essentially moving deposits from regional/commercial banks to U.S. Treasury bonds and deposits at major financial institutions. The implications of this trend are profound: while consumers maintain dollar-denominated purchasing power by holding stablecoins, the actual bank deposits and Treasury bonds backing these tokens will become more concentrated, rather than dispersed across the traditional banking system.

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(# Contraction of Credit Creation

A key social function of bank deposits is to provide loans to the economic system. The fractional reserve system allows banks to lend out several times the amount of their deposit base. As deposits shift to stablecoins, the deposit base available for lending at regional banks decreases, which may lead to a decline in credit creation capacity. When this impact reaches a certain scale, regional banking regulators may have to take measures to maintain credit creation and financial stability.

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(# Over-allocation of U.S. Government Debt

Stablecoin issuers have become important buyers of U.S. Treasury bonds, with their holdings increasing in scale along with the growth of stablecoin asset management. It is expected that in the near future, stablecoins may become one of the top five buyers of U.S. Treasury bonds.

When the scale of stablecoins is large enough (for example, $1 trillion), it may have a significant impact on the yield curve, as short-term U.S. Treasury bonds will have a large buyer that is insensitive to price. This could distort the interest rate curve on which U.S. government financing relies.

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(# New Asset Management Channel

Stablecoins are siphoning funds from traditional banking systems, particularly from emerging market banks and regional banks in developed markets, creating a whole new asset management channel. Certain stablecoin issuers have begun to emerge as non-bank lending institutions, and other issuers may also become significant lending institutions over time.

If the stablecoin issuing institution decides to outsource credit investments to professional companies, they will immediately become limited partners in large funds and open up new asset allocation channels. Large asset management companies may achieve scale expansion in this context.

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(# The New Frontier of On-Chain Yield

Stablecoins not only represent a claim on the underlying US dollar, but also serve as a unit of value on the blockchain itself. Stablecoins like USDC can be used for lending on-chain, and consumers will need yield products priced in USDC. Various "vaults" will provide consumers with on-chain yield opportunities, thereby opening up another channel for asset management.

In the future, new vaults may emerge that track different on-chain and off-chain investment strategies, competing for USDC/T holdings across various applications. We may see the formation of an "effective frontier of on-chain yields," where some on-chain vaults may specialize in providing credit to specific regions that are at risk of losing this capability in traditional banking.

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( Conclusion

The integration of stablecoins, DeFi, and traditional finance marks the reconstruction of global credit intermediation, reflecting and accelerating the shift from bank to non-bank lending post-2008. By 2030, it is expected that the asset management scale of stablecoins will approach $1 trillion, which will systematically change the structure of traditional bank deposits and concentrate assets into U.S. Treasury bonds and major financial institutions.

This transformation brings both opportunities and challenges: stablecoin issuers may become important participants in the government debt market and new types of credit intermediaries; while regional banks (especially in emerging markets) may face credit tightening. Ultimately, this could lead to the emergence of a new asset management and banking model, in which stablecoins will serve as a bridge to the forefront of efficient digital dollar investment.

Just as shadow banking filled the void left by regulated banks after the financial crisis, stablecoins and DeFi protocols are positioning themselves as the dominant credit intermediaries in the digital age. This trend will have profound implications for monetary policy, financial stability, and the future architecture of global finance.

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