Dominic Basulto, The Motley Fool
5 min read
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Stablecoins are now growing at an exponential rate, and could be worth $2 trillion in just three years.
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Treasury Secretary Bessent views stablecoins as potentially solving two major problems: a rising national debt load, and a weakening currency.
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Investing in stablecoin issuers could be one way to profit from this emerging new investment opportunity.
Five years ago, stablecoins were a $20 billion industry. Today, they are a $250 billion industry. And in just three years, this rapidly growing sector of the cryptocurrency market could be worth an eye-popping $2 trillion.
That's according to U.S. Treasury Secretary Scott Bessent, who recently testified in front of Congress about the future growth of the stablecoin market. As a result, stablecoins could be a once-in-a-lifetime investment opportunity -- as long as you know where to look.
As Bessent sees it, stablecoins are becoming the new digital pillars of the dollar-based global financial system. Thus, the U.S. government must do everything it can to foster the growth of this industry, including passing new stablecoin legislation that's currently working its way through Congress.
There are two key reasons Bessent is so bullish about stablecoins. The first involves the huge $37 trillion debt load facing the U.S. government. If all goes according to plan, stablecoins will become a key policy instrument to help reduce the impact of that debt load.
At the same time, there's been increasing talk about the U.S. dollar losing its status as the global reserve currency. According to Bessent, stablecoins could be the key to fixing this problem as well.
In short, stablecoins have become -- in the minds of some policy makers, at least -- a sort of magic bullet that can solve multiple economic problems at once.
To understand why, it's important to know that stablecoins are pegged 1:1 to the U.S. dollar. This means that they are always supposed to trade for exactly $1. And to make that a reality, they must be backed 100% by cash. At any point in time, you can theoretically trade $1 in cash for $1 in stablecoins, and vice versa.
Cash can also include cash equivalents, such as short-term, highly liquid Treasury bills.
That's what leads to the hidden link between stablecoins and the nation's $37 trillion debt load. Bessent expects that debt load to expand by another $2 trillion during the next three years.
Thus, expect stablecoins to grow by a similar amount. That's because stablecoin issuers will opt to back their stablecoins with T-bills instead of cash. In doing so, they will become buyers of new government debt. And, indeed, the two largest stablecoin issuers -- Tether (CRYPTO: USDT) and Circle Internet Group (NYSE: CRCL) -- already hold more than $142 billion in T-bills.
