Banking Industry Likely to Capitalize on Stablecoin Deposit Demand, Says Morgan Stanley

The stablecoin market cap has grown to $137.7 billion from $20 billion a year ago.

Nov 8, 2021 at 11:48 a.m. UTC
Updated Nov 8, 2021 at 10:02 p.m. UTC

The banking industry will most likely try and capitalize on the demand for stablecoin deposits on the back of the market’s exponential growth, Morgan Stanley’s lead cryptocurrency strategist, Sheena Shah, said in a report.

  • Some notable features of these coins is that they provide access to crypto-deposit interest rates and decentralized finance (DeFi). Crypto lenders offer over 5% interest on some of these coins, which in turn will cause regulators and governments to respond, Morgan Stanley said.
  • Stimulus from governments and central banks have led to risky assets reaching all time highs and cryptocurrencies are no different, Shah said. Cryptocurrencies are trading “similarly to risky assets” with the support from the leverage growth in their markets, she added.
  • Shah notes that “institutional investor interest in participating in the upward price momentum is building,” adding that bitcoin’s dominance is slipping as “alternative coins outperform due to their lower [U.S. dollar] prices and potential use cases.”
  • “The battle of the blockchains” is likely to continue as each picks up market share, Shah said, noting that stablecoin issuance has risen 20 times since 2020.
  • As more institutions, such as asset managers, exchanges and corporates, decide to buy crypto, bitcoin units will end up in the possession of fewer participants, which will result in centralization, she said.
  • Bitcoin was trading at $65,962 as of publication time.


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