Stablecoins now generate $425 billion monthly, yet banks report a sharp decline in FX trading revenue.
Banks’ revenue from trading foreign exchange and rates has significantly decreased, but stablecoins are becoming more popular as a substitute for international transactions. According to Matthew Sigel, Head of Digital Assets Research at VanEck, global banks are expected to post the lowest FX and rate trading revenue since before the pandemic, with estimates indicating a 17% year-on-year collapse and a 98% decline, notably in FX desks.
As of November 2024, the market capitalization of stablecoins was $188 billion, with USD Coin (USDC) and Tether (USDT) holding the most significant shares. In 2024, stablecoin transactions averaged $425 billion per month, suggesting that its use is expanding beyond selling digital assets. According to a poll, 39% of participants in emerging markets use stablecoins for cross-border payments, while 69% use them to replace their currency.
The impact of lower margins and developments in electronic trading was highlighted by Matthew Sigel, who stated that “Global Banks are on track to Report the Lowest Revenue from FX and Rates Trading Since Pre-Pandemic.” It’s “insane to think of any bank not building out a crypto desk,” Sigel concurred with LondonCryptoClub in a thread, highlighting the necessity of change in the banking industry.
The contrast between the steady expansion of stablecoins and the diminishing traditional FX income demonstrates a change in the financial landscape. Stablecoins make cross-border transactions quicker and more accessible. Therefore, banks may need to incorporate digital assets into their offerings to stay competitive.
