London – Fitch Ratings believes that stablecoins will become increasingly relevant constituencies in the short-term credit markets. The market capitalisation of stablecoins has increased rapidly, and the security portfolios of stablecoins are typically invested in short-term securities such as commercial paper (CP).
Fitch’s dashboard presents information on the overall stablecoin market, and aggregates information on the security portfolios of the largest stablecoins. The 10 largest stablecoins had an aggregated market capitalisation of USD126 billion as of end-September 2021 and Fitch estimated a 9M21 growth rate of 420%. Tether is the stablecoin with the largest market capitalisation, reaching USD68.4 billion as of 30 September 2021, followed by USDCoin at USD31.4 billion.
Stablecoin security portfolio allocations are developing rapidly. USDCoin held 10% CP and 15% in certificates of deposits (CDs) as of end-June 2021. However, USDCoin’s portfolio significantly de-risked between June and August 2021, with cash and cash equivalents approximately doubling to 92% of portfolio assets. In contrast, as of end-June 2021, Tether held 49% of its assets in CP and CDs. Stablecoins are typically backed by a variety of different assets, including money market instruments, corporate bonds, funds and, potentially, precious metals.
Stablecoins are digital currencies, primarily used, at present, for storing proceeds from cryptocurrency trades. The “use case” for stablecoins may expand over time, particularly as regulatory clarity emerges. Should stablecoins gain wider traction and their security portfolios continue to grow, they could become more material participants in sectors such as the CP market.