From adoption trends to policy hurdles, this discussion evaluates where stablecoins stand today and what they mean for the future of digital money.
At Davos, a panel spanning the IMF, stablecoin issuance, and emerging-market finance argued that stablecoins are moving from crypto plumbing to a mainstream payments and settlement layer—though the scale is still modest. IMF’s Dan Katz cautioned that headline figures like “$33 trillion” in transactions can be misleading because much reflects high-frequency digital activity; in his view, the more relevant benchmark is the roughly “$300 billion” outstanding, “still very, very tiny” in global terms. Circle CEO Jeremy Allaire countered that adoption is accelerating across real-economy use cases—remittances, trade settlement, e-commerce acceptance, card-network settlement, and tokenized funds—describing stablecoins as “general architecture money for the internet.”
Vera Songwe highlighted Africa’s demand drivers: lower remittance costs and faster settlement, inflation protection, and SME payments. Stablecoins, she argued, can be a “governance enhancer” and “monetary policy disciplinary tool,” while she advocated an Africa-oriented platform backed by SDR-like baskets to reduce “dollar domination.”
On regulation, Katz emphasized that benefits require cross-border interoperability beyond national rules such as the U.S. GENIUS Act and EU MiCA. On interest-bearing stablecoins, Allaire stressed that major regimes ban issuer-paid interest and called bank run fears “totally absurd,” likening concerns to earlier debates over money market funds. The panel also forecasted AI-driven “agentic” commerce, with stablecoins enabling internet-scale microtransactions and verifiable settlement.
Good morning everybody. Welcome. Welcome to this session on where are we with stablecoins past, present and future. Thanks very much indeed for joining us. I'm Gerry Baker, I'm editor at large of the Wall Street Journal. Typically write about macroeconomics and geopolitics, but like everybody have an interest in this, phenomenon, this growth broadly of cryptocurrency. And of course, particularly, what's been happening in stablecoins, got a terrific, panel here with a range of perspectives and, views on, on this topic. Just briefly introduce them. We've got, to my immediate left, Dan Katz, first deputy managing director of the IMF. Next to him, Jeremy Allaire, co-founder and CEO of circle, of course, one of the big stablecoins or big stablecoin company. To his left, Vera Zongwei, who's co-founder of the Liquidity and Sustainability facility based in the UK, though with heavily focused on Africa. Aren't you, Vera? Yeah. And on my far left Suyat, co-founder of Animoca brands, based in Hong Kong. Just to set the stage, obviously we've seen, dramatic explosion in the use of stablecoin, just in the last few years. The numbers are latest data were that 33, $33 trillion worth of transactions in stablecoin, last year, that was a 72% increase on the year before, I think over $350 billion worth of stablecoin assets. Now, everybody seems to expect this growth to continue. We've had, a lot of focus, interesting focus on the regulatory environment. Genius act, of course, passed in the United States last year. Other countries also establishing a, regulatory framework for dealing with stablecoin, I suppose. I think to me, the most fascinating story we'll get into all aspects of this. But the most fascinating story to me is the question of, you know, of what is the ultimate potential here? I know the sort of passionate, the even the evangelists for crypto generally, see stablecoin because obviously because as the name implies, because of its, stability as a real disrupter, of the global payment system representing a significant challenge to existing financial institutions, reducing friction in, domestic and especially in international transactions. With all the potential some think some of the people I speak to think that ultimately perhaps replacing traditional financial institutions in so many of these payment systems, others think maybe the potential is more limited. So we'll get into all of that and we'll get into a lot of the details. But, once again, thank you all for being here. But let me start with you, Dan. We have seen, as I said, this, this explosion of the use of stablecoin in the last stablecoins in the last few years. What's what's what's what, what have been the main drivers of that growth?
Well thanks, Jerry. It's great to it's great to be here. In terms of what's been the main driver for that growth, I think that's actually a helpful framing for understanding the way that the evangelist, as you put it. And also maybe you could say the reactionaries, look at it. So the $37 trillion of transaction volume, I think, is actually a little bit misleading, because a lot of that transaction volume, you know, might be trading back and forth between AI agents and various other forms of digital transactions, which may not actually be that tied to economic substance. So I generally prefer to look at what's the total volume of stablecoins that's been issued, which absolutely has been growing. But, you know, in context, in the context of global financial system, it's $300 billion is still very, very tiny. So I don't think we quite yet know where this is going. You know, what is clear, though, is that there are both very significant potential benefits from the deployment of stablecoins, you know, across, improvements in both domestic and cross-border payments. In terms of financial inclusion, I think that's often overlooked, benefit, but a really important one. And then, of course, that's, you know, offset by potential risks, whether that's financial stability risks. So as a result of runs on particular stablecoins or whether that's a result of payment fragmentation that could silo liquidity or as a result of disintermediation, disintermediating the banking system, which I think is oftentimes the most severe risk that folks are focused on. And from an emerging markets perspective, the threat of currency substitution and very, very volatile capital flows. But it's really early days. And so I think, you know, from the perspective of the fund and from the perspective of economic policymakers, it's important to remain balanced, to work, to establish clear rules and frameworks. And we've seen a lot of progress on that front, but be very open minded both to the benefits and the opportunities as this ecosystem starts to interact with the traditional financial system.
So, Jeremy, let me ask you, so sort of almost a flip that my opening question on its head about why have we seen this explosive growth? I mean, to Dan's point, okay, the transaction number is one thing, but the actual total value of stablecoins is another 300 billion, which again, as Dan says, is a drop in the bucket not only of total obviously financial assets, but actually even of crypto, of total crypto assets. So to sort of flip the question around, maybe, you know, should why haven't we seen even faster growth? Why aren't people adopting stablecoin more. And, you know, presumably again, from your perspective, you you firmly expect them to do so. And how is that going to unfold?
Well, I mean, look, I it depends on your definition of fast. You know, we've seen Usdc grow over 80% a year for multiple years straight. We saw in Q3 our most recently reported quarter, we saw transaction volume in Usdc grow, 580% year on year. You know, across so many other metrics, the amount of, Usdc flow across blockchain networks also growing at huge, at huge growth rates. What's interesting for us, though, is, this gets into the the original question, which is, you know, when we think about this really from inception, when we designed this in the first place, we think about general purpose, general architecture, money for the internet, fully reserved, very safe, fully reserved. Now we're getting prudential frameworks to to provide for that, that safety in a digital cash instrument that can scale from a transaction that might be between one AI agent and another AI agent that needs to consume digital tokens for $0.25, all the way up to a, a bond purchase that might be $1 billion bond purchase settled internationally and everything in between. And so when I look at the use case proliferation that we're seeing, it's extraordinary. We are seeing use grow in in cross-border trade settlement. We're seeing use grow in trade finance. We're seeing the biggest e-commerce platforms like Stripe and Shopify adding Usdc payment acceptance at in their own platforms. We're seeing the biggest remittance companies and Neobanks adding Usdc as a way to store value as a savings vehicle, as a payment system capability. The biggest payments networks in the world, like Visa and Mastercard. Now using Usdc as an internal settlement infrastructure, the biggest asset issuers and asset managers like Blackrock and Apollo issuing private credit products on chain or, other fund products on chain, where the primary way that you create and redeem these new securities is with things like Usdc. And then obviously, in, in peer to peer transactions, I think one of the, one of the, one of the things that I think people often mistake is there's a lot of Usdc and stablecoin in general that comes in and out through these big, aggregators like Binance or Coinbase or others, quote unquote, crypto exchanges. But what's interesting about these platforms is that, yes, people are using them for trading and investing, but they're also using them for savings. If you look at a platform like Binance, with over 300 million users, 20% of their users are in Africa, far higher penetration of users in Africa than the banking system in Africa. And people are using it primarily as a dollar substitution mechanism, as a way to store value, make peer to peer payments, etc.. And so the use cases are growing in every sector of the of the economic system. And with the regulatory clarity, I think, that's, that's breaking out all around the world, we expect that to, to accelerate as well.
Well, you moved us nicely on there by talking about Africa to. I want to Vera. The vast bulk I think it's true so far of the of the stablecoin activity we've seen is obviously fiat currency backed and in particular us, us, US dollar backed. But I know you you've been particularly in, in Africa working on alternatives. Can you can you tell us how that sector of the market is growing.
Yes. No, I think thank you very much. I want to come back to the 33 trillion number. And it's not clear to me that one needs to dismiss it just because the money velocity is increasing, because that is what 33 trillion is. It's the money velocity. Yes. The base is 300 billion, which is already a big number. When you talk about how quickly it has grown. But in Africa in particular, I think there are four, I think positive use cases for it, which is one of the reasons why it's growing so fast. The first one is just about transaction costs and arbitrage. And so far for the last I would say 15 years, one constant agenda item on the G20 has been reduced the cost of remittance transfers. Remittances are more important to Africa than aid, has been. And actually cumulatively, over the last three years, remittances have tripled compared to overall development assistance. So this is how important it is. However, for every dollar that is, sent out onto the continent, you have 0.06. So let's say if it's $100, $6 of payments, costs in transactions, which is quite expensive. In addition to that, if you're transacting over the weekend, then you have to wait for Monday. Right. So there's if you're a small business transactions person, those 3 or 4 days, sometimes on the continent, it's actually five days in terms of sending resources with, stablecoins, it takes minutes. And and it costs a dollar. So one of the beautiful things about the genius Act is really that, you know, it has now created a regulatory framework for stablecoins. But the the big beautiful budget was going to start taxing remittances by $5. So you're going to add already 6%. You're going to add another 5%. With stablecoin. You can do that. The second thing that is important for stablecoins is of course, the hedge against the, inflation in many of our countries post Covid, we have we have about 12 to 15 African countries where inflation was above 20%. And so essentially, you know, the fastest way to poverty increases is inflation. And so what you want to do is what stablecoin is doing is providing people with a safety net, a safe, account, 6.5 billion people globally do not have, sorry, 6.5 1.5 billion people globally do not have access to a bank account. 650 million people on the African continent. With a smartphone, you have access to stablecoins. So you can actually save in a currency that is not, exposed to the fluctuations of inflation and making you poorer. So that's another big contribution of the stablecoin.
Can you give us a sense of what the take up is so far in Africa? I'm assuming.
You have a lot of take up in the countries where inflation. So and I think stablecoin also in some sense is almost a directional way of looking at monetary policy and restrictions on capital controls where you have higher capital controls. Any country that has higher capital controls has stablecoin use quite high. So we have the three biggest stablecoin users on the continent today are Egypt, Nigeria, Ethiopia to some extent South Africa. But South Africa is because small businesses are using it. And this is the last point that I was going to make, is actually also small and medium enterprises. The large bulk of stablecoin use on the continent is below $1 million, which means it's mostly SMEs transacting on it. So it's a huge inclusion in financial inclusion, as you said. Two.
Yatsu what what's your sense of the both the immediate potential, the short term potential of, of the growth in stablecoin and ultimate potential? I mean, where does this go?
I mean, I guess I'll take it from the lens, from the entirely virtual economy, which is kind of what we're sitting between video games and digital assets purely. I mean, the state of crypto broadly went from, you know, like 6 or 7 years ago to, you know, about 3 to 400 billion to basically 3 trillion. And so that's very much a proxy as well as those economies grow in themselves, not just the rise of Bitcoin, but the entire crypto economy. Of course, the use of stablecoins grows well. And I think the very initial use of stablecoins was this on off ramp as well. It was kind of really, if you think about it, the bridge to the real world, not just as an artery, but literally, oh, I have assets that are worth something in the digital world that are entirely virtual, so to speak. And now how do I bridge it to I can, you know, buy something in the real world and do that and that actually stablecoins really sort of sort of perfected that model at start and was also.
And that has, that has up to now been quite a significant, component of the stablecoin.
It certainly has been a significant opponent for the initial growth, but I think it's much more significant today, because the other thing that's also happened, and especially during Covid, we saw this in places with some of our products in places like Philippines and Indonesia, there was basically mass adoption of places where they needed to make virtual income. And virtual income can be made through activities that are done in those digital worlds. Right? They used to call it the metaverse. Metaverse is kind of out, but the point is that people are still making money in those environments. They make them in these digital assets, in crypto tokens. They may be, you know, not real. However, they would then trade them out into stablecoins. And then next thing you know, because they have a wallet, they've got a bank account of some form where they normally get banked because, you know, $5 isn't worth a bank account, but $5 is a lot of money in, in places like the Philippines. And then what's interesting also is this financial inclusion that actually introduces a form of financial literacy. And I think it's interesting because, you know, for those of you who've been around for a while, I think it's a little bit synonymous of looking at media consumption in the internet back in 1995 and 96. Right. The growth is rapid, but in relative media consumption compared to TV and newspapers, it seems very low. And I think with stablecoins and broadly with digital assets, we're kind of at that stage, right. $3 trillion is a big figure. But at the size of the stock market and generally speaking, it's still a tiny, tiny fraction, which I think represents that opportunity. The other thing, of course, is that we think of this also as the asset class of the youth. So it's not just developing. It's also for young people. If you look at South Korea, the majority of people under the age of 30 now exclusively deal in digital assets of some form or fashion. Sometimes they don't even care about stocks, which is why people talk about tokenizing stocks themselves. And so what is that bridge. Right. So I think the growth of stablecoins is going to grow not just because of the demand in the physical world. Better, faster, cheaper. All the arguments that we're seeing here, just on the topic of unbanked, I mean, you know, we're used to t plus two, sometimes t plus seven, depending what it is. But in places of these countries you need, you know, you basically you need it there in the second. Because, you know, why do we have payroll systems that pay us on a monthly basis? We think that's normal because we've got credit systems around. But in those places, you need to have your payroll on a daily basis. And stablecoins is one of the best, best use cases for that. So it's it's growing from there.
Jeremy. We're all obviously, now completely used to the idea that artificial intelligence, you know, is, is not only the adoption of artificial intelligence is not only now, pretty well, universal, but we're expecting, obviously, the dramatic acceleration of it in a increasingly short kind of time frame. Can you tell us how that how stablecoin, what role stablecoin can play there and how how AI will affect stablecoin?
Sure. I'd start with, maybe some basic which is, you know, when when we got started working on this almost 13 years ago, the, the, the idea that got us very excited was that first that you could have kind of money as like a native data type on the internet. So you could have digital dollars, just like you have digital music or, or communications like kind of basic building blocks, and that it would be programmable. And the programmability idea was, through the advent or the proposal of the idea of smart contracts. And 12 years ago, 13 years ago, that wasn't a thing. Now we have very mature computing networks, these blockchain networks that, are able to execute code. And what's powerful about it is that these smart contracts are, they're publicly verifiable. So that's really important when you're dealing with transactions amongst, unknown counterparties or for example, when you're dealing with transactions between an AI agent and another AI agent. And so we now have kind of the computing material to provide a kind of assured, verifiable, cryptographically verifiable way to conduct transactions. And so, that's powerful and a whole bunch of things. It's powerful for bringing more financial market infrastructure online and innovations in the way financial services get built and delivered and rendered. But it's particularly important in this, in this growing world of agentic economic activity. And so, you know, right now what we're seeing is, this proliferation in new technology standards for, basically payment protocols for AI agents and payment protocols for AI agents that primarily use stablecoins, as the as the actual medium of exchange. If you if you think about, you know, AI agents that are making these high velocity transactions at very low cost to do work or consume data, etc., like taking out your visa card or firing up a bank wire, or it's just completely absurd. And so we need a medium of exchange that can scale down to fractions of a cent, that has the money, velocity and speed of the internet that works openly globally. Interoperably any software or hardware connected device in the world that that may have AI agentic activity happening on it, being able to transact. And critically, you know, with AI, one of the big concerns is truth. Not just hallucinations, but also how do we know, who is this AI agent acting on behalf of? And how do I verify that it's it's output and it's work is is correct. And so, what what we're really seeing is sort of the next generation of blockchain networks, things like arc, which circles building on. There's other new blockchain networks are actually being designed specifically for Agentic, compute. They're designed specifically for the financial and economic activity of a world where three years, five years from now, one, I think, can reasonably expect that there'll be billions, literally billions of AI agents conducting economic activity in the world continuously on a continuous basis. They need an economic system. They need a financial system. They need a payment system. There is no other alternative, in my view, other than stablecoins to do that right now. And that can keep up with that pace of technological change. And so that's a it's a it's a critical, focus for us, but not just us. There's a lot of other folks that are interested in this and contributing to the technical standards to, to support this upgrade to our digital economic system.
Let's talk about about.
Can I just quickly interject, just because Jeremy was talking about programmability and you know I absolutely it's going to it's going to be huge. The programmable aspect of basically money is actually I think the other part that's really revolutionary, the whole DeFi economy comes from the fact that you can actually program money. And I think the parallel I think of it is a little bit like open source, right? For the first time in the world, you have a kind of open source money that is basically reserve backed. But what you can now do is create products and services on top of it that weren't accessible before. And when you think about what the internet did in the early days, it provided that toolkit for media. You weren't a media professional, but now you could enter the world of media. You could be a kid, you could be a programmer. You didn't have to come from the world of finance. And I think it's very interesting when you look at the origins of a lot of the people in the crypto world, they don't originally come from finance, they come from many other industries, but they became sort of included in this world of finance. They learned about it and then they brought their own creativity, their own ideas to the space and say, hey, how about we do this? Or maybe we should do, you know, a prediction market? Or maybe we should do sort of something in gaming. They just integrated that. And in a way, previously, because money was kind of locked in sort of traditional systems only experts could enter. Essentially, you couldn't grow that space. I think the real incredible added opportunity is by open sourcing money, you're bringing the entire global creativity, which I think is the opportunity for economies as well, to say, you know what, you don't have to have a finance degree, but you can now dabble with this. And then from there you can develop and then actually become more financially literate, just in the same way that we used to call digital literacy. I think.
This raises again, helpfully brings us on to the next topic I wanted to discuss, which is the policy environment. And firstly, the the regulatory environment. And, you know, given these extraordinary innovations you're seeing, I mean, we've had we had the genius act obviously last year, you know, and I wondered, Dan, if you could tell us what, you know, obviously its principal provisions were, you know, research, you know, required reserve backing, you know, some sort of certain protections. How is that from your perspective? How is that working? Is it? I mean, often when you get a significant piece of regulation, it works in some respects. And then you discover that there are whole areas actually, which are either overregulated or under-regulated. What's your sense of of the regulatory climate right now, especially in the US?
Sure. So I mean, with respect to the US specifically, I think it's it's quite early, right? I mean, certainly genius was a big step forward in terms of establishing some clear rules of the road. But at the same time, there's still a range of rulemakings that regulators need to go through, to figure out how to appropriately calibrate, the, the, the regulatory framework. And then critically, you know, I think, I think the, you know, one of the key things is going to be the interaction between regulatory frameworks internationally. And we have seen progress, on the international front, obviously, Mika, in the EU and lots of other jurisdictions introducing their own frameworks. But if you really want to realize the benefits of stablecoins, particularly from a cross-border transactions perspective, and of course, you really need scale to generate a lot of the benefits that we, that we, that we realize could, could be realized with, with stablecoins, you need to have effective interoperability. And so I think that's really the next regulatory frontier, that, that folks need to work on. But just kind of stepping back for a minute from the fund's perspective in thinking about global economic growth and stability. You know, the reason why we need these clear regulatory frameworks is a concept that I think is really important for everyone to keep in mind, when thinking about this, the these developments. And that's competition, right? And so one of the reasons why I think there are such exciting potential use cases for stablecoins is the competitive dynamics that they will bring into the traditional financial system. And I don't I don't begin to know exactly what this is going to look like over the next decade and beyond, whether stablecoin issuers will be the dominant provider of mediums of exchange or stores of value, or whether the technological underpinnings that exist in the ecosystem will be absorbed into the traditional financial system. But I think it's critical that we allow this process to play out, because ultimately it's consumers are going to benefit from the efficiency gains that the market that the market will respond to. And that would also extend, by the way, to, to the role of currencies generally in the international environment. And so, you know, as, as we've already heard, as stablecoins create the potential for additional uptake in, you know, jurisdictions that have weak, fiscal and monetary frameworks, you know, for dollar, for dollars or for, you know, other other currencies, that creates a competitive pressure on those countries themselves in order to improve their fiscal and monetary frameworks, which I think is an important element that we shouldn't also also lose as we're thinking about concepts like monetary sovereignty.
Yeah, there is I mean, that's obviously and talk a little bit also about, you know, you talked in your opening remarks a little bit about, you know, the role of the dollar. But, but, but the importance of perhaps of de-dollarization. And I know you've been working on sort of alternative currency backed stablecoin.
Yes. No, I think that's, thank you. And that's a very good segue. So one of the biggest prize and just to to to to be clear, stablecoin is not crypto, right? At least, fiat based stablecoin, which is, backed by, some liquid currencies is what we're talking about here. And I think if you look at the African continent, we have over 50 countries. We have the African Continental Free Trade Area agreement. Countries need to trade. We have a lot of capital controls on on the continent. And so it's very difficult to move around if you're trading. And essentially part of that is about, you know, weak fiscal policies, deficits, debts and and also monetary policy that sometimes is not always appropriately anchored. And what you can do with stablecoins and what we're trying to do, actually, a group of us is design an African stablecoin platform, which essentially is backed by the SDRs. And so sort of the underlying assets will become, you know, still, fiat currencies, US treasuries. But then it begins to mirror Africa's trade with the rest of the world. And if you take, for example, one of the advantages we are beginning to trade a lot in Renminbi's. Right? Today we have to go through the dollar, the intermediation cost. And so if you can do a stablecoin platform that has the SDRs, of course, have the seven largest currencies of the world, then you begin to it does not impact on monetary policy, because today what we have if you're in Nigeria, the 59 billion is mostly Usdc. And so there is already a monetary policy dislocation that is happening because even if the Nigerians are mostly buying, I was just talking with the Bank of industry. They are mostly purchasing, Brazilian machinery for agriculture, but they are switching through the dollar and or Chinese machinery. And essentially what this kind of system will do is one, it will push, monetary policy to anchor better on inflation, push, fiscal policy, hopefully to be slightly more prudent. And then what happens is that you don't have the sort of dollar domination, which is what I think everybody is afraid of. And it is true today, 75% of the stablecoin environment is with Usdc, which are basically dollar denominated. But the good news about it is also, I want to say, for Africa at least that the other part is not all fun and games. I think there are some drawbacks. One of the biggest drawbacks, particularly more in the crypto world, is a little bit about transparency, AML and those kinds of safeties. I think with blockchain, we are able now to build in sort of truths to the system. In Africa, we have talked for the last another 15 years about illicit financial flows and the fact that, you know, the mining companies take out the resources and we cannot appropriately fiscals that this is another way of doing that in a more appropriate way and actually really following, the payments and the system. So I think for us, it actually is a governance enhancer. It's a fiscal policy enhancer. And well done. It's a monetary policy disciplinary tool.
I've got a few more questions from me, but so please, I'll have we'll open it up to questions from the floor in a second. Jeremy. One one very lively debate that's going on right now in the context of regulatory policy environment is, the question of interest of, of interest bearing stablecoin of interest payment on stablecoin. This has been actually here at the forum, this at the meeting this week, this topic of lively debate with, perhaps not surprisingly, banks, expressing great concern about the possibility of, of of interest being paid on stablecoins. I think I saw Brian Moynihan Bank of America CEO, saying that could would lead to a massive flight of bank deposits into stablecoin. What is your we can explore the implications of that sort of the monetary policy implications on other things of that. But what's your where where are you on that and what do you think? Do you think he's right that this you would see, you would see a very dramatic, shift out of, traditional bank deposits if that were to happen.
So there are a few, I think, key issues here. I think there's the sort of the, the law and policy issue. There's the actual kind of data about what, you know, what's here, and then kind of how does this go forward. And I think embedded in all of this is sort of, in my view, sort of taking a first principles approach to how we're designing an internet native financial system, which is sort of how we think about things. So, so maybe just to touch on each of these, I think, the first is we have a law, the Genius Act in the United States, and we have laws in Europe. Mika, we have laws in Japan for stablecoins. We now have laws in the UAE, Hong Kong, Singapore imminently and in many other places in every single one of these jurisdictions, stablecoins are prohibited from paying interest. That is because stablecoins payment stablecoins and in fact, the law in the United States defines a payment stablecoin as a cash instrument that is, a payment token that is used as a form of of payment and settlement. Right. This is the the fundamental definition. I think it's the correct definition. And that's the work of the FSB. That's the work of the G20. That's the work of central bankers who've looked at this and said, we see this as a payment system innovation. This needs to have the safeguards of kind of cash level money. And, and really that was the regulatory design that came out of a lot of work, five years of work. That work went into the development of stablecoin bill, which eventually became known as the Genius Act in the US. And that is the law. And I think that's very good, and I think that's the right law. Now the, the, the sort of a second piece which is, you know, stablecoin issuers such as circle are prohibited from paying interest, but we generate income, we make money from reserves and other revenue sources, and we build partnerships with lots of companies. We have a partnership with Coinbase. We have partnerships with Binance. We have partnerships with visa. We have partnerships with so many different companies. And we have, you know, we have economic arrangements with these firms and they may decide based on income that they generate from us that they want to incentivize people to use stablecoins, which are are so-called rewards. I think the discussion has been, you know, really banks are not happy that, you know, companies that are involved in promoting the adoption and use of stablecoins are paying rewards. They're saying, hey, isn't this just a way to provide a substitution for a bank deposit? And isn't that going to suck all the deposit base away from banks? It's going to basically undermine the ability for banks to have, you know, money to actually have a base in order to give credit. It's going to draw away credit from the real economy. And when we're in a stress condition, the economy is going to implode and we're going to have no credit, and it's going to be a huge recession. And that's the the kind of, you know, reductio ad absurdum kind of logic that flows through.
Is it absurd?
It's totally absurd, in my view. And it's totally absurd for a couple of reasons. I think the first is that, you know, you know, rewards around financial products exist. Those rewards around financial products exist in every balance that you have with a credit card that you use. They exist around so many other financial products and services that we have. And these these rewards are actually very important. They help with stickiness, they help with customer traction, etc. they are not themselves like these huge monetary policy dampeners. The second is just the historical fact, which is that this is exactly what was said when government money market funds emerged, the exact same arguments were made. Government money market funds are going to draw away all the deposit base. And and as that happens, there will not be lending. And so we have I don't know what the aggregates are now. It's been around $11 trillion of dollar money market funds that grew in various different circumstances. But that has not stopped the ability for lending to happen. The other is that lending itself is moving away from the risk taking of banks. A huge amount of lending is moving towards private credit. Last night, a very important capital markets participant was pointing out that the vast, vast majority of GDP growth in the United States, if you look at it through many, many cycles, the vast majority of GDP growth was funded by capital market formation around junk bonds. So private credit issuing junk bonds, capitalizing the build out of the American technology advancements, not bank credit. Now, I'm jumping around a lot of topics here, I realize, but I think, the bottom line from my perspective is we want stablecoin money to be cash instrument money, prudentially supervised very, very safe money. And then I think what we want to do is we want to build models for lending that build on top of stablecoins. And that's DeFi is an early example of that, where people are borrowing and lending these. And I believe we can create very, very efficient credit delivery systems built on these very sort of digital cash type forms of money. And these credit delivery systems actually can be safer, more transparent, more efficient, more inclusive, and more globally available than what we have with bank credit today. And so this is a change in the architecture of the financial system. It will play out over decades. And, and I think we need to kind of preserve that, that structure.
Do you want to weigh on this?
Yeah, yeah, I want to come in quickly in Africa again. And I think it is true for some developing countries, a lot of our bank deposits are government paper and or short term deposits. So banks don't lend as much. And so there's a huge illiquidity problem on the continent. And what we are hoping that stablecoins will do is provide a little bit more liquidity and velocity of money for that, businesses to happen. So it's almost like your junk bond sort of releasing the economy and deepening. I think we heard today, even in Europe, that, you know, there is constraints in building capital markets. One of the constraints for building capital markets on the continent is precisely liquidity in the system, which stablecoins will begin to fix. And so but I think actually and one of the reasons why stablecoin has come so fast and is huge adoption, is because the banks themselves took too long to get to central bank digital currencies that everybody has been waiting for for as long. And my sense is over time, what we will see is maybe a closer relationship between the circles of the world and the banking system. I think there is, because again, this is really a payment system. There is still going to be a lot of the monetary policy functions that remain with central banks and where we should be. It's not saying, you know, one is going to take away the other. It's how are we going to create a system? I think the genius act, Micah and everybody else is beginning to say, and that's why we're saying it's a payments settlement system. But then there is the whole collateral management, central depository systems that the banks will still continue to do. And I think we do need to find, you know, where is that bridge so that the real sort of collide. I think that's the argument.
Maybe just as a, as a, as a closing statement to this argument also is that, you know, the liquidity isn't just domestic. Of course, the liquidity is global. Just how the internet distributed information to the world to consume. Now you can do commerce with literally the entire world. There are about 2 to 300 million people around the world that have stablecoins that are US dollar denominated. Every American, European, Asian business can now transact with them relatively stably and safely. They don't have to worry about local currency. They don't have to worry about. I mean, those people can't sign up with a PayPal or Venmo account, right? They don't have a way of having a credit card. And you can now do business with them. Right? So both ways. Right. So I think I think that's the added added dimension as well. That adds much more liquidity to the entire space.
Thank you. We have time for some questions, please. This is your opportunity to talk to some of these experts. Gentleman in front. Would you stand up, please, and identify yourself? And you've got a microphone there? Sure, sure.
My name is Pierre Ghahramani. I'm the managing director of the European Stability Mechanism. So there's the lender of last resort of Europe. I'd like to congratulate all the speakers. And you, for for the very insightful discussion. And I have a question to which I don't have the answer, but what struck me most from all the points was this issue of instant payment, instant settling, and liquidity. And if I remember correctly, the money supply is, is the amount of money there and the velocity at which it circulates. So my question is to to which I don't have the answer, but it would be important to, to think of it would be the following. With all these instant payments and settlements, don't we have, money supply that grows tremendously. And if it grows tremendously because of the velocity, will that have an impact on inflation, on monetary policy?
Very. I'm very glad you asked that question, because we were going to come on to monetary policy, PV so, Jeremy, you want to answer that?
I'll just give my quick take. I actually think it's the opposite. I actually think that I call it the new physics of money. And so basically, just like the marginal cost of storing and moving a piece of data is effectively zero, we can now move infinite data at the speed of the internet at zero cost, or the marginal, the marginal cost of publishing software in the world is zero. And now with AI producing software, the marginal cost of actually producing software is effectively zero. So we have these these collapsing marginal costs. And on these networks, the marginal cost of storing and moving value of any form, whether it's a digital dollar or a tokenized bond, effectively goes close to zero. Now, there may be intermediary tasks that introduce costs, but fundamentally, the physics of money becomes the physics of the internet. And what that means is actually you need a smaller monetary base, in order to achieve a dramatically higher amount of economic velocity. And so I actually think this is a this is a prudential and a monetary theory question. It is unresolved. I think about this a lot, which is, hyper velocity of money is is potentially a very good thing in terms of money velocity kind of as a, as a mechanism to transmit economic activity could be a real driver of and growth enabler. I think risk supervision in that is very different. So that's an unknown how to do risk supervision and something like that. But I actually think the monetary base is, is is lower. But I do think over the long run this, this will affect how interest rate policy setting happens. So interest rates are designed to affect money multipliers money multipliers creating money velocity. So I actually think this this will change the calculus that central banks have to use as they think about the interest rate setting mechanism. Because of the nature of this new physics of money, as I think about it, these are these things need to be studied, obviously, by perhaps folks like you and your team. Our chief economist thinks about this, as well. And obviously we're still small, but but growing rapidly. So we are thinking about it a lot.
Dan, the impact of all this on monetary policy must be of great interest to the International Monetary Fund.
Yeah, absolutely. So we're one of these groups that are working on these issues that, Jeremy's quite right, need to continue to be studied. And just to pick up on a few of the points that Jeremy made in terms of the interplay between the velocity of money and inflation. You know, the classic equations, I would say, are really designed to to measure the balance of demand and supply for money. And what's interesting about the about, the impact of digital assets on the velocity of money is that it's really more of a supply driven function increase in the velocity rather than a demand driven, increase, which you would which if there was a, an imbalance between demand or demand was higher than supply, that's where you would tend to see inflation. And so I actually think Jeremy could quite be right. That actually will ultimately end up with a smaller monetary base and not have, you know, significant inflationary pressures as a result. More generally, in terms of the operation of monetary policy, look, I think it's very difficult to say today where things are going. So much will depend on what happens across the entire ecosystem, how banks compete with stablecoins, and how stablecoins more generally get integrated into the financial system. But I would observe that, that for central banks, actually updating their operational frameworks is a is an exercise that they go through quite regularly. In fact, in the United States and in Europe over the last decade, we've had fundamental transformations over the way that the central bank actually conducts monetary policy from an operational perspective. And so this is something that central banks are already thinking about and will continue to think about. And we shouldn't, you know, wet ourselves to a particular framework that's frozen in time.
We have time for one more question. If anyone.
Would just answer very quickly that essentially for us on the in the emerging market world, it is actually about efficiency. I think when we talk about Europe, we're talking about, you know, accelerating real time gross settlements. That's what we're trying to do. So I don't think it's a it's contradictory. And so I agree with, with with you it's a little bit at least Africa has been five days of settlements whereas Europe is one hour. And so you're saying should we stay at five days because and I think it's, it's we're, we're hurrying to efficiency.
So yeah. Just because there is an interest in another question very quickly if you would stand up, please and identify yourself.
Hi everyone. I'm Drishti, a global shaper from India and an entrepreneur. I just have two questions. We know the stablecoins have proved the utility as a settlement in liquidity instrument in the tokenized real estate market, but I wanted to understand how viable it is in terms of commodity tokenization, especially when it is volatile and how does it work in terms of hedging, when commodity backed assets are relying on stablecoins?
All right. I'm going to get so short of time, I'm only one of you to answer whoever wants to answer that question, Jeremy.
I mean, basically tokenization of other assets, whether it's a gold or oil or some other commodity is happening. But you need to marry those with stablecoins for actual cash settlement, and you need to marry those with traditional market structures that people use for hedging. So options and derivatives markets, etc.. And so what we've seen is an explosion in on chain markets that are all stablecoin based markets, like hyper liquid, where basically people are building tokenized instruments for basically providing derivatives on every single form of commodity and asset that's in the world. And stablecoins are the collateral, the relative margin and the and the and the liquidity for that. And so I actually think market infrastructure to support tokenized commodities is maturing very, very fast. And stablecoins play a key role in supporting that.
We are unfortunately out of time. Thank you all very much. The title of this session was where are we on stablecoins? I think our excellent panel has answered that question, both in terms of where we are now and what the potential is, what the various challenges are. And I think, generally speaking, a very good overview of what is a rapidly evolving subject. So ladies and gentlemen, please join me in thanking the panel.