What’s Next for Digital Assets

David Cunningham, Head of Strategy and Partnerships, Digital Assets, Services, Citi  and Matthew Blumenfeld, Global Digital Assets Lead at PwC discuss the evolution of digital assets, particularly stablecoins, and their impact on the financial landscape. They reflect on the significant regulatory and market developments in the past year, including advancements in the US, EU (MiCA) and Hong Kong.

Key takeaways:

• "Digital Dollars" Report: The report predicts substantial growth in stablecoins and blockchain adoption globally.While B2B and B2C payments are gaining traction, the capital markets use case (using stablecoins for settlement) holds significant potential but remains largely unexplored.
• The Rise of Stablecoins and 24/7 Financial Operations: Stablecoins are experiencing a surge in interest, likened to blockchain's "ChatGPT moment." The increasing demand for stablecoin strategies is driving board-level discussions and CEO engagement. Many multinational corporations are exploring stablecoin solutions, with some considering issuing their own. However, the need for interoperability and ecosystem fungibility raises questions about the practicality of individual stablecoins.
• Predictions for the Future of Digital Assets: Formalized legislation in the US and licensing in Hong Kong are expected to further legitimize and accelerate the adoption of stablecoins. Increased collaboration between financial institutions and stablecoin issuers is anticipated, leading to the development of networks like the Circle Payment Network (CPN). Continued growth in transaction scale and wider adoption of 24/7 operations are predicted, driven by the efficiencies and automation they offer.
• The Role of Banks and the Evolution of Financial Services: While stablecoin issuers require banking services, the role of banks may evolve. Banks may offer stablecoin services as a feature, similar to how FinTech innovations have been integrated into traditional banking. The rise of stablecoins and 24/7 money market funds raises questions about the future business models of commercial banks and the potential impact on deposit holdings. Banks may need to adapt and offer a range of solutions, including stablecoin services, to remain competitive.