5th October 2026
By Tsering Namgyal
2026 may well be termed the year of stablecoins. There is growing real-world adoption of stablecoins, moving what was originally a crypto-native idea into a mainstream financial instrument. Initially associated with crypto-native issuers such as Tether and Circle, stablecoins are increasingly making inroads into the mainstream financial industry.
Total stablecoin capitalization reached $312.3 billion as of September 29, according to Stablecoin Beat, a market intelligence platform.
The question is no longer simply how large the stablecoin market can become, but who will control the financial infrastructure built around it—the digital-dollar rails through which AI agents, fintechs, exchanges, merchants and financial institutions move money.
HSBC RedCoin
That transition was visible in Hong Kong this week. HSBC, one of the world’s largest traditional banks, on September 30 unveiled the name of its forthcoming Hong Kong-dollar stablecoin: HSBC RedCoin. The bank plans to begin with person-to-person and merchant payments before expanding into broader applications.
The symbolism is hard to miss. The bank whose red logo has been part of Hong Kong’s financial landscape for generations is putting that identity onto a digital currency.
It also marks a striking reversal in the history of stablecoins. What began largely as a crypto-native attempt to create digital dollars outside the traditional banking system is increasingly being brought inside regulated financial institutions.
Payments
The change is particularly visible in payments. Stablecoins were once primarily associated with trading and crypto exchanges. Increasingly, businesses are experimenting with them for settlement, treasury management, payouts and cross-border commerce.
According to Visa, approximately 17% of stablecoin-linked card volume in fiscal 2026 year-to-date occurred across business and commercial card programs. Visa now supports more than 160 stablecoin-linked card programs spanning consumer, business and commercial activity, with payment volume across those programs growing nearly 200% year over year.
Recent research from Allium found that stablecoin payments reached between $401 billion and $527 billion in the first eight months of 2026, making payments the fastest-growing stablecoin use case. Businesses received between 58% and 64% of payment volume, with business-to-business settlement forming the largest payment lane. The largest business payment categories included service fees ($56 billion), payroll ($43 billion) and supplier payments ($28 billion). Among payment flows for which geographic attribution was available, B2B payments had the highest cross-border share, at 43%.
The numbers suggest that stablecoins are beginning to move beyond their original role as trading infrastructure and into the plumbing of business finance.
Impact on Treasury
The growth of stablecoins is also having an impact on the Treasury market.
Stablecoin issuers increased their Treasury-related holdings by about $200 billion over five years, an amount exceeding 40% of the decline in China’s holdings over the same period, according to research published by the Federal Reserve Bank of San Francisco.
The September 28 Economic Letter, by Sylvain Leduc, Luiz Edgard Oliveira and Aleisha Sawyer, identifies stablecoin issuers as a growing source of demand for U.S. government debt as the investor base shifts toward private holders. The offset is only partial, however: stablecoin issuers favor short-term debt, while China’s decline has been concentrated more heavily in longer-dated securities.
The analysis uses Tether and USD Coin to represent stablecoin issuers. Together, the two accounted for more than 80% of stablecoin market capitalization as of mid-August 2026, according to the authors. Their holdings of Treasury securities have grown more than tenfold over the past five years.
The comparison draws on data from the U.S. Treasury, Tether and Circle Internet Financial. The issuer series includes both Treasury bills and repurchase agreements, rather than direct Treasury ownership alone. Issuers hold liquid reserves to meet requests to redeem their tokens for dollars, linking the growth of stablecoins to demand for short-term assets.
The San Francisco Fed estimates that if the recent trend continues, stablecoin issuers’ demand for U.S. debt could nearly double to roughly $400 billion by the end of 2030. That would make stablecoins a more significant source of demand for Treasury securities, although still well below the U.S. government’s overall financing needs.
Europe and MiCA
Europe illustrates the other side of the stablecoin story: regulators are still grappling with how digital money should fit into the existing financial system.
More than 50,000 Europeans have urged the European Commission to loosen restrictions on stablecoin rewards as part of its review of the bloc’s Markets in Crypto-Assets (MiCA) framework, according to crypto advocacy group Stand With Crypto EU.
The campaign came as the Commission closed its MiCA review consultation, with the group pushing for regulated stablecoin providers to be allowed to offer incentives including cashback, loyalty benefits and fee reductions.
MiCA prohibits issuers and crypto service providers from paying interest on stablecoins, a restriction that Stand With Crypto argues puts the products at a disadvantage to bank deposits and other e-money products that can offer benefits to customers.
In a September 22 response to the European Commission’s MiCA review, the European System of Central Banks called for the existing prohibition on stablecoin interest to extend to lending, borrowing and staking arrangements that generate yield.
The ESCB also proposed replacing MiCA requirements that stablecoin issuers hold a minimum share of their reserves in bank deposits with liquidity thresholds. The central banks argued that the existing rules could strain lenders if a stablecoin run forced an issuer to rapidly withdraw deposits.
The European Central Bank has separately highlighted a potential liquidity mismatch, noting in June that stablecoins can settle around the clock while their reserve assets may still operate on traditional settlement timelines.
The European debate illustrates the tension at the heart of the stablecoin story. The technology promises faster, programmable and potentially cheaper money movement, but its reserves and redemption mechanisms remain deeply connected to the traditional financial system.
The debate is therefore no longer simply whether stablecoins exist, but how they should interact with banks, deposits, securities markets and monetary policy.
That may ultimately be the defining question of the stablecoin era. Stablecoins began as a crypto-native attempt to recreate dollars on the internet. They are now becoming something larger: a new layer of financial infrastructure connecting digital assets with banks, payments, businesses and capital markets.
The technology may have originated outside the traditional financial system. Increasingly, however, its future is being shaped from within it.
