A recent study conducted by the Citi Institute, Citigroup's research division, suggests that the global stablecoin market could expand to approximately $3.7 trillion by 2030, with a more conservative estimate placing it at $1.5 trillion. Despite recognizing potential risks that could lead to a smaller market size of $0.5 trillion, the report overall maintains an optimistic outlook on the sector's significant impact on global markets.

Citi's researchers express optimism about stablecoins due to favorable regulations on a global scale. The report titled "Digital Dollars" highlights the increasing connection of stablecoins to the US dollar, which could drive long-term growth by becoming a key driver. Through regulations requiring stablecoin issuers to hold reserves in US Treasuries, non-USD stablecoins might remain in the minority, with most of the market continuing to be dominated by the dollar.

The anticipated regulations are expected to prompt operational changes among stablecoin issuers, leading to greater alignment between stablecoins and traditional financial markets. While acknowledging that stablecoins may pose a threat to traditional banking, the report suggests that cooperation between different sectors can be fostered through regulatory measures and increased blockchain investments.

Despite outlining a bullish scenario of a $3.7 trillion market by 2030, Citigroup also highlights significant risks such as fraud, de-pegging events, and privacy concerns in the stablecoin sector. It is crucial to note that Citigroup has a long-standing involvement in the crypto space and continues to produce innovative research on the subject.