Core Insights - Morgan Stanley's latest research report indicates that despite significant divergence in market forecasts regarding the future demand for stablecoins, their global adoption in the coming years could lead to trillions of dollars flowing into the U.S. dollar [1][3] - The report suggests that the expansion of stablecoin usage may not accelerate the "de-dollarization" process but could instead reinforce the dollar's position in the global financial system [1] Market Estimates - Morgan Stanley's emerging markets equity strategy team estimates that the stablecoin market could eventually reach a size of $2 trillion, while the U.S. interest rate strategy team is more conservative, projecting a final scale of about $500 billion [1] - The foreign exchange strategy team at Morgan Stanley anticipates that by 2027, approximately $1.4 trillion in additional dollar demand will be generated to support the growth of the stablecoin market [1] Stablecoin Characteristics - Currently, about 99% of the total supply of stablecoins is pegged 1:1 to the U.S. dollar or dollar-denominated assets [3] - Stablecoins are issued by non-bank entities and are backed by U.S. Treasury securities and other large bank reserve assets, designed to maintain a stable value in contrast to more volatile cryptocurrencies like Bitcoin [3] Demand Factors - The growth of stablecoins' demand will depend on two key factors: whether the demand arises from simple transfers of funds from U.S. bank deposits or money market funds, which would keep overall dollar demand neutral, or from new purchases by foreign businesses and households, which would increase dollar demand [3] - Currently, the growth of stablecoins has not significantly impacted currency flows, but there has been a close correlation between the dollar exchange rate and the total market value of stablecoins over the past two years [3] Market Dynamics - If Bitcoin continues to strengthen alongside the U.S. dollar, the stablecoin market may experience further growth [3][4] - The dominance of the U.S. dollar in stablecoins has surpassed that in other areas of the global financial system, such as foreign exchange reserves and trade settlements [3]