Stablecoins are growing — but much of the capital is standing still

Stablecoins have moved decisively into the financial mainstream. With more than $300 billion in circulation and annual settlement volumes estimated to exceed $20 trillion, tokenised dollars now function as a core liquidity rail for exchanges, fintech platforms, payment providers and an increasing number of institutional treasury desks.

Stablecoins are growing

They are no longer peripheral instruments for crypto trading; they are becoming embedded in the operational plumbing of digital finance.

Yet a structural inefficiency is emerging.

A substantial proportion of stablecoin balances sits idle — parked on exchanges, held in custodial wallets or retained as operational cash within institutional accounts.

In certain environments, estimates suggest that more than half of outstanding balances are inactive. They generate no return, contribute little to transactional velocity and remain economically inert despite underpinning high-value settlement flows.

Idle Digital Liquidity Mirrors an Old Banking Problem

For banks, this phenomenon is strikingly familiar. In earlier decades, customer deposits frequently languished without active liquidity management.

The introduction of sweep accounts, automated treasury optimisation and structured cash management transformed that landscape.

The objective was not speculative yield enhancement; it was disciplined capital stewardship.

Stablecoins now present a comparable inflection point. As adoption expands across payments, trading and cross-border settlement, the volume of dormant balances grows in tandem.

Idle liquidity reduces system-wide efficiency, weakens capital productivity and introduces opportunity costs for institutions responsible for safeguarding these assets.

The hesitation to activate these balances is understandable.

During previous market cycles, “earn” products built on opaque lending, rehypothecation and balance-sheet leverage failed spectacularly.

The fallout blurred the distinction between credit risk and other forms of on-chain participation, leaving many institutions wary of anything that resembles yield generation.

Distinguishing Credit Risk from Protocol Participation

However, not all blockchain-based participation mechanisms are synonymous with counterparty exposure.

Some networks embed transparent, rules-based processes — such as validator participation or staking-based infrastructure — that compensate asset holders for supporting transaction processing and network security.

These mechanisms operate on auditable code rather than discretionary lending decisions.

For regulators and financial institutions, the critical task is differentiation. Credit-based lending models transfer balance-sheet risk; protocol-level participation does not necessarily do so.

Conflating the two risks leaving substantial pools of digital liquidity permanently idle.

Stablecoins are increasingly held by corporates for settlement, by asset managers as operational cash and by payment firms seeking efficiency.

Allowing these balances to function as non-interest-bearing deposits in a digitised financial ecosystem is neither optimal nor sustainable.

A Strategic Opportunity for Banks

Financial institutions have navigated similar transitions before. They developed the frameworks that converted dormant deposits into productive capital while preserving prudence and regulatory oversight.

The same discipline can be applied to digital assets.

The path forward is pragmatic: define acceptable participation models, align custody and treasury operations with transparent on-chain mechanisms, and work closely with supervisors to establish clear guardrails.

The question is not whether stablecoins will remain central to digital payments infrastructure — they already are. The question is whether the capital supporting that infrastructure will be managed with the same rigour long expected in traditional finance.

Failure to engage risks embedding systemic inefficiency at scale. Engagement, by contrast, offers the opportunity to shape a more resilient and productive layer of programmable financial infrastructure.