Stablecoins Evolve into Institutional 'Digital Cash'

Stablecoins are shifting from a crypto-native tool to a core piece of institutional market plumbing, according to a new report from Moody's.

The report highlights that stablecoins processed about 87% more settlement volume in 2025 than the year before, reaching $9 trillion in activity based on industry estimates of on-chain transactions.

Stablecoins as Digital Cash

Stablecoins and tokenized deposits are evolving into institutional “digital cash” for liquidity management, collateral movements, and settlements across an increasingly tokenized financial system.

Moody's placed stablecoins alongside tokenized bonds, funds, and credit products as part of a broader convergence between traditional and digital finance.

Investment in Digital Finance Infrastructure

Banks, asset managers, and market infrastructure providers spent 2025 running pilots on blockchain settlement networks, tokenization platforms, and digital custody, seeking to streamline issuance, post-trade processes, and intraday liquidity management.

The report estimated that more than $300 billion could be invested in digital finance and infrastructure by 2030 as firms build out the rails for large-scale tokenization and programmable settlement.

Regulatory Frameworks

Regulation is starting to catch up with this shift. The report highlighted the European Union's Markets in Crypto-Assets Regulation (MiCA) framework,

US stablecoin and market structure proposals, and licensing frameworks in Singapore, Hong Kong, and the United Arab Emirates as evidence of a converging global approach to tokenization, custody, and redemption rules.

Risks and Challenges

Still, Moody's stressed that the transformation is far from risk-free. As more value moves onto “digital rails,” the report warned that smart contract bugs, oracle failures, cyberattacks on custody systems, and fragmentation across multiple blockchains could create new forms of operational and counterparty risk.

The agency argued that security, interoperability, and governance will be just as important as regulatory clarity if stablecoins are to function as reliable institutional settlement assets rather than new sources of systemic vulnerability.

Future Outlook

The report's findings suggest that stablecoins and tokenized deposits will play an increasingly important role in institutional finance, with potential applications in cross-border payments, repo, and collateral transfers.

As the industry continues to evolve, it is likely that we will see further investment in digital finance infrastructure and the development of new regulatory frameworks to support the growth of stablecoins and tokenized assets.