Introduction
A recent study from Standard Chartered projects that U.S. dollar–pegged stablecoins could draw up to one trillion dollars from emerging market banks over the next three years. The report, based on simulations across sixteen developing economies, argues that stablecoins are gaining popularity because they offer easier access to dollar-denominated value at a time when many local currencies face persistent devaluation and inflation. Researchers estimate that stablecoin holdings across developing countries could grow from about one hundred and seventy billion dollars to more than one trillion dollars by 2028.
Although the report frames this shift as gradual, the potential consequences for local banking systems are serious. In emerging markets, traditional banks depend heavily on deposits for liquidity and lending. If even a small portion of those deposits migrates to digital assets, it could alter credit supply, investment levels, and consumer confidence. While one trillion dollars would represent roughly two percent of aggregate deposits across the sampled nations, the signal is clear that financial behavior in developing regions is changing at a structural level.
Why Stablecoins Are Gaining Ground in Emerging Markets
In many parts of the world, inflation continues to erode savings and distort price stability. For households and small businesses in countries such as Argentina, Turkey, Nigeria, and Egypt, storing wealth in local currency often means seeing value disappear each month. Stablecoins, which are digital assets pegged to the U.S. dollar or other major currencies, offer an accessible hedge against inflation. They combine the perceived safety of dollar stability with the convenience of digital transactions, making them attractive to both consumers and traders.
Technological access has also improved dramatically. With smartphone penetration and affordable internet growing in Africa, South Asia, and Latin America, more users are finding it practical to hold digital wallets. These wallets can store stablecoins and allow people to make payments or transfers without depending on traditional banking infrastructure. For migrant workers sending money home, stablecoins offer faster and cheaper alternatives to remittance channels that often charge double-digit fees. In regions where banking hours, bureaucracy, or capital controls limit access to funds, a borderless digital currency becomes a practical solution for everyday needs.
Stablecoins are also gaining traction among importers and exporters who want to mitigate foreign exchange risks. Businesses can settle invoices or receive payments instantly in a stable asset without waiting for clearing houses or currency conversions. This level of utility explains why stablecoin adoption is no longer confined to retail crypto traders but is extending to small enterprises, freelancers, and even local institutions experimenting with digital settlements.
Structural Risks for Emerging Market Banks
The growth of stablecoins brings efficiency for users but pressure for banks. Emerging market financial institutions often operate with thin liquidity cushions and rely on local deposits as their core funding base. A steady outflow of these deposits to digital assets would create funding gaps. To maintain liquidity ratios, banks might need to borrow at higher rates or restrict lending, both of which could slow economic growth.
Smaller banks and microfinance institutions are particularly exposed because they rely on customer trust and neighborhood-level savings to fund their operations. When depositors see peers moving money into digital wallets, confidence can weaken quickly. Even if only a small segment of savers exit, the psychological effect can ripple through the system, prompting others to follow. Over time, such behavior can lead to credit tightening, higher interest rates, and reduced support for small businesses that depend on bank loans.
Another risk lies in profitability. As banks lose deposits to stablecoins, they may raise interest rates on savings accounts to retain customers, squeezing already narrow margins. They may also attempt to compete by launching tokenized deposits or digital banking products, which require costly technology upgrades. For countries with limited resources or regulatory experience in digital assets, this rapid adaptation can prove difficult. Without new frameworks or financial backstops, local institutions could face an uneven playing field against global stablecoin issuers that operate at scale.
Countermeasures and Policy Responses
Regulators and policymakers in emerging markets are aware of these challenges and have begun exploring responses. Some central banks are considering introducing transaction taxes or limits on the use of foreign-backed digital assets within their jurisdictions. Others are focusing on public education campaigns to clarify the risks of unregulated digital instruments and emphasize the protection that comes with local bank deposits.
The more forward-looking strategy involves creating official digital alternatives. Many central banks are experimenting with central bank digital currencies, or CBDCs, designed to combine the efficiency of blockchain with the reliability of state backing. Pilot programs in countries such as Nigeria, China, and India demonstrate that official digital currencies can coexist with stablecoins while preserving monetary control. By offering domestic digital assets that integrate into existing banking networks, central banks hope to provide safer substitutes that discourage capital flight.
Collaboration across borders is also crucial. International organizations like the Bank for International Settlements and the Financial Stability Board are discussing standardized guidelines for stablecoin audits, redemption rights, and reserve transparency. Emerging economies can benefit from participating in these efforts, ensuring that local regulations align with global best practices. Bilateral partnerships with stablecoin issuers could also require them to maintain part of their reserves in local assets, helping offset some of the liquidity drain.
Outlook and Implications
If stablecoin adoption continues to accelerate, the next three years could mark a turning point for financial systems in developing nations. Banks may need to redesign their business models, focusing less on deposit collection and more on providing advisory, lending, and infrastructure services. The role of banks could evolve from deposit-taking to becoming digital custodians and intermediaries between local currencies and global tokens.
For policymakers, the balance will be delicate. Overly restrictive regulations could stifle innovation and push users toward unregulated channels, while lax oversight could undermine monetary policy and financial stability. The most sustainable approach may be hybrid regulation—permitting stablecoin activity under defined transparency and reserve rules while encouraging the development of compliant, locally issued digital assets.
Conclusion
The Standard Chartered analysis offers both a warning and an opportunity. It highlights the growing influence of digital assets on global capital flows and signals that the boundaries between traditional banking and digital finance are fading quickly. If emerging markets fail to adapt, the outflow of deposits to stablecoins could weaken their financial systems and limit credit availability to local businesses. Yet, if managed wisely, the same trend could push governments and financial institutions to modernize payment infrastructure, deepen transparency, and attract investment into compliant digital frameworks.
The next three years will test whether emerging economies can balance innovation with stability. The technology behind stablecoins is not inherently disruptive if paired with strong oversight and collaboration between public and private sectors. Those that move proactively to integrate digital assets within formal systems could benefit from faster, cheaper, and more inclusive finance. Those that hesitate may see capital and confidence slip quietly toward the borderless digital economy that stablecoins are already building.
