Introduction
A recent analysis by Standard Chartered has raised concerns that the rapid adoption of stablecoins could drain as much as one trillion dollars in deposits from emerging market banks over the next three years. The report, released in early October 2025, warns that the accelerating use of U.S. dollar–backed stablecoins could redirect liquidity away from local financial institutions, reducing their ability to lend and finance domestic economic growth.
The bank’s study echoes growing concern among regulators and policymakers that the global rise of dollar-denominated digital assets may undermine local currencies and weaken national monetary control. With stablecoins increasingly being used for cross-border trade and savings, emerging economies face a new form of financial dollarization—fueled not by physical cash or offshore accounts but by tokenized, blockchain-based instruments circulating outside domestic oversight.
Key Findings from Standard Chartered’s Report
According to Standard Chartered’s research division, stablecoin adoption in emerging markets has grown by over 600 percent since 2022, driven primarily by businesses and individuals seeking more reliable store-of-value options amid local currency volatility. Countries in Latin America, Sub-Saharan Africa, and Southeast Asia have seen the sharpest increases in transaction volumes.
The report estimates that by 2028, up to one trillion dollars currently held as deposits in emerging market banks could migrate to stablecoin platforms. This transition could lead to liquidity shortfalls, weaker credit creation, and tighter financial conditions. Standard Chartered analysts warn that such outflows could have systemic implications, particularly for smaller banking systems reliant on domestic savings to fund lending.
Another finding highlights concentration risk. Over 85 percent of all stablecoin value remains tied to the U.S. dollar, deepening global financial dependence on American monetary policy. As users shift from local deposits to dollar-backed tokens, emerging markets could lose further control over their monetary supply. The report describes this as a potential “digital shadow dollarization” that regulators have yet to fully address.
Drivers of Stablecoin Growth in Emerging Markets
The drivers behind this trend are multifaceted. First, inflationary pressures in many developing economies have eroded trust in local currencies. Stablecoins offer a perceived refuge from depreciation and capital controls, enabling users to preserve value in a more stable denomination.
Second, accessibility has improved dramatically. Blockchain-based wallets and payment networks now allow users to transact globally with minimal fees and without the need for conventional bank accounts. In countries with limited financial inclusion, stablecoins provide a low-cost gateway into digital finance.
Third, remittances have played a key role. Migrant workers increasingly use stablecoins to send funds back home, avoiding high fees associated with traditional remittance channels. According to data compiled by Chainalysis, stablecoin remittance volumes across emerging economies rose by over 40 percent in 2024 alone.
Lastly, local fintechs and small businesses are integrating stablecoin payment rails into their operations to hedge against currency risk. By denominating contracts and invoices in stablecoins, firms can maintain predictable pricing and mitigate foreign exchange losses.
The Banking Impact: Liquidity and Credit Constraints
Standard Chartered’s warning reflects a growing fear that deposit flight into digital assets could weaken traditional banking systems. When deposits move to stablecoin platforms, local banks lose their primary source of funding for loans and investments. This reduction in balance sheet liquidity could force institutions to rely more heavily on external borrowing or central bank liquidity facilities.
Such dynamics may also exacerbate interest rate volatility. As local funding dries up, borrowing costs could rise, potentially slowing economic growth and amplifying financial stress. In extreme cases, reduced deposit bases might trigger liquidity shortages reminiscent of previous currency crises, only now driven by blockchain technology rather than capital flight through traditional channels.
Central banks face a policy dilemma. Restricting stablecoin usage could push adoption into unregulated markets, while accommodating it might accelerate dollar exposure. The report urges policymakers to find a balance by introducing clear frameworks for regulated stablecoin issuers, enforcing reserve transparency, and potentially developing central bank digital currencies (CBDCs) to retain monetary sovereignty.
Regional Variations and Risk Concentration
The Standard Chartered report breaks down exposure by region. In Latin America, where inflation and currency depreciation have persisted, stablecoins are already being used for everyday payments. Argentina, Brazil, and Mexico account for roughly 40 percent of regional stablecoin volume. Analysts predict that without stronger regulatory coordination, dollar-linked stablecoins could capture up to one-fifth of total retail deposits in those markets by 2028.
In Africa, usage is expanding rapidly through mobile fintech platforms. Nigeria, Kenya, and Ghana have seen adoption surge, partly due to local currency restrictions and limited access to foreign exchange. Meanwhile, in Asia, countries such as Vietnam, Indonesia, and the Philippines are seeing stablecoins used in export settlements and e-commerce.
This growth pattern presents a unique challenge for policymakers. Unlike speculative crypto trading, these stablecoin flows often represent genuine demand for functional digital money. That makes them harder to control without disrupting real economic activity.
Policy and Institutional Response
Standard Chartered’s analysts recommend that emerging market regulators take a three-pronged approach. First, they should strengthen domestic financial systems through modernization and improved access to foreign exchange markets. Second, they should collaborate regionally to develop interoperable regulatory standards, ensuring that stablecoin issuers face consistent oversight. Third, central banks should explore public-private partnerships to issue tokenized fiat or wholesale CBDCs that compete directly with private stablecoins.
In response to the report, several policymakers have echoed similar concerns. The International Monetary Fund (IMF) reiterated in its latest Global Financial Stability Report that rapid stablecoin growth could disrupt traditional banking systems and challenge capital controls. The Bank for International Settlements (BIS) has also warned of potential contagion risks if reserve assets are concentrated in a small number of institutions or asset classes.
Industry participants, however, argue that stablecoins could complement, not replace, domestic banking if properly regulated. By integrating with licensed institutions and offering transparent, redeemable structures, stablecoins could improve financial inclusion and strengthen cross-border payment networks. The key lies in designing frameworks that ensure one-to-one backing, disclosure, and convertibility into domestic currencies.
Conclusion
Standard Chartered’s projection of a one-trillion-dollar deposit outflow underscores a major inflection point in global finance. The rise of stablecoins represents both opportunity and risk for emerging economies. While they offer faster, cheaper, and more reliable access to digital money, they also threaten to weaken domestic monetary systems if left unchecked.
For banks and policymakers, the challenge is to adapt before digital disintermediation becomes irreversible. Institutions that embrace tokenized finance, establish transparent reserves, and engage proactively with regulators will likely navigate the transition successfully. Those that resist may find themselves marginalized in a future where digital liquidity shapes global monetary flows.
If regulators strike the right balance, stablecoins could evolve from disruptive competitors into integrated instruments of financial modernization bridging traditional banking and the next era of programmable, cross-border value transfer.
