The significant increase in stablecoin usage may result in a potential $1 trillion withdrawal from banks in emerging markets over the next three years, as savers are drawn to the security and liquidity offered by dollar-pegged digital assets, according to a report from Standard Chartered published on Monday.
Stablecoins are enabling individuals and businesses in developing countries to bypass traditional banks, thereby accelerating the shift of essential banking operations into non-bank entities post-financial crisis, analysts Geoff Kendrick and Madhur Jha explained.
These cryptocurrencies maintain their value by linking it to a stable asset, like the U.S. dollar or gold. They are crucial in cryptocurrency marketplaces, providing essential payment infrastructure and facilitating international money transfers.
The adoption of stablecoins has been most pronounced in nations grappling with weak currencies and rampant inflation, such as Egypt, Pakistan, Bangladesh, and Sri Lanka, where the risk of deposit flight is particularly prevalent, the analysts noted.
Even though they don’t offer yields—recently restricted under the U.S. GENIUS Act—stablecoins continue to attract users focused on preserving their capital, the report highlighted.
Standard Chartered anticipates the global stablecoin market will reach $2 trillion by 2028, with about two-thirds of demand originating from emerging economies.
While stablecoins pose a threat to conventional deposits, they also offer advantages like reduced costs for remittances and quicker payment processes.
In response, many regulators in emerging markets are initiating digital currency pilot programs and enhancing payment systems. However, Standard Chartered warns that if local governments do not adapt swiftly, the current “stablecoin summer” could extend into a prolonged winter for banks in these regions.
Read more: Stablecoin Market Surges on U.S. Regulation, With Circle’s USDC Gaining Ground: JPMorgan
