Standard Chartered Forecasts $1 Trillion in Bank Withdrawals into Stablecoins

Standard Chartered, a multinational bank, forecasts that over $1 trillion could be transferred from emerging market banks to stablecoins by 2028 due to rising demand for US dollar-pegged crypto assets.

In a report released on Monday, the Global Research department of Standard Chartered indicated that the global adoption of stablecoins is set to grow as core banking functions and payment networks move to the non-bank sector.

As stablecoins become more popular in emerging markets (EM), Standard Chartered highlighted that users may use them to create essentially a US dollar-based account. “The prevalence of stablecoin ownership in EM surpasses that in DM, suggesting that diversification is more likely in EM,” the bank noted.

They predict that stablecoins for savings in emerging markets might rise from $173 billion to $1.22 trillion by 2028, suggesting that approximately $1 trillion could leave emerging market banks in the next three years.

Emerging markets hold two-thirds of stablecoin supply

According to Standard Chartered, the most significant impact from stablecoins is likely to occur in emerging markets, where access to US dollars has been historically constrained.

Stablecoins offer consumers digital, round-the-clock access to a USD account, presenting lower credit risks compared to local bank deposits, as required by the United States’ GENIUS Act for full dollar backing.

This scenario heightens the risk of deposit flight from EM banking systems to cryptocurrency alternatives.

The bank estimates that two-thirds of the existing stablecoin supply resides in savings wallets within emerging markets.

Countries experiencing high inflation, weak reserves, and significant remittance inflows are particularly vulnerable to deposit flight into stablecoins.

Related: GENIUS Act may signal an end to banking exploitation: Multicoin executive

The role of stablecoins in tackling inflation amid struggling local currencies

Venezuela exemplifies this transition from traditional banking to stablecoins. With annual inflation rates between 200% and 300% and the plummeting value of the bolivar, citizens are increasingly adopting stablecoins both for transactions and as a store of wealth. Merchants frequently quote prices in USDt (USDT), locally dubbed “Binance dollars,” highlighting how stablecoins have taken the place of the bolivar in everyday commerce in the face of hyperinflation.

Chainalysis’ 2024 crypto adoption report ranks Venezuela 13th, showing a 110% growth in crypto usage that year. Numerous family-operated stores, major retail chains, and entertainment venues throughout the country now accept cryptocurrency via platforms like Binance and Airtm.

In 2023, cryptocurrency represented 9% of the $5.4 billion in remittances sent to Venezuela.

In addition to Venezuela, nations like Argentina and Brazil are increasingly shifting their savings to USDC (USDC) and USDT to escape inflation. A growing number of businesses in these countries are now accepting stablecoins for payment.

Fireblocks notes that stablecoins make up 60% of cryptocurrency transactions in Brazil and Argentina.