The Duality of Stablecoins: A Boon for Financial Inclusion or a Threat to Emerging Market Stability?

Stablecoins are at a crossroads. On one hand, they promise to democratize access to financial services in underbanked regions, enabling payments, savings, and lending without reliance on fragile local currencies. On the other, their rapid adoption in crisis-hit emerging markets risks triggering capital flight, destabilizing local banking systems, and accelerating U.S. dollarization. As Standard Chartered projects a $1.22 trillion surge in stablecoin savings in developing economies by 2028, the stakes for investors and policymakers have never been higher.

The Financial Inclusion Revolution

Stablecoins are filling gaps left by traditional banking infrastructure. In countries like Argentina, Egypt, and Pakistan-where hyperinflation and currency devaluation have eroded trust in local institutions-dollar-backed stablecoins offer a lifeline. According to a Standard Chartered report, stablecoin savings in these economies could grow from $173 billion to $1.22 trillion by 2028, driven by their role as a hedge against currency depreciation. This growth is not just about remittances or cross-border payments; it's about enabling everyday users to store value without relying on banks.

The rise of tokenized real-world assets (RWAs) further amplifies this potential. By 2028, RWAs-such as tokenized money-market funds and equities-are projected to reach $2 trillion, matching the global stablecoin market cap, according to a Standard Chartered report. This convergence of stablecoins and RWAs could unlock new liquidity pools for emerging markets, enabling non-bank players to offer services traditionally dominated by banks. For investors, this represents a shift in power from legacy institutions to decentralized platforms.

The Systemic Risk Paradox

Yet, this financial inclusion comes at a cost. The same attributes that make stablecoins attractive-low fees, speed, and dollar pegs-also make them a tool for capital flight. A Standard Chartered report estimates that stablecoins could drain $1 trillion from emerging-market banks over the next few years, as individuals and businesses shift funds to digital wallets. This exodus weakens local banking systems, which are already strained by twin deficits and limited access to global capital.

The U.S. GENIUS Act, enacted in July 2025, aims to mitigate these risks by requiring stablecoins to be fully backed by fiat USD and short-term Treasuries, according to a State Street analysis. While this stabilizes the U.S. financial system, it inadvertently accelerates dollarization in emerging markets. As local currencies face displacement, central banks lose control over monetary policy. For example, in countries reliant on U.S. dollar pegs, tighter financial conditions and currency depreciation could become self-fulfilling prophecies, according to a State Street analysis.

Investment Implications and Strategic Playbooks

For investors, the duality of stablecoins demands a nuanced approach. Here's how to navigate the landscape:

1. Hedge Against Dollarization: In markets prone to capital flight (e.g., Argentina, Egypt), consider shorting local currencies or investing in U.S. dollar-denominated assets. The GENIUS Act's emphasis on USD-backed stablecoins ensures that dollarization will deepen, making local-currency debt riskier, according to a State Street analysis.

2. Bet on DeFi Infrastructure: As stablecoin liquidity fuels DeFi growth, prioritize investments in blockchain platforms and custodians enabling tokenized RWAs. By 2028, tokenized money-market funds and equities could each hit $750 billion in value, according to a Standard Chartered report, creating new asset classes for institutional and retail investors.

3. Monitor Regulatory Shifts: The success of the GENIUS Act hinges on rulemaking over the next 18 months, according to a TD Economics analysis. If stablecoins are integrated smoothly into the U.S. financial system, their global adoption will accelerate. Conversely, regulatory missteps could trigger runs on stablecoin reserves, spilling into funding markets, according to a TD Economics analysis.

4. Diversify Exposure to EM Banks: While stablecoins threaten traditional banking models, they also create opportunities. Banks that adapt by offering stablecoin-based services (e.g., custodial solutions, cross-border lending) could capture a share of the $2 trillion RWA market, according to a Standard Chartered report.

Conclusion

Stablecoins are neither a panacea nor a catastrophe. They are a tool-one that can empower the unbanked while destabilizing fragile economies. For investors, the key lies in balancing optimism about financial inclusion with caution about systemic risks. As the GENIUS Act reshapes the U.S. stablecoin landscape and EMs grapple with dollarization, the winners will be those who anticipate the duality and act accordingly.