EM Inflation Drives $1T Exodus to Stablecoin "Digital USD Vaults"

Standard Chartered has projected that up to $1 trillion could shift from emerging market (EM) bank deposits into stablecoins by 2028, driven by growing demand for dollar-pegged digital assets as a low-cost, liquid alternative to traditional bankingStandard Chartered estimates $1 trillion could exit emerging market bank deposits for stablecoins by late 2028^[1]. The bank's analysts, Geoffrey Kendrick and Madhur Jha, argue that stablecoins are effectively functioning as "USD-based bank accounts" for many EM users, offering a reliable store of value in economies with weak currencies and high inflationStandard Chartered estimates $1 trillion could exit emerging market bank deposits for stablecoins by late 2028^[1]. This shift is expected to accelerate despite the U.S. GENIUS Act's prohibition on yield-bearing stablecoins, as users prioritize capital preservation over returnsStandard Chartered estimates $1 trillion could exit emerging market bank deposits for stablecoins by late 2028^[1]. Standard Chartered forecasts the global stablecoin market will expand to $2 trillion by 2028, with two-thirds of current stablecoin supply already serving as savings in EM bank accountsStandard Chartered estimates $1 trillion could exit emerging market bank deposits for stablecoins by late 2028^[1].

The report highlights Egypt, Pakistan, Colombia, Bangladesh, and Sri Lanka as the most vulnerable to deposit outflows, with countries like Turkey, India, Brazil, and South Africa also at riskStandard Chartered estimates $1 trillion could exit emerging market bank deposits for stablecoins by late 2028^[1]. These dynamics stem from EMs' large unbanked populations and the appeal of stablecoins for cross-border transactions, remittances, and inflation hedging. The bank's "opportunity-risk continuum" analysis underscores how factors such as capital-account openness, inflation trends, and digital infrastructure will shape the pace of adoptionStandard Chartered estimates $1 trillion could exit emerging market bank deposits for stablecoins by late 2028^[1]. For instance, nations with advanced mobile money systems in Sub-Saharan Africa may see faster uptake, while regulatory barriers could slow progress in others.

The potential outflow poses significant challenges for EM banks, which could face liquidity strains as deposits migrate to stablecoins. Standard Chartered warns that correspondent banking, payments, and foreign exchange (FX) revenues may also face pressure unless banks adapt by integrating stablecoins into their operations, such as custodying reserves or embedding them into settlement systemsStandard Chartered estimates $1 trillion could exit emerging market bank deposits for stablecoins by late 2028^[1]. However, the report notes that EM regulators are already responding with initiatives like central bank digital currency (CBDC) pilots and upgraded payment infrastructures to mitigate risksStandard Chartered estimates $1 trillion could exit emerging market bank deposits for stablecoins by late 2028^[1].

While Standard Chartered's $1 trillion forecast assumes stablecoin adoption will scale from high-balance wallets to mass small-holding users, other institutions have offered divergent views. JPMorgan, for example, predicts a more conservative $500 billion market size by 2028, citing limited real-world adoption beyond crypto ecosystems. This divergence reflects broader debates over stablecoins' role in traditional finance, with some experts emphasizing their potential to reduce transaction costs and streamline cross-border payments. The U.S. Treasury has referenced Standard Chartered's $2 trillion target, aligning with expectations that the GENIUS Act's regulatory clarity will spur growthStandard Chartered estimates $1 trillion could exit emerging market bank deposits for stablecoins by late 2028^[1].

The shift to stablecoins also has macroeconomic implications. Standard Chartered estimates stablecoin issuers may need to purchase $1.6 trillion in U.S. Treasury bills by 2028 to meet reserve requirements, reinforcing the dollar's dominance in global finance. Meanwhile, non-USD stablecoins, such as those advocated by Coinbase's Jesse Pollak, could diversify outflows if multi-currency solutions gain tractionStandard Chartered estimates $1 trillion could exit emerging market bank deposits for stablecoins by late 2028^[1]. The bank cautions that long-term risks to dollar hegemony may emerge if stablecoin development expands beyond U.S. dollar pegs, though no viable alternatives have yet emerged.