EM Users Flee Inflation, Spur Stablecoin Surge Over Traditional Banks

Standard Chartered has issued a stark warning that stablecoins could drain over $1 trillion from emerging-market (EM) banks by 2028, as dollar-pegged digital assets gain traction as alternatives to traditional banking systems. The bank's Global Research unit estimates that stablecoin savings in EM economies could surge from $173 billion today to $1.22 trillion within three years, a shift that would represent a historic reallocation of capital and reshape financial infrastructure in regions with weak currencies and high inflation. This projection aligns with the U.S. Treasury's own forecast of a $2 trillion global stablecoin market by 2028, underscoring the scale of the potential disruption.

The report highlights that stablecoins-cryptocurrencies pegged 1:1 to the U.S. dollar and backed by cash or short-term Treasuries-are increasingly serving as "USD-based bank accounts" for millions in EM countries. Geoffrey Kendrick, Standard Chartered's global head of digital asset research, and economist Madhur Jha argue that the appeal of stablecoins lies in their 24/7 accessibility, liquidity, and reliability, which contrast with the limitations of traditional banking systems in regions plagued by inflation and currency instability. Countries like Venezuela, where annual inflation has exceeded 200% in recent years, have seen stablecoins like Tether's USDT and Circle's USDC replace local currencies in everyday transactions. Chainalysis data shows Venezuela ranked 13th globally for crypto adoption in 2024, with stablecoins accounting for 60% of crypto transactions in Argentina and Brazil.

The report identifies Egypt, Pakistan, Bangladesh, Sri Lanka, Turkey, India, Brazil, and Kenya as the most vulnerable to deposit flight. In these economies, stablecoins are filling gaps left by weak financial systems, enabling users to hedge against inflation and access USD exposure without relying on local banks. For example, in Venezuela, merchants now price goods in stablecoins, locally termed "Binance dollars," while in Argentina and Brazil, businesses increasingly use USDC and USDT to manage currency volatility. Standard Chartered projects that two-thirds of the current stablecoin supply-already concentrated in savings wallets across EMs-will continue to grow as adoption shifts from large holders to a broader base of small-scale users.

The implications for traditional banks are profound. The report warns that stablecoins could undermine the core functions of commercial banks, including deposit-taking and credit creation, by redirecting savings into digital alternatives. This shift could weaken the link between deposits and lending, reducing banks' ability to fund loans and destabilizing financial systems. Bank of England Governor Andrew Bailey has echoed these concerns, noting that stablecoins could "reshape Britain's financial system" by separating money storage from credit provision. Regulatory responses are emerging, with the UK proposing deposit caps and Germany restricting the issuance of certain stablecoins, but Standard Chartered cautions that such measures may not be sufficient to counter the momentum of stablecoin adoption.

Despite the U.S. GENIUS Act, which prohibits U.S.-compliant stablecoin issuers from offering yield to holders, demand remains strong in EM markets where capital preservation outweighs the need for returns. The bank argues that "return of capital matters more than return on capital" in these regions, where users prioritize liquidity and trust. This dynamic is evident in Q3 2025, when stablecoin net creations hit record levels, with Tether's USDT, Circle's USDC, and Ethena's USDe adding over $45 billion collectively. The stablecoin market's total capitalization recently surpassed $300 billion, signaling rapid growth but also raising questions about systemic risks, such as liquidity pressures and regulatory fragmentation.

Standard Chartered's analysis concludes that the shift to stablecoins is not a fringe trend but a systemic transformation already underway. Banks in EMs face a critical choice: adapt by integrating stablecoins into treasury and cross-border systems or risk further erosion of their market share. As the global financial landscape evolves, the $1 trillion outflow from traditional banking into digital alternatives could redefine the role of financial institutions in the 21st century.