Inflation and Weak Currencies Drive $1T Exodus to Dollar-Backed Stablecoins

Standard Chartered has warned that up to $1 trillion could exit emerging market banks within three years as savers shift to dollar-backed stablecoins, driven by the growing appeal of these digital assets in economies with weak currencies and high inflation. The bank projects the global stablecoin market could expand to $2 trillion by 2028, with approximately two-thirds of demand originating from emerging marketsStablecoin News: Emerging Market Banks Could Suffer - CoinDesk^[1]. This shift, it argues, reflects a post-financial-crisis trend of moving core banking functions into the non-bank sector, as stablecoins offer households and companies a low-friction alternative to traditional banking systems.

The report highlights that stablecoin adoption is strongest in countries such as Egypt, Pakistan, Bangladesh, and Sri Lanka, where deposit flight risks are acute due to inflation and currency instability. Standard Chartered analysts note that even without offering yields-prohibited under the U.S. GENIUS Act-stablecoins attract users prioritizing capital preservation and liquidityStablecoin News: Emerging Market Banks Could Suffer - CoinDesk^[1]. The bank's forecast aligns with broader industry trends, as stablecoin transaction volumes surged to $1.39 trillion in early 2025 alone.

The projected growth of stablecoins is tied to anticipated U.S. regulatory clarity. The GENIUS Act, which passed the Senate Banking Committee in late 2025, mandates reserve requirements for stablecoin issuers, formalizing operational standards and channeling capital into short-dated U.S. Treasury bills. Standard Chartered estimates that stablecoin issuers could purchase $1.6 trillion in T-bills by 2028, potentially absorbing all new issuance during President Donald Trump's second termStandard Chartered expects stablecoin supply to surge …^[3]. This dynamic, the bank argues, reinforces the U.S. dollar's dominance in global finance by deepening its role in cross-border payments and financial reservesFrom Banks to Blockchain: Standard Chartered Foresees $1 …^[4].

Emerging market banks face significant challenges as stablecoins threaten traditional deposit bases. The report warns that countries like Turkey, India, and Brazil could see substantial outflows, with Egypt, Pakistan, and Bangladesh identified as most vulnerable. While stablecoins promise cheaper remittances and faster payments, the shift could strain liquidity for banks already struggling with economic volatility. Standard Chartered urges regulators to adapt quickly, warning that failure to modernize payment systems could leave emerging market banks exposed to prolonged instabilityStablecoin News: Emerging Market Banks Could Suffer - CoinDesk^[1].

The implications extend beyond banking. Keyrock and Bitso, in a separate analysis, predict stablecoins could process $1 trillion in annual payment volume by 2028, reshaping U.S. monetary policy and accounting for 10% of the total money supply by 2030. This growth is fueled by the "stablecoin sandwich" model, which replaces correspondent banks in cross-border transactions by leveraging fiat on-ramps, blockchain transfers, and fiat off-ramps. Such innovations, coupled with programmable compliance and real-time transparency, are accelerating adoption in markets where traditional systems remain fragmented.

Standard Chartered's forecast underscores the dual-edged nature of stablecoin growth. While the U.S. dollar's hegemony appears reinforced in the short term, the long-term risk lies in the emergence of multi-currency or non-dollar-pegged stablecoin baskets. Such diversification could attract central banks and sovereign wealth funds if digital asset reserves gain legitimacyStandard Chartered expects stablecoin supply to surge …^[3]. However, the bank emphasizes that current regulatory frameworks and the concentration of stablecoin reserves in U.S. Treasuries suggest dollar dominance will persist for the foreseeable futureFrom Banks to Blockchain: Standard Chartered Foresees $1 …^[4].