Stablecoins Enable Direct USD Access, Draining $1T from EM Banks

Stablecoin adoption is accelerating a structural shift in global finance, with Standard Chartered warning that the phenomenon could drain up to $1 trillion from emerging-market (EM) banks within three years. The bank's analysis highlights the growing appeal of dollar-backed stablecoins as alternatives to traditional banking systems in economies grappling with weak currencies, high inflation, and fiscal vulnerabilities. Countries like Egypt, Pakistan, Bangladesh, and Sri Lanka are identified as particularly exposed, with Standard Chartered estimating that such outflows would represent approximately 2% of aggregate deposits in high-risk economies. The report underscores the broader trend of disintermediation, where households and corporations increasingly bypass local banks to access USD-based liquidity through digital assets.

The bank attributes this shift to stablecoins' ability to offer instant, borderless access to stable value without reliance on traditional intermediaries. This dynamic is amplified in markets with twin deficits-fiscal and current account imbalances-such as Türkiye, India, Brazil, South Africa, and Kenya. While U.S. legislation like the GENIUS Act seeks to curb risks by banning yield-bearing stablecoins, Standard Chartered argues that adoption will persist regardless of regulatory constraints. The report projects the global stablecoin market could reach $2 trillion by 2028, with two-thirds of demand originating from emerging markets.

Industry experts validate the report's thesis, noting that stablecoins represent a "structural realignment" in how global money moves. Matt Huang, co-founder of Paradigm, observes that the end of zero-interest-rate policies (ZIRP) has accelerated the stablecoin "supercycle," as users seek alternatives to volatile fiat and low-yield assets. Raj Brahmbhatt, CEO of BlockRidge, emphasizes that stablecoins outlast rate cycles due to their utility in cross-border payments and capital preservation. Sam Noble, a digital asset strategist, adds that stablecoins have achieved crypto's first true product-market fit, further entrenching their role in global finance.

For EM policymakers, the implications are dire. As digital dollars flow freely across borders, local banks face a growing risk of losing core depositors to non-bank systems. This challenges traditional financial models and raises concerns about systemic stability in economies already vulnerable to capital flight. Standard Chartered warns that unless regulators adapt quickly-through digital-currency pilots or upgraded payment systems-the "stablecoin summer" could evolve into a prolonged "winter" for EM banking sectors. The bank's analysis also highlights the dual-edged nature of stablecoins: while they promise cheaper remittances and faster transactions, they threaten to undermine the stability of fragile financial ecosystems.

The report's projections align with broader market trends. CoinDesk notes that stablecoin adoption is strongest in regions with weak currencies, where users prioritize liquidity and safety over yields. This aligns with Standard Chartered's findings, as savers in high-inflation economies increasingly shift assets to dollar-pegged stablecoins to hedge against devaluation. The bank's warning reflects a growing consensus among analysts that stablecoins are not merely speculative tools but foundational infrastructure for a decentralized financial system.

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Source: [1] Stablecoin Summer Could Trigger a $1 Trillion Emerging Markets Winter | US Crypto News (https://finance.yahoo.com/news/stablecoin-summer-could-trigger-1-132104542.html) [2] Stablecoin News: Emerging Market Banks Could Suffer - CoinDesk (https://www.coindesk.com/markets/2025/10/06/stablecoin-surge-could-trigger-usd1t-exit-from-emerging-market-banks-standard-chartered)