The sharp rise in stablecoin usage could drain as much as $1 trillion from emerging market banks over the next three years as savers seek the safety and liquidity of dollar-pegged digital assets, Standard Chartered said in a Monday report.
Stablecoins are giving households and companies in developing economies an alternative to local banks, accelerating a post-financial-crisis shift of core banking functions into the non-bank sector, analysts Geoff Kendrick and Madhur Jha wrote.
Stablecoins are cryptocurrencies whose value is tied to another asset, such as the U.S. dollar or gold. They play a major role in cryptocurrency markets, providing among other things a payment infrastructure, and are also used to transfer money internationally.
Adoption of these cryptocurrencies has been strongest in countries with weak currencies and high inflation, including Egypt, Pakistan, Bangladesh and Sri Lanka, where deposit flight risks are acute, the analysts wrote.
Even without offering yields, now barred under the U.S. GENIUS Act, stablecoins attract users prioritizing capital preservation, the report said.
Standard Chartered forecasts the global stablecoin market will hit $2 trillion by 2028, with roughly two-thirds of demand coming from emerging markets.
The bank noted that while stablecoins threaten traditional deposits, they also promise cheaper remittances and faster payments.
Many emerging market regulators are responding with digital-currency pilots and upgraded payment systems. Still, Standard Chartered cautions that unless local authorities adapt quickly, the “stablecoin summer” could become a long winter for emerging-market banks.
Read more: Stablecoin Market Surges on U.S. Regulation, With Circle’s USDC Gaining Ground: JPMorgan