Standard Chartered warned that the rapid growth of U.S. dollar-backed stablecoins could pull as much as $1 trillion in deposits from emerging market banks within the next three years.
Reuters report on the note:
Around 99% of stablecoins are pegged to the dollar, effectively making them digital dollar accounts that appeal to savers in countries prone to currency instability. The bank said people and firms in these markets are likely to shift funds into stablecoin wallets to protect their savings.
Even with new U.S. rules barring compliant issuers from paying yields, Standard Chartered said demand would persist, arguing that “return of capital matters more than return on capital.”
It expects stablecoin holdings in developing economies to rise from $173 billion today to $1.22 trillion by 2028, or about 2% of total deposits across 16 vulnerable countries including Turkey, India, Brazil, South Africa, Egypt, and Pakistan. Policymakers, it warned, face growing risks of capital flight as digital alternatives gain traction.
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This could intensify dollarisation pressures in emerging markets and weaken local currencies
- Potential capital flight may raise funding costs for EM sovereigns
- Highlights growing institutional recognition of stablecoins’ systemic impact
