A new report from Standard Chartered highlights the significant growth potential of US dollar-backed stablecoins, predicting that this trend could result in a transfer of up to $1 trillion from banks in emerging economies over the next few years.
This so-called “boom,” fueled by a new regulatory dawn for the broader digital asset market in the US under President Donald Trump’s administration, is making stablecoins increasingly attractive, particularly in regions vulnerable to currency crises.
Stablecoins As Savings Could Surge To $1.2 Trillion
Currently, nearly 99% of stablecoins are pegged to the US dollar, effectively transforming them into dollar-denominated bank accounts. This characteristic is particularly attractive for individuals and businesses in countries where economic instability has historically led to significant losses in savings.
According to Standard Chartered, the desire to safeguard capital amid global economic uncertainties will drive many to favor stablecoin wallets over traditional banking institutions.
In a report published this week, the bank noted, “We see the potential for $1 trillion to leave emerging market banks and move into stablecoins in the next three years.”
This shift reflects a trend where individuals prioritize the preservation of their capital over the potential for earning returns, which is encapsulated in the phrase, “Return of capital matters more than return on capital.”
Despite new US regulations designed to curb this deposit flight—by restricting US-compliant stablecoin issuers from offering direct yields akin to bank interest—Standard Chartered argues that the allure of stablecoins will persist in emerging markets.
The bank projects that the use of stablecoins as a savings mechanism in these regions could grow dramatically, increasing from approximately $173 billion today to an estimated $1.22 trillion by the end of 2028.
Potential Impact On Traditional Banks
While this projected figure is significant, analysts emphasize that it would still account for only about 2% of total bank deposits in 16 countries deemed “high-risk” for such capital flight.
These nations include Egypt, Pakistan, Bangladesh, and Sri Lanka, all of which have recently experienced currency devaluations, as well as Kenya, Morocco, and other emerging economies like Turkey, India, China, Brazil, and South Africa.
The report highlights that many of these countries, with the notable exception of China, suffer from twin deficits that make them particularly susceptible to global risk aversion and sudden currency depreciation.
As such, the increasing migration of deposits into stablecoins could pose serious challenges to the stability of traditional banking systems in these regions.
Featured image from DALL-E, chart from TradingView.com
