Standard Chartered: Stablecoin Surge Could Extract $1 Trillion from Emerging Market Bank Deposits

Standard Chartered Bank has issued a stark warning about the rapid rise of stablecoins and its potential to disrupt the financial systems in developing nations. According to the bank, the burgeoning adoption of dollar-pegged digital assets could lead to a staggering $1 trillion outflow in deposits from emerging market banks within the next three years. This seismic shift highlights a growing preference among savers for the security, liquidity, and efficiency offered by digital platforms over traditional banking systems.

Leading analysts Jeff Kendrick and Madhur Jha from Standard Chartered explained in their October 6 report that stablecoins have become a viable, and in many cases, preferable alternative for households and businesses in developing economies. This trend mirrors the increasing migration of critical financial functions from banks to non-banking financial entities in the years following the 2008 financial crisis.

The Stablecoin Advantage: Driving a Digital Financial Revolution

Stablecoins are digital assets tied to the value of stable currencies like the U.S. dollar or to assets such as gold. These cryptocurrencies serve as a cornerstone of the modern digital financial ecosystem, revolutionizing areas like cross-border remittances and real-time payments. They offer faster, simpler transactions compared to the often slow and costly processes associated with traditional banks.

Emerging markets with fragile currencies and rising inflation rates are at the epicenter of this transition. Nations such as Egypt, Pakistan, Bangladesh, and Sri Lanka are especially impacted, as local banks in these regions face mounting challenges in retaining deposits. In countries where financial instability looms large, stablecoins stand out as an attractive alternative for capital preservation.

Although the United States has implemented restrictions on yield-generating stablecoins under the GENIUS Act, the appeal of using these digital assets remains undiminished. Savers and businesses in developing countries continue to flock to stablecoins as a means of safeguarding their wealth from inflationary and economic pressures.

Unlocking the Market Potential: Emerging Economies Lead the Way

Standard Chartered forecasts the size of the global stablecoin market to nearly triple, surging to $2 trillion by 2028. Developing countries are expected to account for a significant two-thirds of this growth, underscoring their pivotal role in shaping the future of the market.

Beyond their disruptive potential, stablecoins also offer clear advantages, such as reducing the high costs of remittances—an economic lifeline for millions in emerging markets—and speeding up cross-border payments. The widespread adoption of stablecoins can transform how financial transactions are carried out globally, extending inclusivity to populations previously underserved by traditional banks.

Regulatory Oversight: A Double-Edged Sword for Emerging Markets

However, this rapid trajectory of stablecoin adoption is not without its challenges. Standard Chartered has highlighted regulatory inertia as a key threat to the banking sectors of emerging economies. While many governments in these regions are piloting central bank digital currencies (CBDCs) and upgrading payment infrastructures, they often lag behind the pace of stablecoin innovation.

The bank cautioned that without proactive regulatory measures, emerging market banks could face a long-lasting decline. As stablecoins continue to grow in acceptance and usage, policymakers must act decisively to mitigate risks while harnessing the opportunities these digital assets bring. A failure to do so could see these financial systems sidelined by nimble, tech-driven competitors.

Conclusion: The Crossroads of Financial Innovation and Risk

The surge in stablecoin adoption represents both a challenge and an opportunity for the global financial system, particularly in emerging markets. While these digital assets promise greater efficiency, lower costs, and heightened accessibility for millions, they also threaten to erode traditional banking systems if left unchecked.

As Standard Chartered’s analysis underscores, developing nations must strike a delicate balance—adapting their regulatory frameworks and monetary policies to integrate stablecoins while protecting local financial institutions. The decisions made over the next few years will determine whether emerging market banks endure a “stablecoin summer” or succumb to a financial winter.