Stablecoins Could Pull $1T from Emerging-Market Banks: Standard Chartered

The report anticipates that the total market capitalization of stablecoins could expand from its current size of about $230 billion to roughly $2 trillion by 2028, assuming that favorable legislation and market infrastructure are established. The authors of the study model several possible outcomes, with their most aggressive scenario suggesting that depositors in emerging markets may redeploy up to $1 trillion of bank deposits into stablecoins. This projection reflects how individuals and businesses in inflation-prone economies or regions with limited trust in banking institutions may increasingly view dollar-backed digital tokens as safer and more liquid stores of value.

To sustain that scale of issuance, stablecoin providers would need to purchase roughly $1.6 trillion in U.S. Treasury bills and other highly liquid assets over the same period. That would represent a substantial new source of demand for U.S. government securities and could influence the broader dynamics of the Treasury market. The report notes that stablecoin expansion, therefore, is not just a technological or regulatory issue but one with macroeconomic implications for sovereign debt and global liquidity.

Standard Chartered’s analysts caution that the migration of deposits into stablecoins could strain banking systems in emerging markets. Banks rely on deposits as a core source of funding for lending and investment. If significant volumes are withdrawn and redirected into stablecoins, banks may face liquidity shortages, higher funding costs, and tighter credit conditions. The risk is especially acute in economies already under stress from currency volatility, balance-of-payments pressures, or high inflation. In these countries, even modest outflows could amplify existing vulnerabilities.

Another concern highlighted in the report is the erosion of monetary sovereignty. As stablecoins, particularly those pegged to the U.S. dollar, gain traction, central banks in emerging markets could find their monetary policy tools less effective. The ability to influence domestic liquidity and interest rates may weaken if large segments of the population hold value in dollar-denominated digital assets instead of local currency deposits. This phenomenon, sometimes described as “digital dollarization,” could limit governments’ capacity to stabilize exchange rates or manage inflation.

Liquidity and redemption risks are also discussed in detail. A sudden surge in redemption requests would test the resilience of stablecoin issuers, which must maintain highly liquid reserves to meet withdrawals. If reserve quality or transparency were inadequate, de-pegging events could occur, undermining confidence in both the issuer and the broader digital-asset market. The study points to the potential for a destabilizing feedback loop: as banks lose deposits and curtail lending, economic activity slows, further undermining trust in the traditional system and accelerating the shift toward digital assets.

The report emphasizes that its projections depend on several enabling factors. Regulatory clarity is one of the most important. In key jurisdictions such as the United States, proposed legislation to define stablecoin reserve rules, redemption rights, and audit standards would give institutional investors the confidence to adopt these assets more widely.

Another factor is the development of infrastructure for cross-border payments and wallet interoperability. As these systems mature, they make stablecoin transactions faster, cheaper, and more reliable. A third determinant is the degree of trust that users place in issuers. Strong governance, transparent audits, and credible redemption mechanisms are prerequisites for sustained growth.

The research also acknowledges multiple uncertainties. The rate of adoption could be slower than predicted if consumers remain loyal to banks that provide deposit insurance and established protections. Some governments might impose restrictions on stablecoin use or enforce strict capital controls to protect domestic currencies.

Not all stablecoin issuers are equal, and weaker ones could face failure if their reserves are not genuinely liquid or if audit practices are opaque. Even in regions with growing digital adoption, infrastructure gaps such as poor internet access or limited smartphone penetration could hinder uptake.

Standard Chartered’s economists further warn that if issuers collectively buy trillions in U.S. Treasury bills, the effect on global bond markets could be significant. While such demand could initially lower yields, it might also create dependency between stablecoin liquidity and the U.S. debt market, linking digital finance more closely to traditional fiscal policy than ever before.

The study suggests that regulators in emerging markets will need to act proactively to address these challenges. Legal frameworks should be established to define how stablecoins operate, how reserves are managed, and how redemption rights are enforced. Policymakers must also monitor digital capital flows in real time, using data analytics to detect large cross-border movements and mitigate potential shocks. Strengthening domestic banking and payment infrastructure could help reduce the incentive for deposit flight, ensuring that local institutions remain competitive and resilient.

Banks themselves, according to the report, may need to innovate. Offering digital deposit accounts, improving transparency, and expanding mobile banking services could help maintain customer loyalty. Some banks might explore partnerships with fintech companies or controlled integration of blockchain-based rails for settlement, provided compliance and risk controls remain strong.

For stablecoin issuers and investors, Standard Chartered’s analysis underlines the need for transparency and prudence. Issuers must maintain clear disclosure of their reserve composition, ensure regular third-party audits, and develop contingency plans for liquidity stress. Investors, meanwhile, should evaluate not only market demand but also regulatory risk, jurisdictional exposure, and the robustness of the issuer’s governance model.

The report portrays the rise of stablecoins as both an opportunity and a systemic risk. The forecast of up to $1 trillion flowing out of emerging-market banks is not a certainty but a plausible scenario that underscores how digital finance could reorder long-standing financial structures. Whether that outcome becomes reality will depend on how regulators, central banks, issuers, and investors navigate the next phase of innovation. A coordinated approach, anchored in transparency, accountability, and robust regulation will determine whether stablecoins strengthen or destabilize the global financial system.