A new report from Standard Chartered has sent ripples through the financial world, warning that stablecoins could drain as much as $1 trillion from emerging market banks within the next three years. The forecast underscores how quickly digital currencies, once seen as niche instruments, are now poised to challenge traditional banking models – particularly in economies where currency volatility has eroded trust in local institutions.
The report reveals that nearly all existing stablecoins are backed by the U.S. dollar, making them an attractive refuge for savers in markets facing inflation and exchange-rate instability. As consumers increasingly favour the perceived security of dollar-pegged tokens, deposits in domestic banks could face sharp erosion. Standard Chartered projects that stablecoin holdings could rise from $173 billion to $1.22 trillion by 2028, equivalent to around two percent of total deposits across sixteen high-risk economies. Though the percentage appears modest, the systemic effect on liquidity and funding costs could be profound.
For banks, the risk extends beyond capital flight. Deposit attrition could force them to offer higher interest rates to retain clients, compressing margins already under strain from tighter regulatory oversight and slowing credit growth. Moreover, in moments of market stress, digital outflows can occur almost instantaneously – a dynamic that traditional banking systems, with their physical and procedural frictions, are ill-equipped to manage.
Regulators, particularly in the United States, are attempting to contain the shift by restricting stablecoin issuers from offering yields. Yet, as Standard Chartered’s analysts note, safety, not return, remains the principal motivator in emerging markets. The appeal of stability, transparency, and easy convertibility continues to outweigh conventional deposit guarantees.
Still, the banking sector is not without recourse. Some institutions are investing in tokenisation and exploring central bank digital currencies as defensive strategies. Others are seeking to differentiate through advisory services, lending expertise, and customer relationships that technology alone cannot replicate. The next phase of competition in financial services will depend on which institutions adapt first – those that integrate innovation with regulation may yet turn disruption into renewal.
Ultimately, the rise of stablecoins highlights a broader truth: the contest for trust in finance is being rewritten in real time. For emerging market banks, survival will hinge not on resisting change, but on redefining what it means to be stable in a digital age.
