Standard Chartered warns of $1 trillion deposit flight from emerging banks as stablecoins surge

Standard Chartered has warned that the rapid growth of US dollar-backed stablecoins could attract up to $1 trillion in deposits from emerging market banks over the next three years.

Reuters report on the note:

About 99% of stablecoins are pegged to the dollar, making them digital dollar accounts that appeal to savers in countries prone to currency instability. The bank said individuals and businesses in these markets will likely move their funds to stablecoin wallets to protect their savings.

Even with new US 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 grow from $173 billion today to $1.22 trillion by 2028, or about 2% of total deposits in 16 vulnerable countries, including Turkey, India, Brazil, South Africa, Egypt and Pakistan. Policymakers, he warns, face growing risks of capital flight as digital alternatives gain traction.

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This could intensify dollarization pressures in emerging markets and weaken local currencies.

• Potential capital flight could increase financing costs for emerging market sovereigns
• Highlights Growing Institutional Recognition of the Systemic Impact of Stablecoins