Stablecoin Summer Could Trigger a $1 Trillion Emerging Markets Winter

Core Insights - Standard Chartered warns that the rise of stablecoins could lead to a potential outflow of up to $1 trillion from emerging-market banks over the next three years as depositors shift to digital dollar alternatives [2][4] - The bank identifies countries like Egypt, Pakistan, Bangladesh, and Sri Lanka as highly vulnerable to these outflows, highlighting a structural trend of banking functions migrating to the non-bank digital sector [3][4] - The report emphasizes that stablecoins provide consumers and corporations with access to USD-based accounts without traditional intermediaries, which could exacerbate financial instability in countries with weak currencies and high inflation [5][6] Summary by Sections - Emerging Market Impact: The estimated outflows from EM banks would represent approximately 2% of aggregate deposits in high-vulnerability economies, indicating significant potential disruption [4] - Policy Implications: The findings create urgency for policymakers, especially in countries facing twin deficits, as stablecoins could amplify existing financial instabilities [5][6] - Stablecoin Appeal: Analysts suggest that the appeal of stablecoins as a safe digital store of value will persist, regardless of yield incentives, emphasizing the importance of capital preservation over returns [7] - Structural Realignment: The phenomenon of stablecoins is viewed as a structural realignment in global finance rather than merely a speculative trend, indicating a fundamental shift in how money moves [8]