Core Insights - The rise in stablecoin usage could lead to a potential outflow of up to $1 trillion from emerging market banks over the next three years as savers prefer the safety of dollar-pegged digital assets [1] - Stablecoins are becoming an alternative to local banks for households and companies in developing economies, indicating a shift of core banking functions into the non-bank sector [1][2] - The global stablecoin market is projected to reach $2 trillion by 2028, with approximately two-thirds of the demand originating from emerging markets [3] Market Dynamics - Stablecoins are tied to assets like the U.S. dollar or gold and are crucial for providing payment infrastructure and facilitating international money transfers [2] - Adoption is particularly strong in countries with weak currencies and high inflation, such as Egypt, Pakistan, Bangladesh, and Sri Lanka, where there are significant risks of deposit flight [2] Regulatory Response - Emerging market regulators are initiating digital-currency pilots and enhancing payment systems in response to the growing stablecoin market [4] - Standard Chartered warns that if local authorities do not adapt quickly, the increasing popularity of stablecoins could pose long-term challenges for emerging market banks [4]