Stablecoins represent lower credit risks than banks, Standard Chartered

Standard Chartered has predicted that more than $1 trillion may exit emerging market banks and flow into stablecoins by 2028. According to the Multinational Bank, there will be a shift of payment networks and other core banking activities from the bank sector to the non-bank sector.

Standard Chartered said stablecoins used for savings in emerging markets may increase from $173 billion to $1.22 trillion within the next three years. The bank stated that the biggest disruption from stablecoins is likely to come from emerging markets, where access to US dollars has historically been limited.

According to the bank, as stablecoins become more popular in emerging markets (EM), users may use them to access what’s essentially a US dollar-based account. “Stablecoin ownership has been more prevalent in EM than DM, suggesting that such diversification is also more likely in EM,” Standard Chartered said.

“Stablecoins represent lower credit risks than banks”

Stablecoins represent lower credit risks than deposits held in their local banks because they give users digital access to a USD account 24 hours a day, seven days a week. This is because the US GENIUS Act requires them to be fully backed by dollars. 

To that end, Standard Chartered said this change increases the risk of deposit flight from EM banking systems to crypto alternatives. In fact, according to the bank estimates,  two-thirds of the current stablecoin supply is already in savings wallets across emerging markets. 

Also, Standard Chartered added that countries with high inflation, weak reserves, and large remittance inflows are likely to see deposits leave their banks and migrate to stablecoins. For instance, Venezuela, which has an annual inflation rate between 200% and 300%, and with the bolivar’s value collapsing, citizens have turned to stablecoins.

In Chainalysis’ 2024 crypto adoption report, Venezuela ranked 13th and showed a 110% increase in crypto usage throughout the year. In addition, countries like Argentina and Brazil are also increasingly substituting savings into USDC and USDT to dodge inflation. Many businesses in these countries have also started to accept stablecoins as a form of payment. 

Stablecoins record an ATH in net creations in Q3

Stablecoins has reported that Q3 is their biggest quarter on record. According to on-chain data, the industry has seen an estimated $45.6 billion to $46.0 billion in net creations. That translates to a 324% jump from Q2’s $10.8 billion.

This rise was contributed to by Tether’s USDt, which added approximately $19.6 billion, Circle’s USDC, which added approximately $12.3 billion, and Ethena’s USDe, which added approximately $9 billion. This is a mix of established large-scale designs with rising interest in newer, yield-linked ones.

The overall stablecoin float is now between $300 billion and $310 billion. According to DefiLlama, new industry numbers put the total closer to $310 billion over the last 30 days.

Besides the top three, PayPal’s USD and Sky’s USDS each saw about $1.4 billion and $1.3 billion quarterly inflows, respectively. Newer tokens, such as Ripple’s RLUSD and Ethena’s USDtb, also made small but steady gains from a low base.

However,  just because growth is at an all-time high doesn’t mean use is at an all-time high: Active addresses plummeted by around 23% in the last month, and transfer volume fell by 11%. Much of the additional supply appears more like cash sitting on the sidelines than money actually moving through the system.

Liquidity remains weak across venues and chains, making swings harsher when conditions become tough. New designs, such as USDe, create new demand, but they also come with additional hazards. 

In Europe, they are already getting more attention from regulators. As reported by Cryptopolitan, Germany’s financial regulator BaFin cited serious flaws in the issuance process of Ethena’s stablecoin USDe. As a result, BaFin moved in to restrict the offering of USDe to German traders and investors.

Sign up to Bybit and start trading with $30,050 in welcome gifts