Stablecoins and Emerging Markets

Stablecoins are growing more important in discussions about payments, currencies, and financial access. These tokens sit at the intersection of digital assets, foreign exchange, and policymaking, with uses that make them particularly relevant for emerging markets, ranging from cross-border transfers to hedging against local currency volatility. This Goldman Sachs Global Institute Q&A provides an overview of stablecoins, why they are relevant in emerging markets, risks they may pose, and the key trends to watch.

What is the purpose of stablecoins and how are they used?

Stablecoins are digital tokens designed to maintain stable values by being pegged to a reference fiat asset, most often the US dollar. Stablecoins operate on blockchain networks, typically on public chains, and can be held in digital wallets accessible via technologies like smartphones. Private companies have generally been the primary issuers of stablecoins.

Unlike other digital assets such as cryptocurrencies, whose values can fluctuate widely, fiat-backed stablecoins aim to maintain a 1:1 peg to a reference asset by backing outstanding tokens with reserves held primarily in assets like cash, cash equivalents, or short-term US Treasuries. Stablecoins, therefore, act as digital representations of other forms of value.

Stablecoins have relied on a range of parity-maintenance mechanisms, including crypto overcollateralization, algorithmic designs, and commodity-backed structures such as gold. However, consumer preferences and regulatory emphasis have increasingly converged on fiat-backed stablecoins, albeit with variation in reserve composition and governance.

According to Goldman Sachs Research, the primary use case for stablecoins is as an on- and offramps to other crypto assets, representing ~88% of all stablecoin transactions. However, stablecoins are increasingly being used for other purposes, including cross-border payments, B2B tokenization, and retail-sized payments (currently estimated at 0.5% of use cases).

Why are stablecoins particularly relevant to emerging markets?

Of the roughly $290 billion of current global stablecoin supply, it is estimated that ~66% is held by individuals in emerging markets. Stablecoins have the potential to mitigate persistent financial challenges in emerging markets, including currency instability, limited access to the US dollar, weak or fragmented payment rails, and fiscal accountability.

In many emerging markets, local currency instability and the lack of banking infrastructure significantly affects households’ ability to save, invest, and obtain essential goods. Emerging markets more often face chronic inflation, currency devaluation, and low trust, which can reduce local currencies’ function as a store of long-term value. These trends can push households into informal dollarization, often through cash, offshore accounts, or real estate. However, stablecoins offer portable and immediate access to US dollars and greater monetary stability, even for those without access to US bank accounts. In contrast, in developed markets—where consumers have stable currencies, developed banking, and fast payments—stablecoins may be less transformational.

Remittances, when immigrants send home part of their earnings to parties in their home countries, is another burgeoning use case for stablecoins in emerging markets. From 2010–2024, the level of global remittance volumes more than doubled, and is now estimated to be $892 billion. Eight of the top ten destinations for remittances are emerging markets. Traditional remittance channels often take several days and can charge 5–10% in fees. However, stablecoins offer consumers near-instant transfers across borders, with potentially much lower cross-border transaction fees.

What risks may emerge as stablecoins proliferate?

Stablecoins can introduce risks to financial stability and monetary sovereignty. As adoption and the utility of stablecoins increase, consumers may shift assets out of local banks and into stablecoin issuers, raising the risk of deposit flight. In countries where commonly used stablecoins are backed by foreign sovereign assets, rather than by the local currency, central banks may see the power of their monetary tools weaken, including control of the money supply and ability to act as lenders of last resort. As a result, the policies of central banks whose treasuries back widely used stablecoins, like the US dollar, could exert greater influence.

Stablecoins have also been used to facilitate illicit activities, in part because they offer dollar-denominated exposure outside traditional US banking relationships and can serve as on- and offramps to broader crypto markets. A Chainanalysis investigation estimated stablecoins were used for $25 billion in illicit transactions in 2024. Due to this risk, policymakers and financial institutions remain focused on regulatory compliance, sanctions enforcement, and oversight, leveraging the transparency of public ledgers to enhance accountability.

What are the most important trends to follow to understand the future of stablecoins?

The stablecoin landscape is shifting swiftly as the market grows and faces increased scrutiny. The next phases of stablecoin development is likely to be shaped by regulatory convergence and enforcement, the expansion of B2B tokenization and settlement use cases, and growth in consumer adoption.

In the US, the GENIUS Act, signed into law in July 2025, outlined key sets of requirements for stablecoins, such as defining issuers, providing Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) guidance, and creating a reasonable expectation of stable value through limits on what assets can back a payment stablecoin. In the months since the GENIUS Act’s passage, American executive agencies have begun developing and implementing regulations, and the US Congress is considering additional digital asset market structure legislation. As governments globally enact their own stablecoin and central bank digital currency frameworks, additional regulatory certainty may encourage a broader proliferation of issuers beyond the current US dollar-based players.

This document has been prepared by the Goldman Sachs Global Institute with the assistance of members of the Digital Assets Team and Office of Government and Regulatory Affairs and is not a product of Goldman Sachs Global Investment Research. The opinions and views expressed herein are as of the date of publication, subject to change without notice, and may not necessarily reflect the institutional views of Goldman Sachs or its affiliates. The material provided is intended for informational purposes only, and does not constitute investment, legal, or tax advice, a recommendation from any Goldman Sachs entity to take any particular action or be used as a basis for any other investment decision, or an offer or solicitation to purchase or sell any securities or financial products. Any forward-looking statements, case studies, computations or examples set forth herein are for illustrative purposes only. Past performance is not indicative of future results. Neither Goldman Sachs nor any of its affiliates make any representations or warranties, express or implied, as to the accuracy or completeness of the statements or information contained herein and disclaim any liability whatsoever for reliance on such information for any purpose. Each name of a third-party organization mentioned is the property of the company to which it relates, is used here strictly for informational and identification purposes only and is not used to imply any sponsorship, affiliation, endorsement, ownership or license rights between any such company and Goldman Sachs. This material should not be copied, distributed, published, or reproduced in whole or in part or disclosed by any recipient to any other person without the express written consent of Goldman Sachs.