The Impact of Stablecoins on Financial Activities in Emerging Markets

The Growing Role of Stablecoins in Emerging Markets

Stablecoins are becoming increasingly integral to everyday financial activities such as savings, currency conversion, and cross-border payments, particularly in emerging markets. This insight is drawn from a recent report released on Thursday by Castle Island Ventures, a digital asset investment firm, in collaboration with Brevan Howard, a prominent hedge fund group.

The report is based on a comprehensive survey conducted among over 2,500 cryptocurrency users across five emerging economies: Brazil, Nigeria, Turkey, Indonesia, and India. While access to cryptocurrency markets remains the primary motivation for using stablecoins, the findings reveal a diverse array of practical applications beyond digital asset trading.

• 69% of respondents indicated they have converted their local currency into stablecoins.
• 39% reported using stablecoins to purchase goods or services, and also to send money to relatives abroad.
• 30% have employed stablecoins for business transactions.
• 23% have either paid or received their salaries in stablecoins.

Survey participants expressed a clear preference for using stablecoins over traditional U.S. dollar banking systems, citing several advantages such as enhanced efficiency, the potential to earn yields, and reduced risk of government interference. Users of Tether (USDT), which is the largest stablecoin by market capitalization and is notably popular in these emerging regions, highlighted multiple reasons for their choice of this token. These included its strong network effects, user trust, high liquidity, and a proven track record in comparison to other stablecoins.

When it comes to blockchain preferences for stablecoin transactions, the majority of respondents identified Ethereum (ETH) as their top choice, followed closely by Binance Smart Chain (BNB), Solana (SOL), and Tron (TRX).

Nic Carter, a general partner at Castle Island, emphasized the need for more data on stablecoin usage globally, particularly in emerging markets. In an email to CoinDesk, he stated, “We felt there was a lack of data around how folks are actually using stablecoins around the world, especially in emerging markets.” He further noted in an X post, “What we found validated our beliefs about stablecoins: they are being used not just for crypto trading, but increasingly feature in the ordinary economic lives of these individuals.”

Currently, stablecoins represent a substantial $160 billion asset class within the cryptocurrency ecosystem, with their values primarily pegged to external assets, predominantly the U.S. dollar. They play a crucial role as infrastructure that bridges the gap between cryptocurrencies and fiat currencies. Furthermore, as the recent survey confirms, stablecoins are gaining traction as a safe haven asset and a cost-effective payment solution in developing regions that have historically faced currency devaluations and possess underdeveloped banking systems.