Three reasons why stablecoins are thriving globally – Will the U.S. follow suit?

Author: David Feliba, CoinTelegraph; Translated by: Bai Shui, Golden Finance

Although the Trump administration laid a preliminary foundation for the regulation of the U.S. cryptocurrency industry (with the expectation that the new crypto czar in the White House will set the direction in the coming months), these digital assets have already been thriving in emerging markets.

Stablecoins are pegged to fiat currencies and are becoming important financial tools for many developing countries, promoting remittances and cross-border trade, bridging the gap in financial inclusion, and providing inflation hedging in countries where traditional banking is often insufficient and millions are nearly unable to access financial services.

Stablecoins (primarily pegged to the US dollar) have seen explosive growth in recent years, with their real-world applications rapidly expanding to Africa, Latin America, and some developing countries in Asia. While the US is still exploring how to apply this technology beyond the crypto space, emerging markets have already demonstrated the importance of stablecoins.

In these regions, they are not just a financial experiment, but a solution.

Stablecoins as a Hedge Against Inflation in South America

In inflation-stricken economies such as Argentina and Venezuela, stablecoins provide a dollar-pegged haven to avoid local currency depreciation, especially when foreign exchange channels are strictly controlled. Throughout Africa and Central America, they serve as an economically efficient tool for remittances and cross-border payments, while in places like Indonesia, they can offer an alternative that is more accessible than traditional dollar banking, which may involve complicated requirements.

Eswar Prasad, a professor of trade policy at Cornell University, stated that while stablecoins are primarily used in decentralized finance in wealthier, more developed economies and serve as a bridge between traditional banking and DeFi, their role is more fundamental yet essential in emerging markets with limited financial infrastructure.

“In low- to middle-income economies with underdeveloped financial systems, they can play a beneficial role in providing citizens and businesses with convenient, widespread, low-cost digital payment systems.”

The US dollar is widely regarded as a global store of value, and acquiring dollars is a key driving factor for emerging markets adopting stablecoins. Compared to the volatility of early cryptocurrencies like Bitcoin, stablecoins are designed to provide stability, with most stablecoins pegged to the US dollar. USDT Tether accounts for nearly 60% of the global market, followed by another dollar-backed asset, USDC.

Stablecoin provided by the issuer. Source: Castle Island Ventures.

“Some problems in the world need to be solved with a cryptocurrency whose price does not fluctuate constantly,” said Julián Colombo, a senior executive at the Mexican cryptocurrency exchange Bitso, in an interview. Bitso has official offices in Argentina, Brazil, and Colombia.

“Stablecoins provide a way to bring all the benefits of cryptocurrency into real-world use cases – not just the potential to get rich off Bitcoin.”

Stablecoins are the top priority for Trump, the crypto czar.

As bipartisan senators introduced legislation to establish a regulatory framework on February 4, momentum around stablecoins is increasing in the U.S. White House artificial intelligence and cryptocurrency czar David Sacks emphasized that stablecoin regulation is a top priority for the government during his first address to the industry. The working group led by the former venture capitalist will draft key policies in the next six months.

Regardless, the growth of stablecoins has been nothing short of remarkable. According to data from DelfiLlama, their market capitalization has reached an astonishing $100 billion in just the past year, with the total market cap soaring to $225 billion by February 2025. USDT still dominates, holding over 60% of the market share, but challengers – including those backed by financial giants like PayPal – are rapidly emerging.

“Stablecoins - the tokenized representation of fiat currency circulating on the blockchain - are undoubtedly the ‘killer application’ of cryptocurrencies,” mentioned a report written by Castle Island Ventures and sponsored by VISA.

“We believe that stablecoins represent a payment innovation that has the potential to provide safe, reliable, and convenient payment services to more people in more places,” said Cuy Sheffield, the global cryptocurrency head of this American payment giant.

The report states: “Although they initially appeared as a type of crypto-native collateral and settlement medium for traders and exchanges, they have crossed the chasm and are widely adopted in the global mainstream economy.”

“Based on the differences between stablecoin activity and cryptocurrency market cycles, it is clear that the adoption of stablecoins has gone beyond merely serving the needs of cryptocurrency users and trading use cases.”

Spot cryptocurrency trading volume and monthly sending addresses for stablecoins. Data source: Castle Island Ventures.

Stablecoins are seen as a means of value storage, a tool for hedging against inflation, and a medium for cross-border transactions, gaining significant appeal in emerging markets. A recent report by Chainalysis found that the adoption rate of stablecoins far exceeds that of Bitcoin in regions such as Africa, Eastern Europe, Latin America, and Asia, and in some cases accounts for nearly half of all cryptocurrency transactions.

In comparison, the adoption rate of stablecoins in the United States and North America is the lowest, although it still holds a considerable share.

Regional trading activity share: stablecoins and Bitcoin. Source: Chainalysis.

Gabriel Galipodo, the president of the Central Bank of Brazil, stated that the use of stablecoins has significantly increased in recent years in Brazil and other regions. Brazil, a strong country in Latin America, has a population of 216 million and a GDP of 2.2 trillion dollars. The economist mentioned at the Bank for International Settlements event held in Mexico City on February 6 that up to 90% of the entire cryptocurrency circulation is related to stablecoins.

“Most of it is about buying things and shopping from abroad,” Galipolou said, emphasizing that this new trend brings severe regulatory challenges in terms of taxation.

However, Julián Colombo, the head of the local operations for the regional exchange Bitso, stated that in Latin America, no place has stablecoins more popular than Argentina. In the context of long-term inflation and economic instability in the country, they provide a vital financial refuge for citizens.

Colombo stated: “In Argentina, just like in other high-inflation countries, stablecoins have become a solution to a very real and pressing problem.”

“Argentinians do not trust the local currency and prefer to save in US dollars, but the foreign exchange controls and restrictions imposed by the government make it difficult to obtain dollars. Stablecoins fill this gap, providing a way to hold and trade in dollars.”

He said that in Argentina, about two-thirds of the cryptocurrencies purchased through exchanges are done with assets pegged to the US dollar. Despite improvements in Argentina’s financial indicators under the market-driven government led by pro-crypto President Javier Milei (Javier Milei), the inflation rate remains as high as 84.5%.

Despite recent monthly data showing a downward trend, rebuilding trust in the local currency in a country long plagued by triple-digit inflation and severe currency depreciation takes time to ensure sustained demand for stablecoins pegged to the US dollar.

Similarly, the adoption of such digital assets is of great significance for Venezuela, a country suffering from prolonged inflation and heavy regulation, making it very complicated to obtain foreign currencies like the US dollar. In emerging markets with more stable currencies, such as Brazil or Mexico, they can play a different but equally important role: enabling fast, low-cost remittances without the volatility associated with traditional cryptocurrencies.

Businesses use them to pay for international service fees, hire remote employees, send dividends, and facilitate remittances, making cross-border transactions more efficient and convenient.

“Compared to other crypto assets, stablecoins promise stability,” said the Bank for International Settlements in a report on stablecoins. “Due to this potential, they are increasingly entering mainstream finance, and many jurisdictions have developed regulatory approaches for stablecoin issuers linked to a single fiat currency.”

Stablecoins Drive Remittances in Central America and Africa

One of the most powerful use cases for stablecoins is cross-border transfers and remittances, especially in Central America and Africa, where these digital assets provide a cheaper and faster alternative for cross-border capital flows. Immigrants working in the United States often find stablecoins to be a more convenient tool for sending money back to their families at home.

“Stablecoins have received some attention in domestic and cross-border payments,” said Prasad, a professor of trade policy at Cornell University in the U.S., to Cointelegraph. “They have played a particularly useful role in overcoming the inefficiencies, high costs, and slow processing times associated with cross-border transactions conducted through traditional payment channels.”

Speaking about the popularity of stablecoins in remittances, Colombo said, “Before the advent of cryptocurrencies, remittance services could charge fees of up to 10% just to transfer money from one country to another. With cryptocurrencies, you might have some extra money to send to Mexico, and the transfer might only cost a penny—arriving in minutes instead of hours or days.”

Increasing Cases of Stablecoins for Non-Cryptocurrency Use

In a report sponsored by Visa, researchers surveyed approximately 500 cryptocurrency users in Nigeria, Indonesia, Turkey, Brazil, and India, totaling 2,541 adults. While acquiring cryptocurrency remains the most popular motivation for using it, non-cryptocurrency purposes such as obtaining dollars, generating profits, or trading are also very popular.

Stablecoin Survey Results. Source: Castle Island Ventures.

Surveys show that, compared to other surveyed countries, Nigerian users have the strongest affinity for stablecoins. Nigerians trade with stablecoins most frequently, have the largest share of stablecoins in their portfolios, use them for the widest range of non-crypto purposes, and report the highest level of understanding of stablecoins. Saving in dollars is their top priority.

Zekarias Dubale, co-founder of the Africa Fintech Summit, stated that stablecoins have become the “holy grail” for cross-border trade, international remittances, and value transfer across the entire African continent. He believes that these digital assets can provide the financial infrastructure needed to facilitate global trade.

However, stablecoins are not without risks. While the most widely used stablecoins have essentially maintained their peg to the strong fiat currencies they are designed to reflect, the market is rapidly expanding, with hundreds of digital assets currently in circulation. However, many of these assets lack transparency regarding the reserves that back them, and instances of stablecoin decoupling occur from time to time, with some even collapsing.

Nevertheless, under the leadership of the Trump administration, the development momentum of stablecoins in the United States and emerging markets is strong, proving to be a powerful tool for helping citizens overcome challenges related to financial inclusion and underdeveloped infrastructure.