Will stablecoins help developing countries? It’s complicated

The GENIUS Act means that, for good or ill, stablecoins are here to stay. Their ability to facilitate capital flows in and out of emerging economies presents a mixed bag for policymakers.

Expert comment

Published 26 August 2025

Updated 3 October 2025 — 4 minute READ

Image — A cryptocurrency shop in Hong Kong promotes bitcoin, ethereum and the stablecoin USDT on 29 July 2025. Photo by PETER PARKS/AFP via Getty Images.

David Lubin

Michael Klein Senior Research Fellow, Global Economy and Finance Programme

Plenty of people have been celebrating last month’s passage of the GENIUS Act, which will regulate the US market for stablecoins. These are digital cryptocurrencies traded on blockchain that promise to maintain a one-to-one link with respect to an off-chain asset, almost always the US dollar. A dollar-linked stablecoin, like Tether’s USDT or Circle’s USDC, is basically a digital representation of a dollar that should be exchangeable on demand for a ‘real’ one. 

Among those likely welcoming the GENIUS Act are the stablecoin issuers themselves; other financial services firms, who can envisage new revenue streams as they bolt stablecoins onto their existing set of services; and the US treasury bill market, where demand is expected to rise sharply to secure the real-world assets needed to back new digital coins.

This move is less likely to be welcomed by many central bankers in emerging economies, who have two main fears. One is that their domestic money supply will be siphoned off from deposit accounts into stablecoin wallets, making monetary policy more difficult to implement. Another, more pressing worry is that stablecoins create a new mechanism for capital flight, allowing citizens to get hold of virtual dollars at home that can be exchanged for real dollars offshore.

For good or ill, stablecoins are here to stay.

Since emerging markets are where demand for stablecoins is growing fastest, the ambivalence of some policymakers there should be taken seriously. Stablecoins do indeed present huge regulatory challenges, especially since criminals seem so fond of using them to move funds around undetected. But their efficacy, on balance, makes them worth supporting.

It is extremely difficult to measure with accuracy cross-border flows of stablecoins or any other form of cryptocurrency. This is due to the pseudonymous nature of crypto wallets: while a wallet’s public address is known, its owner and location aren’t.  Getting hold of reliable data, therefore, requires a kind of sleuthing that both the Bank for International Settlements (BIS) and the IMF have recently attempted in different ways. In the end, though, approximation is the best to be hoped for.

That said, emerging markets is where the action seems to be. Data from the blockchain data platform Chainalysis suggests that among the ten countries where crypto activity is greatest, only one – the US – isn’t an emerging economy. India, Nigeria and Indonesia make up the top three.

The most obvious benefit of dollar-backed stablecoins is the way in which they facilitate the flow of remittances to developing countries. World Bank data suggest that the average cost of sending $500 by conventional means from the US to, say, Pakistan in late 2024 would have been over 3.5 percent. Doing the same thing with stablecoins pushes the cost down to near-zero, with near-instantaneous movement of funds at any time of the day or night, without the need for access to a conventional bank account. 

Facilitating capital flight

But stablecoin traffic runs in two directions. As much as it facilitates inflows of remittances to emerging economies, it also shores up crypto’s status as a ‘marketplace for capital flight’.

Twenty percent of Nigerians, for example, report that stablecoins account for more than half their total portfolio. Much of that demand springs from a desire to convert local currency into dollars, since capital controls have made it tough to access the foreign exchange market in conventional ways.

The means by which residents of a developing country use dollar-linked stablecoins to expatriate wealth are straightforward. You pay local currency to a crypto exchange or local broker, receive a stablecoin into your wallet, send the coin to an account or wallet on a crypto exchange offshore, and then sell the stablecoin for dollars. In countries where capital controls restrict residents’ access to dollars, the local currency price you pay for the dollar stablecoin won’t be the official exchange rate, but a parallel market rate.

In this case, the stablecoin is simply providing another mechanism for capital flight among the many others that already exist. This use of an intermediary instrument to get money offshore echoes the way, for example, Argentinians have relied on the so-called blue-chip swap, which uses securities listed in both Argentina and the US to siphon money offshore.

The blue-chip swap came into its own for Argentinians after the country’s then-president, Cristina Fernández de Kirchner, imposed restrictions on access to foreign currency in 2011. Similarly, stablecoin demand today seems to be especially robust in countries with capital controls. That’s why there’s a strong overlap between countries that have capital controls and those that have sought to ban crypto – China being a good example.

Challenges for policymakers

How should policymakers react to all this? Since stablecoins can pose some kind of threat to a country’s policy sovereignty, perhaps they should be discouraged, not least because of evidence that stablecoins are used in most of the digital world’s movement of illicit funds.

Finding a way to end the use of stablecoins in illicit finance is a major regulatory challenge. But stablecoins’ role in allowing money to vote with its feet when governments misgovern is worth taking seriously.

If it is reasonable to expect governments to manage their countries’ finances responsibly, it is also reasonable to expect that citizens will move their money to seek protection against currency debasement or the risk of confiscation – especially when the main purpose of capital controls is to shore up autocratic governments, as is sometimes the case.

Controls on capital outflows are sometimes essential, especially during a crisis, but they are often implemented to allow policymakers to keep the price of foreign exchange cheaper than it should be. That makes the economy less competitive overall, encourages corruption, limits export growth, makes it more difficult to attract stable funding from abroad, and unnecessarily increases the country risk premium that governs what it costs for the economy to borrow internationally.

Since emerging markets are where demand for stablecoins is growing fastest, the ambivalence of some policymakers there should be taken seriously. 


If stablecoins contribute to partially breaking down the barriers to capital outflows in poorly managed economies, that could be considered an achievement, since it might encourage policymakers to organise their countries’ finances better.

For good or ill, stablecoins are here to stay, not least because countries who don’t welcome them could well incur the wrath of President Donald Trump, who has associated himself personally with the recently passed legislation. And since China is now reportedly moving towards a yuan-backed stablecoin, the need for robust international regulation of these instruments will only grow.