Stablecoin Surge Threatens Emerging Market Banks with $1 Trillion Capital Drain

A new paper from Silicon Valley Bank and payments firm Sphere Labs warns that stablecoins could drain over $1 trillion from emerging market banks within three years. The authors argue that dollar-pegged stablecoins can speed up currency crises in high-inflation economies by facilitating capital flight.

The paper, co-authored by Sphere Labs CEO Arnold Lee and SVB crypto director Anthony Vassallo, notes that while stablecoins themselves do not create sovereign debt crises, they can exacerbate existing issues. The authors cite the example of Argentina, where stablecoins already make up 94% of peso crypto trading.

The market for stablecoins has grown significantly in recent years, from $205 billion to approximately $307 billion in 2025, according to the paper. Emerging market holdings are predicted to rise from around $173 billion to $1.2 trillion by 2028.

Lee and Vassallo propose that compliance checks be built into networks before payments settle, rather than relying on rules applied at the point of minting. They argue that this approach would help prevent capital flight and mitigate the risks associated with stablecoins in emerging markets.