The Decisive | Season 5 Ep.4 - Stablecoin Adoption: The Next Wave

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Kristen Hallam:

You're listening to The Decisive Podcast. Insights and analysis to empower confident decision making. Hello, I'm Kristen Hallam, your host for this episode of The Decisive Podcast. Stablecoins were called out in the Age of Agility, our report on strategic themes for 2026 as a key component of the evolving financial landscape, especially in emerging and frontier markets. To tell us more about stablecoins, we have with us Robert Matthee, an economist in our Sub-Saharan Africa research team at S&P Global Market Intelligence. The region has been grappling with persistent foreign exchange shortages, high inflation and the challenges of cross-border payments. And Robert has recently written a report about how those trends are fueling stablecoin adoption. Robert, welcome to The Decisive Podcast. It is great to have you here.

Robert Matthee:

Thanks, Kristen.

Kristen Hallam:

So, Robert, let's start at a high level. What are stablecoins exactly?

Robert Matthee:

So to answer that question, I think we need to take a step back and think about the crypto world when it started gaining widespread attention years ago, because the criticism back then was always that cryptocurrencies are just too volatile. But at the same time, there was a lot of praise for the technology on which it was built, the blockchain technology. It was really impressive because you could essentially use that technology to conduct transactions at great speed and at much lower fees compared to the traditional banking system. So then came about the concept of stablecoins, which are, in a sense, digital assets designed to maintain a stable value by being pegged to a reserve asset, typically a fiat currency like the US dollar. So it's much different to some of the more volatile cryptocurrencies out there because it's a coin that's pegged to a stable asset such as the dollar, and it's integrated still into this very impressive new technology to make faster, cheaper payments.

Kristen Hallam:

All right, thanks for that. And how do stablecoins work? Without getting too technical about it, you mentioned blockchain technology there. Could you tell us a little bit more about how they work?

Robert Matthee:

So stablecoins work by maintaining a fixed conversion rate to whatever the reserve asset is. So for example, a US dollar backed stablecoin is backed on a one to one basis by actual US dollar reserves or equivalent assets held by the issuer. So this backing helps ensure that the stablecoin can at any time be redeemed or converted back into the reserve currency at a stable value, reducing the price fluctuations common to other cryptocurrencies, like I mentioned previously. And I think it's also important to note that stablecoins are predominantly issued by private companies and not by governments.

Kristen Hallam:

Thank you for that. Now one more piece of context, I think, before we start diving a little deeper into the scene in the emerging markets. How big is the stablecoin market, Robert, and what is expected to drive its growth?

Robert Matthee:

So the stablecoin market is growing rapidly. It's currently close to about $300 billion in total market capitalization, which is up from $5 billion in early 2020. So quite significant growth over the past couple of years. The two largest stablecoins out there are USDT and USDC which were issued by two private companies called Tether and Coinbase, respectively. They're dominating the market at the moment. We are seeing that they account for about 80% to 90% of total stablecoin market cap. And in terms of growth going forward, we expect it to continue growing strongly, especially following the US GENIUS Act that was signed in by President Trump last year, which really set a very clear regulatory framework for stablecoin for companies like Tether, Coinbase and other stablecoin issuers out there, perhaps US banks. And it's definitely going to increase.

We're going to see increasing demand from economies with large unbanked populations and heavy remittance inflows, especially the countries that I follow across sub–Saharan Africa. There are some estimations out there that the stablecoin market cap could grow to

about $2 trillion by 2028. And it's going to be driven by factors like faster and cheaper cross border payments. Those two factors are going to be strong drivers of the stablecoin market growth.

Kristen Hallam:

Wow. $2 trillion by 2028. That's what you said.

Robert Matthee:

There were some estimations out there for from the administration in the US. It varies, it depends on who you ask. But the consensus is that we are going to continue seeing rapid growth similar to what we've seen over the last five years.

Kristen Hallam:

I'm definitely glad that we are here talking about it as it's on a growth trajectory there. And so this is a good pivot to looking particularly at emerging markets and sub-Saharan Africa. So Robert, why are stablecoins a big deal for emerging markets? Looking at sub-Saharan Africa as an example.

Robert Matthee:

So if you look at sub-Saharan Africa, one of the biggest economic challenges that many of these countries face is that they've got limited access to hard currencies such as the US dollar, euros, yen, et cetera. And the reason is because many of these countries have a very narrow export base, limited industrialization, and that makes them very dependent on a single commodity or industry. And so when there's an oil price shock or maybe a natural disaster and they're unable to export enough to access hard currency, then that is usually followed by a balance of payment crisis. The currency devalues and inflation skyrockets, and that eats up the purchasing power of its citizens. But now citizens across the region can access a form of hard currency such as a US backed stablecoin, which is essentially a digital dollar in a much more easy way than the traditional banking sector. And there's already a huge appetite for US dollars across the region because of the reasons I mentioned previously.

Kristen Hallam:

So Robert, what would you say are the potential consequences of widespread adoption of stablecoins in emerging markets?

Robert Matthee:

That's the key question. And I think that just looking at some of the data that we have available within the Market Intelligence department, we've looked at the probability of a 25% currency devaluation for some of the emerging market countries over the next five years. And oftentimes we see that correlate with higher crypto adoption rates. There's actually a pretty strong correlation. And so what tends to happen is that when countries start holding cryptocurrencies or other currencies such as the US dollar and not the local currency, then obviously there's a lack of demand that is created for the local currency and that actually increases the risk of devaluation of the currency even further. So we could see that the rise of stablecoins might actually accelerate this trend and the development of dual currency economies, which will have ramifications for the credibility of domestic monetary policy. It could also impact the traditional banking sector by potentially diverting away deposits. So those are some of the key risks and consequences of stablecoins.

Although there's a lot of positive things that can come out of this, such as increased financial inclusion, reaching unbanked populations, et cetera. There could be some significant consequences for the sovereign governments of some of these frontier and emerging market economies.

Kristen Hallam:

Pros and cons. All right, lots to keep an eye on there for sure. I know we could keep talking about this topic. It's a really hot topic right now. And as I said in the intro, it's part of our Age of Agility report on strategic themes for 2026. But alas, it is time for us to wrap up our conversation. Robert, any final thoughts for our listeners?

Robert Matthee:

All I would say is that it's something that we are keeping a very close eye on, the adoption of not only US backed stablecoins, but stablecoins that are potentially backed by commodities such as gold. And I think that understanding the risks to again, domestic monetary policy, as an example, is something that we're keeping a very close eye on the

credibility of domestic monetary policy because that could have wide scale ramifications if policymakers don't come up with solutions to the problem.

Kristen Hallam:

All right, all that's left for me to do then is to thank you, Robert, for taking the time to share your insights with us. And thanks to our listeners, of course, for tuning in. Please check out the links in the description of this episode for additional insights. Until next time, thank you for listening to the Decisive Podcast from S. Global. Please subscribe and join us for next week's episode. Until then, stay curious and stay informed.