Why Local Stablecoins Risk Faster Dollarization

Roughly 98% of all outstanding stablecoins are denominated in U.S. dollars, with a global market cap near $315 billion as of early April 2026 and annual on-chain transaction volumes of about $35 trillion, the Bank for International Settlements reported. The IMF's 2026 staff report on Nigeria called the phenomenon "digital dollarization," noting that inflows of USD-pegged stablecoins approached the country's recorded remittances. In Argentina, stablecoins accounted for 61.8% of all crypto transaction volume through June 2024, according to Chainalysis. In Turkey, fiat-to-stablecoin trading equaled roughly 4.3% of GDP over the same period, Axios reported, citing Chainalysis data.

These are not marginal use cases. Households and firms in stressed currency environments are using USDT and USDC as digital dollars, outside the domestic banking system. The IMF's Nigeria report said USD stablecoins "effectively enable households and firms to store and transact in foreign currency outside the domestic banking system." Currency substitution happens off balance sheet.

Local-currency stablecoins were supposed to offer an alternative. In Brazil, native BRL-pegged tokens grew quickly through 2024 and 2025. Yet circulating value sat at roughly $23 million in one Dune snapshot, and their liquidity frequently paired directly with USDC or USDT on decentralized exchanges. Nigeria's naira-pegged regulated stablecoin, cNGN, launched in early 2025. Its on-chain footprint was about 66 million cNGN – roughly $44,000 – across 74 transactions, the IMF said.

The contrast is stark. The BIS noted that yen-pegged regulated stablecoins represent less than 0.01% of USD-pegged supply. The same dynamic plays out wherever local tokens exist: they sit alongside dollar liquidity, not replace it.

Part of the reason is plumbing. Major stablecoin issuers have become large buyers of short-term U.S. safe assets. A BIS working paper estimated issuers held more than $120 billion in Treasury bills around March 2025 and purchased roughly $35 billion of T-bills in 2025. The paper also found that concentrated inflows can move short-term yields; a $3.5 billion inflow materially lowered the 3-month T-bill yield on impact. That linkage reinforces the depth and convenience of dollar liquidity compared with local-paper collateral.

When local stablecoins integrate through pools paired with USDT or USDC, they inherit the dollar as unit of account and settlement baseline. The most efficient liquidity path often crosses a dollar bridge. The more users rely on those bridges in times of local-currency stress, the more domestic currency substitution can accelerate. Chainalysis reported that retail-sized stablecoin receipts in Argentina grew faster than any other asset type, signaling household-level hedging against peso depreciation.