Layer One: Stablecoin adoption in emerging markets raises concerns over dollar dominance

Welcome to Layer One: the newsletter and podcast on the intersection of crypto and the real world. Hosted by The Block's Kelvin Sparks, Layer One brings you inside the institutional conversations driving blockchain forward.

In our latest episode, we were joined by David Sutter, founder and CEO of OpenTrade, to discuss the regulatory landscape, institutional DeFi adoption, and surging stablecoin demand in emerging markets worldwide.

In this week’s newsletter, we’re looking at how stablecoins could cement dollar dominance worldwide, and how governments are responding.

Stablecoin adoption drives sustained crypto growth in emerging markets, raising concerns over dollar dominance

Last month, Chainalysis released its 2026 Global Crypto Adoption Index, placing Brazil in the top spot for grassroots adoption worldwide. The South American nation ranked in the top four across all four metrics measured by the index. Nigeria, meanwhile, placed behind the United States in third place, leading the world in both cross-border and domestic peer-to-peer activity.

The research also revealed that despite a sharp 50% drop in the overall crypto market cap, onchain economic activity slipped just 1.6%, from $9.5 trillion to $9.4 trillion. Chainalysis attributed this resilience to crypto's expanding real-world use cases, which are less subject to the cycles of speculative demand that have defined the market’s history.

Over the past year, global cross-border stablecoin transfers rose from $124.2 billion to $220.3 billion — an increase of 77.5% — while domestic stablecoin peer-to-peer activity surged 377.7%. Retail-sized transfers also grew sharply, with transactions under $100 increasing 78.4%, suggesting that adoption grew among smaller users even as the overall market declined.

Beyond the prominence of Nigeria and Brazil as leading crypto markets, the growth of their respective regions is another core theme.

Only three regional markets saw net growth over the past year: Sub-Saharan Africa led at 13.4%, followed by Latin America at 9.8%, while Western Europe stayed generally flat at 1.4%. Stablecoin adoption has been a major contributor to this resilient growth in emerging markets, as digital assets integrate deeper with everyday economic activity.

This is just the latest evidence for a phenomenon we have explored in the past: dollar stablecoins being used as a savings and payments tool in regions where local currencies are volatile and existing financial systems are antiquated. However, this surge in demand has been accompanied by some complications.

U.S. banks have spent a year pushing back against stablecoins over fears their adoption could induce deposit flight; as these digital assets grow in popularity overseas, foreign governments are now likewise concerned about flight from their domestic currencies.

Stablecoins in the United States are predominantly used by a small but growing number of fintechs doing cross-border payments, where the recipient is in an emerging market. But in emerging markets, blockchain-based wallets and stablecoins have become the new de facto U.S. dollar bank account. — David Sutter

Earlier this year, the IMF explicitly warned that dollar-denominated stablecoins could “displace local currency in both transactions and savings” and thereby "weaken financial stability."

Concerns around financial sovereignty and the waning powers of central banks are already driving some governments to take action. The central bank of grassroots adoption leader Brazil prohibited the use of digital assets in regulated cross-border payments this May, in an effort to keep international transfers under central bank oversight.

Nigeria is an even more urgent case. The country alone accounted for 60% of Sub-Saharan Africa’s stablecoin inflows since 2019, leading the IMF to write in June that the pace of adoption was putting significant strain on the country’s monetary framework. President Bola Tinubu signed an executive order in July to coordinate virtual-asset regulation and assess the growing risks of monetary sovereignty erosion.

Rather than relying on regulation, some other countries are instead promoting domestic competitors. South Korea is currently working on legislation reminiscent of the U.S. GENIUS Act, which would provide the framework for a domestic stablecoin industry. Last week, Oh Kyoung-suk, CEO of Upbit parent company Dunamu, urged lawmakers to expedite the plans or risk ceding ground to international platforms running on USD stablecoin rails.

For the United States, these trends will look less like a crisis in the making and more like a golden opportunity. So much so that, as of last month, the Trump administration is reportedly considering an initiative to actively promote USD-denominated stablecoins abroad. Although still at the exploratory stage, with no formal policy announced, such a program could see the U.S. federal government working in tandem with stablecoin issuers to actively accelerate these assets’ effects on dollar dominance worldwide.

These examples offer just a snapshot of the varied responses to the rise of dollar-backed stablecoins. Some governments are approaching the problem through regulation, some through restriction, and some through competition. As adoption accelerates, so too will the tension between consumer demand and monetary sovereignty.

Podcast Catch-up: OpenTrade CEO cites bank lobby's $3 trillion deposit-flight warning

Last time on the podcast, we were joined by David Sutter, co-founder and CEO of OpenTrade, to discuss the evolving regulatory environment, institutional demand for DeFi and the rapid growth of stablecoins in emerging markets.

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In the Headlines: The stories driving the conversation this week

• Cross-border payments firm Conduit has sued Tether over $2.76 million in USDT that it alleges was frozen without justification. The funds have been inaccessible for more than a year, following an investigation by Brazilian authorities involving a former Conduit customer. However, Conduit claims Brazilian police never flagged its wallet for freezing and that a court confirmed the company was not under investigation. The lawsuit seeks the release of the frozen funds plus at least $2.76 million in additional damages.
• Avalanche has partnered with Arya.ag and Finternet to bring more than $2 billion in agricultural records onchain. Covering 12,000 warehouses across India, the initiative will digitize agricultural financing processes, allowing lenders to verify stored commodities as collateral and track associated loans. By making inventory records and financing processes more transparent, the project aims to improve farmers’ access to credit backed by their existing crops.
• Samsung announced plans to integrate USDC transfers into Samsung Wallet for eligible U.S. Galaxy users later this month. The feature will enable cross-border stablecoin transfers across 82 million compatible U.S. devices without requiring a separate crypto app or private key management. Users will also be able to send funds to bank accounts in more than 60 countries, with recipients receiving their local currency.

Top of the Charts: Transfers under $100 grew by almost 80% over the past year, signaling broader everyday adoption

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