Emerging Markets Do Not Need More Local Stablecoins
Africa and LATAM processed over $250B in remittances last year. That scale has sparked a push to mint new local stablecoins. The logic sounds straightforward: local currencies are volatile, cross-border payments are slow, and stablecoins promise faster, cheaper rails.
The reasoning makes sense, but does it solve the real problem?
Why Local Stablecoins Fall Short
Everyone already uses USD because it is stable. Putting volatility on-chain does not erase volatility. It only makes it programmable.
And if the goal is to fix cross-border FX, on-chain pairs bring their own risks:
- Impermanent loss: Thin liquidity pools drain quickly when markets move
- Price impact: Illiquid corridors see trades that distort pricing, making them unusable at scale
- Fragmentation: Every new token splits liquidity further instead of deepening existing pools
Stablecoins can cut settlement times. But without deep liquidity and sustained demand, “local stablecoins” risk becoming assets no one wants to hold.
Where They Could Work
Local stablecoins are not entirely without purpose. They may find traction in narrower contexts:
- Domestic payments: speeding payroll and commerce within a single country
- On/off-ramps: bridging local fiat into global liquidity, similar to how USDC already functions
- Regulatory sovereignty: giving governments a way to modernize rails without defaulting entirely to the dollar
Technical Patterns in FX Infrastructure
The harder challenge is not minting another coin, but building FX infrastructure that can withstand shocks and deliver predictable execution. The systems that survive tend to follow a few patterns:
- Liquidity aggregation: Three-tier models combine CEX order books for depth, AMM pools for 24/7 access, and P2P networks for last-mile conversion.
- Routing algorithms: Weighted pathfinding across venues that factors in liquidity depth, spreads, fees, and historical fill reliability.
- Volatility management: Circuit breakers with adaptive thresholds. Static limits fail during regime changes; time-decayed volatility bands with manual override provide resilience.
- Compliance caching: Rolling TTL windows with event-based invalidation balance KYC speed with cost. Too short and APIs are overloaded; too long and data risks going stale.
- AMM trade-offs: Concentrated liquidity models improve efficiency but increase impermanent loss in volatile corridors, requiring active rebalancing strategies.
These are the architecture-level choices that determine whether remittance flows clear or collapse under volatility.
What Comes Next
Emerging markets do not need more local stablecoins. They need better rails, deeper liquidity, and smarter intelligence layers for the stablecoins people already trust.
If you were building for remittances today, would you mint a new token, or fix the rails around the ones people already use?