Beyond USDC and USDT: The Rise of Local Currency Stablecoins in Emerging Markets

For the past five years, "stablecoin" has effectively been a synonym for "Digital Dollar." USDC and USDT dominate the landscape, accounting for over 90% of the market cap. For businesses in emerging markets, this has been a vital lifeline—a way to access hard currency in a world of volatile local FX.

But as we head into 2026, the narrative is evolving. We are witnessing the second wave of the stablecoin revolution: the rise of Local Currency Stablecoins.

From Singapore’s XSGD to the discussions around Nigeria’s cNGN and the Euro-backed EURC, the market is signaling a shift. For banks, Telcos, and Payment Service Providers (PSPs), this isn't just a new asset class to list—it's the missing link for true digital payment sovereignty.

Why the "Dollarization" Model Isn't Enough

While USD stablecoins solve the problem of holding value, they don't always solve the problem of transacting in a local economy.

Consider a merchant in Lagos paying a supplier in Nairobi. Using USDT requires a double conversion:

1. Merchant converts Naira (NGN) -> USDT.
2. USDT moves across borders.
3. Supplier converts USDT -> Kenyan Shilling (KES).

Each "hop" incurs FX fees and slippage. Furthermore, local regulators are often wary of "dollarization"—the fear that widespread use of USD stablecoins undermines the local currency and monetary policy.

Local currency stablecoins (e.g., a digital NGN or digital KES) bridge this gap. They allow value to stay "on-chain" while remaining denominated in the unit of account that local businesses actually use for pricing and taxes.

The FX Settlement Layer of the Future

The true power of local stablecoins is unlocked when they interact with automated market makers (AMMs) and on-chain liquidity pools.

Imagine an automated liquidity pool containing Digital-NGN and Digital-KES.

• The Transaction: A Nigerian bank sends Digital-NGN into the pool.
• The Swap: The protocol instantly swaps it for Digital-KES.
• The Settlement: The Kenyan bank receives Digital-KES.

This happens in seconds, 24/7. It bypasses the need for USD as an intermediate bridge currency entirely. It creates a direct FOREX market between emerging market currencies, increasing efficiency and reducing reliance on the dominance of the Dollar clearing system.

The Regulatory Green Light

Unlike the "wild west" era of crypto, this new wave is being built with regulators, not around them.

• Singapore has set the standard with a clear regulatory framework for single-currency stablecoins (SCS), leading to the success of XSGD.
• The European Union's MiCA regulation explicitly regulates "E-Money Tokens" (their term for fiat-backed stablecoins), creating a path for compliant Euro stablecoins.
• Emerging Markets are following suit. Central Banks in Africa and Southeast Asia are realizing that regulated, privately issued local stablecoins can actually enhance oversight. Because transactions occur on a public ledger, the Central Bank has real-time visibility into monetary velocity, unlike with cash.

The Strategic Opportunity for Banks & Telcos

This is where the Commercial Leader needs to pay attention. Local currency stablecoins are not just for crypto startups; they are a product opportunity for incumbents.

1. Issuance Revenue: Institutions that become licensed issuers of local stablecoins hold the fiat reserves. In a high-interest-rate environment (common in emerging markets), the float on these reserves generates substantial net interest income.

2. Merchant Acquiring: Merchants want to accept digital payments but hate volatility. A local stablecoin allows a PSP to offer "Crypto Acceptance" that settles instantly in a stable, local unit of value. No FX risk for the merchant, lower fees for the acquirer.

3. Programmable Money: Local stablecoins enable programmable payments in the local economy. Think of conditional cash transfers (e.g., a government grant that automatically expires if not used) or automated payroll streams—all denominated in the local currency.

The 2026 Landscape

The dominance of the USD stablecoin is not ending, but the monopoly is. The future is a multi-currency on-chain world.

For global merchants and multinationals, this means simpler treasury management. For local institutions, it means reclaiming a stake in the digital payment rails.

The question for your product roadmap is straightforward: Will you be the institution that facilitates these local digital flows, or will you stand by as global players capture the liquidity of your own national currency?

The local stablecoin era is the era of on-chain FX. And it is open for business.

Explore Local Stablecoin Liquidity: Learn how Yellow Card’s infrastructure supports multi-currency settlement and local stablecoin on/off ramps.