The de-facto duopoly in stablecoins today is made by USDC and USDT: both USD-pegged and both representing two different versions of a tokenised dollar.

Even though the non-USD pegged (or local) stablecoins are a tiny part of the market, I’m convinced that they represent the biggest opportunity in today’s stablecoin market not because they will replace the dollar on-chain, but because the dollar on-chain is the offshore layer of a system that still has no domestic layer, and every economy on earth runs on its domestic layer.

I already hinted at the importance of local stablecoins in my previous series on the Stablecoin sandwich, but I believe the topic deserves a proper space.

The goal of this post is to explore the local stablecoins space, analyse the state of local stablecoins and argue in favour of my thesis on the inevitability of local stablecoins.

State of Local Stablecoins

Looking at the surface, the future for non-USD pegged stablecoins seems pretty grim.

As of today, USD pegged stablecoins have the overwhelming majority of the stablecoin market: according to DeFilama data, USD-pegged stablecoins account for over 99% of the stablecoins market cap ($303b out of $305b in total) and the first non-USD pegged stablecoin (EURC) is the 24th biggest stablecoin in circulation and is ~400x smaller than the biggest USD-pegged one (USDT).

However, looking beyond the tagline, the story is a bit different. The penetration of non-USD stablecoin has grown from basically 0 to more than 0.5%.

The growth of local stablecoins over the last 20 months (from January 2025) has been around 4x (from $379m to $1.6b) versus a 50% growth of the USD-pegged segment (from $204B to $303B) – even though absolute volumes are really different. On the velocity side, numbers are even more interesting: transfer volume increased 16x, while supply grew only 4x.

In addition, most of the local stablecoins have a real world usage and a low DeFi penetration – signaling an organic adoption less exposed to predatory capital and incentives schemes. Excluding EURC – 80% of the local stablecoin activity are simple transfers consistent with payments, remittances, payroll, and treasury flows.

Why local stablecoins are inevitable

Looking at the numbers, the local stablecoin growth seems solid, even though absolute numbers are still tiny. But I’m convinced that a number of factors will facilitate an exponential growth of the local stablecoin space over the next few years.

De-Dollarisation and convergence to TradFi volumes
Even though the Dedollarisation narrative is still a narrative and not a fact, it is undeniable that the US Dollar has lost part of its appeal as a Central banks’ reserve currency, declining from more than 65% 10 years ago to ~57% today.

On the other hand, as shown by SWIFT data, International payments (excluding the intrapayments in the Eurozone) denominated in US Dollars have grown from 42% in 2020 to 59% in 2026.

The goal of this post is not to dig deeper into the phenomenon of De-dollarisation, but – for the purpose of my thesis – it is safe to assume that there is no dollarisation in action. Basically the world is not unequivocally adopting more and more of the US Dollar, in some use cases it is, in others the other way around.

Given this – if stablecoins want to become the new backbone of the financial system – the mix of volumes passing on them will have to converge to those of traditional finance. In order to make this happen, local stablecoins will have to grow orders of magnitude faster than USD-pegged stablecoins.

Monetary policy instrument
A currency is much more than a payment instrument or a store of value tool. A currency is one of the most important tools a country possesses to influence its economy, and thus the real fabric of its social texture. A country that doesn’t control its currency is a lame duck and it’s severely affected in its ability to stimulate the economy – this is a very active discussion in the Eurozone.

So far, countries have tolerated USD-pegged stablecoins because they were overall a limited phenomenon, not systemic. But there are very few doubts that, in case USDT or USDC adoption gets to the point of taking over a country’s economy, a form of currency control will be extended to them. This is less likely in semi-dollarised economies, but it is almost certain in jurisdictions that managed to keep the level of USD usage under control.

Geopolitical Risk
In parallel with the monetary policy argument, another political argument emerges. In an increasingly confrontational and fractured world, adopting a foreign country’s currency strongly limits the foreign policy freedom of a nation state. If another country holds the switch button on the backbone of your economy, you are not free.

Ultimately, a USD stablecoin is not just a tokenised dollar. It is a tokenised dollar issued by an entity that answers to OFAC, the sanctions arm of the United States Treasury Department.

In this sense, given their user-friendly and widespread accessibility, stablecoins represent a multiplier of the financial sanctions system already widely used by the US administration against Iran, Russia and other geopolitical adversaries.

And this is actually explicitly defined by the GENIUS Act. The new crypto legal framework requires every permitted issuer to have the technical capability to seize, freeze or burn tokens and to comply with lawful orders. Freezability is now written into US law as a design requirement of the dollar on-chain.

MiCA has an explicit article that wants to avoid similar traps: Article 23 forces an issuer to stop issuing once a token is used as a means of exchange above one million transactions or €200m per day within a single currency area, and Article 58 extends that to e-money tokens referencing a non-EU currency.

Local distribution
Payment demand is local by definition: salaries, rents, taxes, groceries and invoices are denominated in the currency of the jurisdiction. The dollar-savings demand that drove USDT adoption in Argentina, Turkey or Nigeria is real, but it is mainly a store-of-value use case, not a payments one.

Payments are also local in a second, more practical sense: the ramps are local. Every on-ramp and off-ramp is a bank account, a local instant payment scheme, a licence and a KYC file. The moment a stablecoin touches the real economy, it touches one of these systems, through an entity that is licensed locally. These entities that own local customers are not crypto companies. They are the banks, neobanks and PSPs that already hold the licence, the deposits and the payment-scheme membership. Those players have no reason to hand their base to Circle/Tether in exchange for a share of Treasury yield when they can issue, or white-label, a token in the currency their customers are already paid in and keep the economics. Stripe bought Bridge rather than partnering with Circle for the same reason.

So for stablecoins to become the financial rails of an economy, they must be in the unit of account of the flows, and the people best placed to distribute them have every incentive to make them so. They must be local stablecoins, and they will be issued by the players who are already local.

Conclusions

The post has presented a number of arguments which I believe push towards a wide adoption of local stablecoins: the convergence of stablecoin mix to the currency mix of the real economy; the protective measures that states will implement to preserve their monetary policy toolkit; the geopolitical risk of fully adopting USD-pegged stablecoins and the fact that real economy use cases create an organic demand for local stablecoins.

Looking at the market I think a few elements confirm my thesis.

The first is that the use cases already on the table need it. In the stablecoin sandwich series I described the local leg as the part of the flow that stablecoins do not fix: the fiat on-ramp on one side, the fiat off-ramp on the other, each with its own bank, its own FX and its own reconciliation. A local stablecoin does not shorten that leg, it removes it. The sandwich only closes when both slices are tokens, and the second slice is, by construction, local.

Another key element is that regulation is manufacturing supply. The launch of MiCA in the European Union boosted the EUR-pegged stablecoins adoption and this is probably going to happen also in other jurisdictions.

The last one is an historical analogy: the Eurodollar market grew into the largest pool of money in the world, and it never displaced domestic currency for domestic payments anywhere. It served offshore and cross-border demand but every domestic economy kept running on its own money, on its own rails, under its own central bank. I have argued before that USDT is the tokenised Eurodollar. If that is right, then the honest shape of the future is not local stablecoins replacing the dollar, rather it is a two-layer system: USDT and USDC as the offshore layer, and a domestic layer for each currency that matters. The offshore layer is built. The domestic layer is the thing that is currently missing.

This is why I think this is the biggest opportunity in the market. Not because 0.5% will become 50%, but because the dollar layer is complete and the local layer has barely started, and every argument in this post says it has to be built. The only open question is who builds it: the incumbents that already own the distribution, or someone who moves first.