The inevitability of local stablecoins - Lombard Notes
Short summary
USD stablecoins like USDT and USDC currently control 99% of the market, but the author argues local currency stablecoins are inevitable because every real economy runs on domestic currency, and governments will demand control over their monetary systems. The growth signals are already there: local stablecoins have grown 4x in 20 months while transfer velocity jumped 16x.
- Local stablecoins are growing 4x faster than USD-pegged ones (from $379m to $1.6b in 20 months), with transfer volume up 16x, showing organic adoption for actual payments, remittances, and payroll rather than speculation.
- Governments will restrict USD stablecoins if adoption threatens monetary policy control, and geopolitical risk from US sanctions authority (OFAC) embedded in stablecoin design will push nations toward local alternatives.
- Banks and payment providers already own customer relationships and distribution in each jurisdiction—they have no incentive to hand that to Circle or Tether when they can issue their own local stablecoins and keep the economics.
- The real opportunity mirrors the Eurodollar market: USD stablecoins serve offshore/cross-border needs while local stablecoins handle domestic payments, creating a two-layer system rather than replacement.
Full summary
USD-pegged stablecoins like USDT and USDC dominate the market with 99% of the $305 billion stablecoin market cap, but local currency stablecoins are growing fast enough to matter. Non-USD stablecoins have jumped from basically nothing to 0.5% of the market in 20 months, with supply growing 4x (from $379 million to $1.6 billion) while transfer volume exploded 16x. The biggest non-USD stablecoin, EURC, ranks 24th overall and is 400 times smaller than USDT. What makes this growth meaningful is that 80% of local stablecoin activity consists of actual payments, remittances, payroll, and treasury flows—not speculation—suggesting real economic adoption rather than capital chasing yield.
The author argues local stablecoins are inevitable because payment demand itself is inherently local. Salaries, rent, taxes, and invoices are denominated in domestic currencies, not dollars. The infrastructure to move money—bank ramps, instant payment systems, licenses, KYC files—is all tied to local jurisdictions and controlled by existing banks and payment service providers. These institutions have zero incentive to hand their customer base to Circle or Tether when they can issue their own local tokens and keep the economics. Stripe's decision to buy Bridge rather than partner with Circle illustrates this logic: whoever controls the on-ramps and off-ramps controls distribution.
Governments will eventually push back on USD stablecoins for both monetary and geopolitical reasons. A country that can't control its currency loses a critical tool to manage its economy, which is why the Eurozone debate matters. More pressingly, USD stablecoins are issued by entities answering to OFAC and subject to US sanctions—making them a force multiplier for American financial control. The new GENIUS Act explicitly requires stablecoin issuers to have the ability to freeze or burn tokens on demand. Meanwhile, the EU's MiCA regulation forces issuers to stop issuing once a token hits one million daily transactions or €200 million in volume within a currency area. As stablecoins scale into real economies, governments won't tolerate foreign currency rails running through their financial systems.